We have now entered the final quarter of 2020 and the end of the Brexit transition period is fast approaching. From the 1st of January 2021, the UK will no longer benefit from being an EU member state, and UK-resident owners of property in Spain will be affected with increased tax implications.
In Spain, tax rates are determined by the taxpayer’s residence—for EU/EEA residents the general tax rate of 19% is applicable, however, once the Brexit transition period ends, British property owners will enter the higher, non-EU resident tax bracket of 24%.
Unfortunately, the jump in tax rate is not the only impact Brexit will have on tax on Spanish property owners as they will also lose the benefit of deducting expenses from rental income. Any expenditure related to running the rental property will no longer be claimable and the tax due will be calculated directly on the total income earned.
Even if the Spanish property is not let out, the deemed rental income calculated on the annual non-resident’s tax return will also be taxed at the non-EU resident rate of 24%.
The Spanish tax office has posted further information on the consequences of Brexit on Non-resident income tax, click here for more details.