There has been renewed speculation over the Brexit affect on the Spanish property market recently after Boris Johnson looked set to force through a UK no-deal withdrawal from the European Union. Sterling fell to below 1.10€but recovered quickly when Parliament backed a bill to postpone the deadline once again and rejected the Prime Minister’s call for a general election.
This third delay was seen, by the markets, as a positive move for the pound and sparked fresh gains for GBP against the EURO. These gains proved to be short lived, however, with Sterling plummeting again after the Queen accepted the Prime Minister’s request to suspend parliament, a decision which proved controversial and sparked accusations that Boris Johnson had acted dishonestly. Yes turmoil still reigns in UK politics.
The important questions for British investors in Spanish property, however, are; How would a no-deal Brexit alter the process of buying a home in Spain? What are the financial implications?
Restrictions do not currently apply on property purchase in Spain, nor are there any requirements to be a national of an EU country. In this respect, then, Spanish real estate would remain a free market for British citizens who wish to invest. Financially, the strength of the pound has always had a direct correlation with property purchases and, although there is still a strong demand amongst the British for property in Spain, an unfavourable exchange rate would, undoubtedly, affect the budget of UK buyers.
There is also the question of inheritance taxes. Prior to 2014, non-residents were taxed a great deal more than residents when inheriting property in Spain but the law was changed following pressure from the European Commission and it was ruled that from January 2015, non-residents from within the EEA, could not be taxed differently on inheritance transactions. In February 2018, the Spanish Supreme Court issued a further judgement declaring that the way Spanish inheritance and gift tax was working breached the free movement of capital by taxing non-EU residents at a higher rate on Spanish assets received through an inheritance or gift.
This is good news for British property investors as it means that whenever and however Brexit occurs there will be no discrimination against non-European citizens paying inheritance or gift tax. For the moment uncertainty still clouds the issue and the future is difficult to predict, but this has done nothing to dampen the enthusiasm of the British to enjoy the Spanish lifestyle.
The UK expat population in Spain remains by far the largest national group, and, although it has fallen from a high of just under 400,000 in 2012 to a current figure of 250,000, the number of British expats officially resident in Spain at the start of each year rose by 1% in 2018 and 3% in 2019.
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