m2m2012

According to Spanish law only residents within the European Economic Area can claim deductions on their Spanish rental properties if they are not Spanish tax residents. So after Brexit, if a Brit, who is not a Spain tax resident, will have to pay a higher tax rate on their Spanish rental income plus no longer be able to claim any deductions. Am I right to think most of the people in this category will decide to sell their rentals? I wonder how many people are in this situation; could we see a flood of properties enter the market?

No arguments about Brexit please.

Rosemary

To be fair to m2m2012 please keep replies strictly to the question asked because any comments about Brexit will be removed as that is not the subject.

Rosemary

Moses2013

People always had to pay the bills and the only difference is that they might not be able to deduct expenses that were never guaranteed in the first place. The Tax rate differences are also not that huge and if you're making a profit, it can't be that bad. It's still a profit
Tax rates:

• Resident in E.U., Iceland or Norway: 19% of net profit
• Rest of the world: 24% of net profit

Barriej

Yep. Correct and it will cost me an extra €3.00 a year, so I doubt its going to break the bank.

We don't rent ours out so its not going to be important. I suppose if you had a property that rented for €1000 a week you might think about it.

bfg69bug

So "assuming the owner pays tax" that would mean that someone renting for an average of €1000 a week would have to pay €3120 more than a spanish resident (based on the above €1000/week avg. rental - and assuming 100% occupancy)

what are the "expenses" that can be claimed ? (maybe)

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.

Moses2013

But then again landlords have increased the rents and are making more than before.

https://www.thelocal.es/20190909/ren...ast-five-years

m2m2012

I think a Spanish landlord's expenses have gone up over the past five years, maybe that's why the rent increases...anyway, whether rents and expenses have gone up is beside the point.

My guess is many Brit landlords who are non tax residents of Spain don't know what's about to hit them; many will decide to sell up and get out.

Moses2013

Maybe it might affect the people in the typical British areas but the rule here is always to buy a home. If you buy a property purely for investment reasons there's always a risk + the Brits buying abroad in the first place must have enough cash anyway. Most banks are not offering buy to let mortgages: See quote from Spanish mortgage broker for British residents: Do buy-to-let mortgages exist? Not at the moment, I’m afraid. Whilst some banks won’t penalise you for buying with the intention of renting out the property, they don’t take into account any future rental income so the principal of buy-to-let finance is lost.

Longlegpete

We rent our place out as a summer holiday rental and yes it will and has made a difference to how we think, we are now only taking bookings over July and August as they have by far the highest yield so are worth it for hassle, it will of course put up all La Renta end of year tax as well, so in our case probably €80 a year.

I can't see why you're unable to offset the agency fees though as these are deducted before you receive money, in our case anyway so they can't tax you on money you haven't earned, as far as offsetting other costs there's very little that can be anyway, certainly in our case, only the IVA which i presume can still be claimed back if your IVA registered

missile

After expenses, you are making circa 4000€ profit on rentals for July & August?

Well done :-)

Longlegpete

Yes, around that, mybe slightly more so the extra tax and soon to be non allowable expenses alone with La Renta it will probably cost us €350 to €400 a year, certainly not enough to consider selling but if it gets more heavily tax then we would simply stop renting it out

missile

That is really good. Those non residents I know who live in UK and let out their holiday homes struggle to make any profit after they pay utilities, cleaners & agents et al.

Longlegpete

Yes, it is good, I think the area has a lot do with it, the most we have had was €6500 after everything was taken out inc tax for 13 weeks rentals which with the current exchange rate is only 20% down on the nett income we get from our house's in the UK for a full 12 months.

At the time the Spanish house was worth 70% of what the UK houses were, not true now as prices have increased a fair bit where we are on the Northern Coast Blanca and have gone down a little where we are in the UK

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?