Brexit changes non-resident tax rates in Spain for British nationals

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As British nationals are well aware, Brexit has changed a long list of regulations in Spain. In tax terms, the most relevant are non-resident tax rates. From January 1st 2021, British nationals will pay the non-EU rate, currently 5% higher than the EU rate. In this article, we explain the implications for the changes in non-resident tax rates in Spain for British nationals.

The main effects

As well as a rise in the general rate of non-resident income tax, British nationals will no longer be eligible for certain exemptions after January 1st. These changes come about because Spain, along with other EU countries, distinguishes between EEA and non-EEA nationals.

Own a home in Spain? Read our FAQs with all the answers to what you need to know about Brexit and property. https://costaluzlawyers.es/blog/what-british-owners-of-spanish-property-need-to-know-about-brexit/

Higher rate

British nationals will be liable for a higher rate of non-resident income tax after Brexit. Instead of the 19% tax levied on income earned by non-resident EEA nationals, British nationals will have to pay 24%.

You are liable for non-resident income tax in Spain on income from activities such as property (e.g. holiday rentals) and employment.

Thinking of becoming resident in Spain? Read our guide to residency for British nationals post Brexit. https://costaluzlawyers.es/blog/brexit-questions-for-uk-nationals-and-family-members-regarding-residency-in-spain/ 

End to exemptions

From January 1st 2021, British nationals will no longer be exempt from income tax in certain instances. Note that some exceptions will still apply, but in general, they will not be able to benefit from exemptions in the following cases:

  • Interest and capital gains from personal property obtained by residents in another EU state.
  • Profits distributed by subsidiary companies domiciled in Spain to parent companies in another EU state.
  • Dividends and profit shares from pension funds in another EU state.
  • Fees paid to a company resident in another EU state.
  • Capital gains reinvested in a habitual residence within the EEA.

From January 1st 2021, British nationals will generally be liable for income tax on all of the above.

Did you know? Brexit does not affect the bilateral double taxation agreement between the UK and Spain. This will remain in place and apply as usual from January 1st 2021.

Get professional advice

Tax regulations are complicated in all countries and Spain is no exception. To make sure you comply with taxation rules and only pay what you need to pay, consult the experts. The Costaluz Lawyers fiscal team has years of experience helping foreigners in Spain – residents and non-residents – with professional tax advice. Find out about our services here https://costaluzlawyers.es/for-you/tax-representation/ and then get in touch for a free consultation.

10 thoughts on “Brexit changes non-resident tax rates in Spain for British nationals”

  1. try to help you with our chatbot.
    Maria:
    ¡Good afternoon! Welcome to Costaluzlawyers.es. How may I assist you today?
    May 02, 18:51 hYou say:
    Hello Maria. I am the British (non-resident) owner of a property in Andalucia which I rent to holiday makers when I am not using the property. Under the new tax rules I understand that, post Brexit, I will no longer be able to claim for any expenses incurred, so will have to pay a full 24% of any income I receive. In the past I have submitted my tax returns to an accountant/gestor who calculates the exemptions I can claim (for example, for the costs of cleaning the property, or laundry) and then forwards my claim to the tax authority. However I can now see no reason to continue with this system (what would the accountant do for me?), so my question is: What is the simplest way to declare my income, without an intermediary? Is there, for example, an online form I can complete and send direct to the tax authority? Regards, Peter James

  2. Jointly own property with husband. I am british and he is irish citizen. We both residents of uk. If I have to pay rate of 24% does he pay 24% or 19% being a eu citizen.

    1. MARIA LUISA CASTRO

      Dear Sally,

      Thanks for contacting us through our blog.

      In answer to your question on rental taxes, if you own the property 50/50, each one of you will have to file a declaration with its corresponding rate.

      Best,

      Maria

  3. Hello I an a uk british subject who has an old green residency paper which i believe i can now change into a new residency card .?.
    And i have a s.i.p. Health card as i worked legally in spain up until 2020 ( when working my boss paid the employment tax)
    Before as a police pensioner in the uk i did not have to pay tax in Spain as well as the uk
    Can you tell me if this is still the case …..????? If i do not work in Spain
    Thanks

    1. MARIA LUISA CASTRO

      Hi Peter Blyth,

      You will be able to apply for residency through the Withdrawal Agreement if you were living in Spain before 31/12/20 and have continued to reside in Spain since that date. The granting of residency through the Withdrawal Agreement is based on two requirements:

      1) Effective residence in Spain before 31/12/2020.
      2) Medical insurance with full coverage before 31/03/21 (if you are not covered by the Spanish Health System).

      Both requirements must be met in order to be granted residency.

  4. hi i live in spain for 170 days or less and have a pension in uk and pay tax on said pension i have a home in uk where my wife lives and my son but am traveling around Europe mostly in a motorhome what is my status now am going back in January to clear up things as i am 75 and have a prostate problem.

    1. MARIA LUISA CASTRO

      Hi Ian!

      I hope this email finds you well. I am Maria L. de Castro, the General Director of Costaluz Lawyers. I understand you have some concerns regarding your residency and tax status between Spain and the UK, given your unique situation.

      Tax Residency: If you reside in Spain for less than 183 days within a calendar year, you typically aren’t considered a tax resident of Spain. This means you may not need to pay taxes in Spain on your worldwide income, given you’re already doing so in the UK on your pension. However, it’s crucial to maintain clear records of your time in each country to ensure compliance.

      UK Taxation: Given that your pension is from the UK and you pay taxes on it there, your primary tax residency likely remains in the UK. There are double taxation agreements in place between the UK and Spain to prevent being taxed twice on the same income.

      Healthcare: If you are utilising healthcare services in Spain due to your medical condition, it’s imperative to ensure you’re covered correctly, either through reciprocal healthcare agreements or private insurance.

      Brexit Implications: Post-Brexit, the rules for UK citizens in Spain and the Schengen area have evolved. You’re allowed 90 days within a 180-day period for short-term stays in the Schengen region without needing a visa. Overstaying could lead to potential fines or re-entry bans.

      Potential Residency: If Spain becomes a more permanent fixture in your life, you might consider securing formal residency status, offering clarity and added rights, especially in the post-Brexit landscape.

      Your health and wellbeing are paramount. Given the intricacies of your situation, I strongly advise you to have a more in-depth consultation with our team to better understand your rights and obligations in both the UK and Spain. We are here to guide you every step of the way and ensure all your concerns are addressed adequately.

      Please contact us if you want us to send to you Our Terms and Conditions.

      Warm regards,

      Maria L. de Castro
      General Director
      Costaluz Lawyers

  5. Hello, I am a UK citizen and I lived in Spain from 2015 to 2022. I have a Spanish “permiso de residencia”, tipo de permiso “Permanente articulo 50 TUE”. It expires in 2031. I have been resident in Sweden since December 2022, with a Swedish residence card. Can I return to Spain to live? Is my Spanish residence permit still valid? On the back of the card is printed “Emitido bajo art.18.4 acuerdo retirada”
    Thank you

    1. Maria Luisa Castro

      Dear Gerald:

      Your residence permit is still valid as it expires in 2031, so you can return to Spain.

      The problem may arise when your residence permit expires and you wish to apply for permanent residence, for which you must have resided continuously in Spain for the last 5 years. This continuity will not be affected by absences from Spanish territory of up to six continuous months, as long as the sum does not exceed ten months within the five years. If it is for work reasons, it may not exceed a total of one year within the five years required.

      Hope the above helps. Please, let us know if you need assistance with this.

      Best wishes

      Maria

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