How Brexit affects English property owners in Spain

Hello there, and welcome back to the Meridional Team blog. On this occasion, we’re looking at one of the issues that has had the greatest impact on English property owners in Spain following Brexit.

As we already know, on 1 January 2021, the UK officially left the EU. This departure entails a number of legal changes that you need to be aware of if you own a property in Spain following Brexit.

However, neither the process of buying property nor the rights of property owners change. Property rights are never linked to residence status.

All property owners in Spain following Brexit have the same rights and obligations. This applies regardless of their country of origin.

What tax changes do you need to be aware of if you own a property in Spain following Brexit?

Although from the point of view of the property market There are no changes to the tax regime for non-EU residents, there have indeed been changes following Brexit that affect English property owners in Spain, relating to the rate of income tax applicable to non-EU residents who own a property that is let out.

As a resident of a non-EU country, the tax rate changed from 19% on net income to 24% on the full amount of the rent in his or her income tax return. This occurred after the previous tax rate of 19% had expired. It all happened when the transition period ended on 31 December 2020. 

In other words, the tax rate increases from 19% to 24%, and furthermore, deductions for expenses such as council tax, repairs, service charges, interest, etc. are not permitted.

This is because Spain, along with other EU countries, distinguishes between nations that belong to the European Economic Area and those that do not.

To understand this point better, we shall look at a simplified example.

Revenue of €1,000 per week was generated over a six-month period during the holiday season, which amounts to a gross income of €24,000 per year.

If expenses of €14,000 had been incurred, and without taking tax relief into account, a tax bill of €1,900 would have been payable before Brexit.

Therefore, if you own a property in Spain after Brexit, that figure rises to €5,760 – in other words, three times as much.

How long can you stay at your Spanish property?

It is one of the changes that Brexit has brought about for property owners in Spain. From 1 January 2021, the rules regarding the length of your stay in Spain have changed. You can no longer stay for more than 90 consecutive days within a 180-day period.

You can therefore spend up to 90 days in Spain, after which you must leave the country. You will then not be able to return to the Schengen Area until 180 days have elapsed since your date of entry into Spain. This also applies to any other part of the Schengen Area.

Please note that the 90-day period begins as soon as you arrive at any location within the Schengen Area. This means that if you travel to Spain via France, for example, the time you spend in France counts towards the 90-day limit.

If you want to stay longer, you simply won’t be able to. However, you can split the 90-day period into smaller chunks. One example would be spending two periods of 45 days each in Spain.

The government may introduce new legislation to benefit British property owners. One example would be to allow them to spend more time in the country. However, the government has not yet announced any new rules.

What happens if you are a legal resident and own a property in Spain after Brexit?

If you hold a Spanish residence permit (known as a foreigner’s identity card or TIE), your status is governed by the withdrawal agreement between the UK and the EU. This means that your rights in Spain and the rest of the EU remain unchanged following Brexit.

The Spanish residence permit is an identity card currently issued to non-EU residents in Spain. The card also covers residents in the United Kingdom.

However, it is worth noting that the card issued to British nationals is slightly different from that issued to other third-country nationals.

British nationals, therefore, have an easier route to residency than residents from other non-EU countries. 

British citizens who held a residence permit issued before 1 January 2021 will retain their rights to reside, work, study and access social security. That is, provided they were residing in Spain before that date.

For British nationals who had not obtained a residence permit before the effective date of Brexit, the rules set out in the general immigration regime will apply.

Although a visa is not required for short trips, a visitor registration scheme is being introduced for non-EU nationals from visa-exempt countries. For longer stays, you will need to apply for a visa if you wish to remain in Spain for more than 90 days within any 180-day period. There are several available visa options. However, almost all of them are very difficult to obtain as a non-EU citizen. 

Types of visas in Spain

If you were not a resident in Spain on 1 January 2021, you will need a visa. The easiest ones to obtain are:

• Residence visa through investment or Golden Visa
• Entrepreneurship visa
• Temporary non-profit residence visa

Residence visa through investment or Golden Visa

It is a residence visa issued to a non-EU citizen who intends to make a significant investment in the Spanish economy.

The visa grants the holder and their family members the right to reside in Spain and visa-free access to the Schengen Area.

In most cases, Spain’s Golden Visa is issued to people who purchase property. However, they are also available to entrepreneurs who invest in a Spanish company, which is why they are also known as Spanish Investor Visas.

Who is eligible for a Golden Visa for Spain?

To be eligible for a Golden Visa for Spain, you must make one of the following investments:

• Purchase property in Spain with a minimum value of 500,000 euros. The property may consist of a single unit or several units, provided that the total value is not less than 500,000 euros.
• Invest at least 2,000,000 euros in Spanish government bonds.
• Buy shares in a company or make a deposit of at least 1,000,000 euros in a Spanish bank.
• To invest in a new business that offers employment opportunities, contributes to scientific and/or technological innovation, and has a significant socio-economic impact on the area in which the business is to be established.

Entrepreneurship visa

The entrepreneurship visa allows you to reside in Spain for a maximum period of two years, provided you launch an innovative project that is of benefit to the country’s economy.

In this regard, we are referring to a visa for non-residents who wish to embark on a business venture within the European Union (in our case, in Spain) that serves the public interest.

What do we mean by the public interest?

Business projects must meet a number of conditions in order to obtain this type of visa:

• To create jobs, at least in the long term
• It should create good investment opportunities.
• High level of technology
• To hold patents.

Temporary non-profit residence

It is perhaps the easiest to obtain and the most attractive, particularly amongst British pensioners.

A temporary non-working residence visa is, in fact, issued to people who can prove that they have sufficient funds to support themselves in Spain without working or studying.  

Instead, you must prove that, whether through savings or monthly income from pensions or investments, you can support yourself independently whilst living in Spain.

This means that you should be able to prove an annual income of approximately €27,115 (£23,436) as a single person and €33,894 (£29,300) as a couple in order to obtain this type of visa.

Am I entitled to free healthcare if I am a permanent resident?

British citizens who are pensioners and are entitled to NHS healthcare in the UK may transfer their entitlement to free healthcare to Spain using the S1 form.

This procedure involves submitting your S1 form to the INSS (National Social Security Institute) office in Spain. Before doing so, you must have applied for a non-lucrative residence visa at the Spanish Consulate-General in London.

British citizens who have lost their entitlement to healthcare in their country of origin and are therefore unable to apply for an S1 certificate can access healthcare through private health insurance.

They can also access Andalusia’s public health insurance scheme through the special agreement.

If I am not a resident in Spain, what about healthcare?

Healthcare is available thanks to the Protocol on the coordination of social security under the trade agreement and Royal Decree-Law 38/2020, so that non-residents can receive emergency medical treatment whilst they are staying in the country temporarily.

All they need is the free UK Global Health Insurance Card (GHIC) or a valid European Health Insurance Card (EHIC).

The TSE card is valid until 30 June 2021 or until its expiry date, if that date is later than 30 June 2021.

By now, you’ll have a slightly better understanding of how Brexit affects English property owners. There have been some changes to your rights and obligations that you need to be aware of if you own a property in Spain following Brexit.

If you have any further queries, please do not hesitate to contact us; at Meridional we’ll be delighted to help.