If you own a rental property in Spain you may be impacted by the upcoming tax changes following Brexit on 1st of January.
If you are resident in the UK from 1st January 2021, you will be treated as a non-EU resident for Spanish tax purposes. This will mean that you will not be taxed at the present Spanish tax rate of 19% on your net rental income but 24% on your gross.
After taking account of the tax credit against the UK tax liability under the terms of the UK/Spanish tax treaty, there may be an excess element of Spanish tax that cannot be recovered. This will be worse for basic rate taxpayers than higher rate ones.
This could mean if you were renting out your Spanish property for £1,300 (assumed exchange rate £1:1Euro) a month with costs, including mortgage, coming to 900 euros a month your Spanish tax would be payable on your gross rental 15,600 euros x 24% = 3,744 euros. This would be credited against your UK rental tax bill up to £1,920 leaving you with excess Spanish tax which is not presently refundable of 1,824 euros/pounds.
We can help. If you think you may be impacted by these or any other changes following Brexit get in touch and we'll put you in contact with one of our experts.
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