UK non-resident and rent out property in Spain? Watch out for higher tax liability due to Brexit.

Holiday home owners will have a shock when they receive their next non-residents tax bill.

If you’re a British holiday home owner paying non-resident tax on rental income in Spain, you need to be prepared for a hike in your tax bill after Brexit.

As from January 1, 2021, non-resident British citizens in Spain are considered “non-EU” for tax purposes, which will have a significant impact on their non-residents tax return – and not in a good way!

Spanish tax legislation establishes different tax liability between EU citizens and those of the rest of the world:

EU citizens – 19% tax rate on NET income
Rest of World – 24% tax rate on GROSS income

So, not only is the tax rate itself higher, expenses like property tax (IBI), repairs, community expenses etc. are no longer deductible, resulting in significantly higher bills for those affected.

While many tax experts consider this regulation seriously violates European Union law, it remains to be seen whether the EU will take any action against Spain to rectify the situation, and even if Brussels does decide to act, any changes will be a long time coming.

It’s clear that for the next few years at least, non-resident British landlords will face a significant increase in fiscal liability. 

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