The implications of Brexit are becoming visible, so we thought to make a small summary for those who are affected by it. These are only the legal downsides. Spain remains the best country to have a holiday, second home or to retire to. Even if there is an increase of costs and bureaucracy, it is still worthwhile and in due time we expect these formalities to be smoothened out by new regulations to attend the wishes and needs of citizens and businesses in both countries.
Bank charges: Banks have started to charge their clients for receiving funds from the UK.
This is in many cases an illegal practise if these funds were transferred from an IBAN Euro account, but banks don’t seem to be bothered by that.
The UK is still part of the SEPA (Single European Payment Area) agreements. SEPA guarantees that euro payments are received within a guaranteed time. Banks and payment institutions still have the option of charging a credit-transfer fee of their choice for euro transfers if it is charged uniformly to all EEA participants, banks or payment institutions, domestic or foreign. So if the bank does not charge for receiving funds from for example Belgium, they cannot charge for receiving funds from the UK either.
Increased tax rate: The income tax rate for Non-Residents will increase from 19% to 24% in 2021. Spain can legally levy taxes on may sources of income, such as rental income or capital gains tax.
No tax benefits: If income was to be declared before Brexit, UK nationals could deduct costs, expenses, commissions, write-off or they would for example have a 60% discount on the net profit before taxes if the tenant used the property for permanent living. These tax deductions and benefits are not applicable anymore.
We have read some internet sources claiming this effect of increased tax rate and loosing tax benefits would be neutralised by offsetting the paid tax in the UK Income Tax return, but to our opinion this is not entirely true. The UK is not allowed to levy Income tax on income received from property in Spain according to the Tax Convention between both countries.
Residency: If before Brexit any UK national could freely decide to permanently live in Spain and have all the benefits that Spaniards have, this now has ceased to exist. Any UK national that decides to live in Spain will have to go through the system of getting a permit, together with all other nationals from outside the EU.
Car: the previous means that if you wish to live permanently in Spain and bring your car, you will probably have to pay an import tax. EU nationals are exempt from this tax.
Health insurance: If you go on holiday of wish to live permanently in Spain, from the 1st of January 2021 you will need to pay for your own health insurance. Before Brexit you could simply apply for recognition of all the years paying into the UK Health care system to obtain health care benefits in the EU. This system is now not applicable anymore for those who did not chose to permanently live in Spain already 5 years ago.
Holidays: Any UK national cannot overstay the allowed 90 days in the EU in a 180-day period. This means that as soon as you enter the EU, the counter starts and after 90 days you are expected to return to the UK, not being able to visit for 180 days without a Visa.
Roeland van Passel