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Brexit to lead non-resident Brits to their sell rental properties?

Brexit to lead non-resident Brits to their sell rental properties?

Old Dec 27th 2019, 11:29 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by m2m2012
Just curious, what do you mean by this? Are you saying Spanish tax authorities often refuse to deduct expenses? If so, why/how do they do this? Can you give us some examples?
What I was trying to say is that the expenses you can deduct were never guaranteed. It's just a tax benefit that exists right now and most people are aware that it could be abolished at any time. I doubt any person bought property based on what they can claim back today.
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Old Dec 27th 2019, 3:01 pm
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by Moses2013
What I was trying to say is that the expenses you can deduct were never guaranteed. It's just a tax benefit that exists right now and most people are aware that it could be abolished at any time. I doubt any person bought property based on what they can claim back today.
Okay, but I fail to see your point again. Where's the guarantee that they will not lift the tax rate 20 percentage points from 19% to 39%? There is no such guarantee is there? Let me put it to you that if the tax rate was 39% instead of 19% people would not touch Spanish rentals with a ten foot poll. The same goes for deductions, they are part of the overall deal, and a big deal...if they were cancelled it would effectively mean a 10 or 20 percentage point rise in tax paid depending on how much deductions you have. Think of the cost of putting on a new roof. Serious investors absolutely look at deductions when considering buying an investment property.
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Old Dec 27th 2019, 5:06 pm
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Because it would be just plain stupid. Might as well threaten to raise it to 150%. Just as likely. And only your actual profits are taxable. That's why there's deductions.

Non argument.
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Old Dec 27th 2019, 5:40 pm
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by amideislas
Because it would be just plain stupid. Might as well threaten to raise it to 150%. Just as likely. And only your actual profits are taxable. That's why there's deductions.

Non argument.
An effective double digit tax rise is on it's way whether it be plain stupid or not if you're a non-Spanish resident Brit who owns rental properties in Spain. What remains to be seen is how many of these people will decide to sell up and get out.
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Old Dec 27th 2019, 6:11 pm
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Regardless of predictions, property has always been a win or loose situation. If people have to sell others will buy at a lower price. There have already been holiday rental clampdowns in cities like Madrid or Barcelona. The government here in Ireland used to give holy communion grants to people and it was axed in 2013. People still send their kids to communion and drink afterwards, even though the benefits no longer exist.
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Old Dec 28th 2019, 7:25 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

The Balearic government has seen fit to tax the daylights out of holiday rental properties and now enforce the licencing. Not only the 19% tax, but they have imposed large fees for obtaining licences and increased rates for rubbish collection etc.

Now, a few Brits who previously bought apartments and illegally rented them as holiday lets, totally tax free and fundamentally paying the mortgage on them, are naturally crying foul and accusing the government of "Brexit punishment" and "threatening" to sell up, but it has nothing to do with Brexit. Brits represent a very small percentage of owners here.

Having said that, I personally think it's a bit too much, but it's not at "crazy, unsustainable" levels nor has anything to do with Brexit.
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Old Dec 28th 2019, 7:51 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

There will always come a point when taxation will make it unacceptable to an individual or company to carry on what they are doing.

Not allowing legitimate deductions is an indirect way of increasing taxation, add this to the 5% rise in the rate of tax that a UK resident will currently be expected to pay after the transition agreement ends will have an effect I'm sure, not for us as a part time holiday landlord, the house is mainly for our use and the rental time is when we don't want to be here anyway.

I'm sure it will have an effect, how big will entirely depend on the individual, and of course the final Brexit deal that is struck or not as the case may be.
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Old Dec 28th 2019, 8:15 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Well, if the "end of deductions" is upon us, then I'd recommend investing in super glue just in case the earth loses gravity.

Oh, and if Britain chooses to no longer be part of the EU, then it's no longer part of the EU. It's not a "punishment". That theory is a natural conclusion only if one believes it can cancel club membership but still have full use of the facilities.

Last edited by amideislas; Dec 28th 2019 at 8:20 am.
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Old Dec 28th 2019, 12:25 pm
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

We have a nice 3 bed 2 bath flat (apartment when described for renting in a nice little village that lots of German and Dutch visit in the early parts of the year to cycle the roads and trails. Flats like ours rent for €400 a week in the spring and €750 a week in summer (we have no pool and you need to drive to the coast) and they sleep 6.

We don't rent out but even if we did we have no mortgage so even if the tax rate were 50% it would still cover the cost of the rest of the year. We know a family who rent out their flat and make around €9000 a year before tax.

With the boom and bust about 10 years ago the flat is still worth less than they paid for it in 2006 as todays prices, so even if the tax went to 80% they would still be better off by renting and then coming out to live full time once they retire.

Ours is empty something like 10 months of the year and the costs of the electric, water, service charge etc comes to less than €2000 a year, so even if we just broke even with rental Id be happy. But as we plan to move over permanently in 2020 anyway, none of this is of any concern to me.
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Old Dec 31st 2019, 3:03 pm
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

European Commission Press Release March 7th 2019.

The Commission requests that SPAIN eliminate discrimination on taxation of non-resident individuals’ rental income

The Commission decided today to send a letter of formal notice to Spain asking it to eliminate a discriminatory tax treatment for non-residents on income derived from the letting of dwellings. For income tax purposes, resident individuals enjoy a reduction of 60% of the net income obtained from the letting of property used by the tenant as dwelling. However, this reduction is not available for non-resident individuals. Thus, investors from other EU or EEA states are subject to a different treatment that unduly restricts the free movement of capital (Article 63 of TFEU). If Spain does not act within the next two months, the Commission may send a reasoned opinion to the Spanish authorities.
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Old Dec 31st 2019, 5:15 pm
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by m2m2012
European Commission Press Release March 7th 2019.

The Commission requests that SPAIN eliminate discrimination on taxation of non-resident individuals’ rental income

The Commission decided today to send a letter of formal notice to Spain asking it to eliminate a discriminatory tax treatment for non-residents on income derived from the letting of dwellings. For income tax purposes, resident individuals enjoy a reduction of 60% of the net income obtained from the letting of property used by the tenant as dwelling. However, this reduction is not available for non-resident individuals. Thus, investors from other EU or EEA states are subject to a different treatment that unduly restricts the free movement of capital (Article 63 of TFEU). If Spain does not act within the next two months, the Commission may send a reasoned opinion to the Spanish authorities.
Seams like that was dated March 2019 and nothing has changed so i guess the Spanish government are not listening, of course the UK will no longer be part of the EU or the EEA by the looks of it so such a ruling would be too late
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Old Jan 1st 2020, 7:33 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by m2m2012
Thanks for your reply.
You are correct the the tax rate will be 5% more, not a huge rise but not being able to claim insurance costs, maintenance, repairs, agent fees (if any), mortgage payments (if any) is a big deal! To put it simply, the change is from paying 19% tax on NET income, to paying 24% tax on GROSS income...that's huge difference.
That's correct but it doesn't mean people will suddenly sell out. It's a big change but as long as it covers its expenses you might be served keeping the asset, unless you need that money urgently. I'm a non-Eu owner and I get no deduction whatsoever...the rent barely covers the 24% tax, all other taxes, owner's associations' fees and property management fees and mortgage but I'm ok with it, as long as it keeps financing itself.
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Old Jan 1st 2020, 9:37 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by m2m2012
European Commission Press Release March 7th 2019.

The Commission requests that SPAIN eliminate discrimination on taxation of non-resident individuals’ rental income

The Commission decided today to send a letter of formal notice to Spain asking it to eliminate a discriminatory tax treatment for non-residents on income derived from the letting of dwellings. For income tax purposes, resident individuals enjoy a reduction of 60% of the net income obtained from the letting of property used by the tenant as dwelling. However, this reduction is not available for non-resident individuals. Thus, investors from other EU or EEA states are subject to a different treatment that unduly restricts the free movement of capital (Article 63 of TFEU). If Spain does not act within the next two months, the Commission may send a reasoned opinion to the Spanish authorities.
You mean like the letter they sent in 2015 (I think) demanding Spain drop the disproportional €10,000 minimum fine for errors or omissions on tax returns which they continue to ignore with apparent impunity.

Rental or otherwise I think ​​​​property owners who do decide to sell are likely to find Brit buyers very thin on the ground!
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Old Jan 1st 2020, 11:28 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by Notdunroamin

Rental or otherwise I think ​​​​property owners who do decide to sell are likely to find Brit buyers very thin on the ground!
Certainly not the case where we are, a fair few Brits buying, one i know personally has just bought and retired on the Costa Del Sol along with another 2 newcomers in our road which is only around 20 villas, all have bought to use rather than rent which at the moment has far less implications from the tax increase

Last edited by Longlegpete; Jan 1st 2020 at 11:49 am.
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Old Jan 7th 2020, 6:13 am
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Default Re: Brexit to lead non-resident Brits to their sell rental properties?

Originally Posted by Longlegpete
Seams like that was dated March 2019 and nothing has changed so i guess the Spanish government are not listening, of course the UK will no longer be part of the EU or the EEA by the looks of it so such a ruling would be too late
Too late for what? For Brits?

It's a discriminatory policy which applies not only to Brits, but also to 26 other EU member states.

It should be stopped, with or without Britain.
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