IN a Brexit blow British homeowners who rent out their properties in Spain but are not registered as Spanish residents may have to pay three times as much tax.
Currently, non-resident property owners from elsewhere in the EU, Norway and Iceland can claim back various expenses, such as insurance or mortgage interest. But come January 1, non-resident Brits letting homes in Spain may be subject to the same taxes as property owners from countries like the USA and China who do not have fiscal residency in an EU country.
It appears that the Spanish tax man is lumping the UK in with the rest of the world as a non-EU country by ending exemptions specified in the TRLIRNR, the Non-resident Income Tax Law.
On its website, governmental tax agency Agencia Tributaria states that taxpayers resident in the United Kingdom will not be able to make a series of deductions for costs like community fees and mortgages currently available.
And to make matters worse, they will also have to pay the higher general tax of 24%, on gross rental income. EU citizens pay 19% on their net income. Brits could also lose certain exemptions related to capital gains tax.
Taken all together, the increased tax and reduced exemptions could lead to UK residents paying triple what they do now.
If there is a glimmer of hope for the nearly one million British property owners in Spain, only 400,000 of whom are registered as residents, it is that the new legislation does not yet seem set in stone.
The EU has criticised Spanish tax laws in the past. It remains to be seen if they will investigate the legality of this new move.