For 900,000 UK citizens who live or own property in EU countries, the pre-Brexit limbo is creating acute concern (see case study, below). At present things are simple — Britons can live, work and own property in any of the EU’s 28 member states and, in some cases, enjoy a preferential tax status to non-EU citizens. But what will happen to these, and other, rights after Brexit is unclear. So if you are a non-resident homeowner and are thinking of selling, should you jump now or later?
The tax burden for sellers
The 150,000 British citizens who own property in France should have few worries about a heavier capital gains tax (CGT) burden if they sell, regardless of whether the UK is a member of the EU. “There is no discrimination between non-residents of France, whether they are in the EU or not,” says Stephen Morris, a senior tax adviser at Blevins Franks, which specialises in helping Britons with homes abroad. This is unlikely to change during Emmanuel Macron’s presidency. The CGT rate payable by all non-residents is 19 per cent, plus social charges of 17.2 per cent, and this applies whether they sell now or later.
In Portugal the standard rate of CGT for all non-residents is 28 per cent.
The situation is different in Spain. The CGT rate for people from the EU or the European Economic Area is 19 per cent, but this increases to 24 per cent if the seller is not from the EU.
The “soft Brexit” dividend
Selling a home in areas popular with expatriates (particularly parts of Spain and France) can be tough. According to Mr Morris, the number of expats buying property on the Continent has never returned to its pre-referendum level. Data from Fexco Corporate Payments, a money transfer business, suggests that British spending in sterling on properties in the Eurozone fell by 21 per cent between 2016 and 2017, although it has recovered since. In contrast, interest in non-EU countries such as Thailand has soared. If your house is sitting on the market, do not despair. Experts say that the situation will improve if a Brexit agreement is reached. “A soft Brexit may well see an appreciation of 10 per cent in the value of the pound, ultimately meaning that the value of the property is reduced, but potentially making a sale easier, with increased demand from UK buyers — particularly in the event of UK citizens’ rights being safeguarded,” says Phil McHugh, the chief market analyst at Currencies Direct, a bureau de change.
Moving to the Continent
For Britons looking to move to an EU country, or those who are seeking residency after Brexit, decision time is rapidly approaching. December 31, 2020, is the cut-off date when “preferential EU rules” cease to apply for Britons who are buying abroad. This means you need to secure an EU home by that date to qualify for residency, healthcare and the UK state pension, which will not be taken away from you.
If you live in an EU country and want to stay, it’s time to “lock in” your rights and get residential status by building up a residency history. If you’ve lived in a country continuously for five years or more, you have residency rights. Many EU countries have beneficial tax schemes for British retirees, so those who have not acquired permanent residency should take steps to do so. It is very unlikely Britons who have been given permanent residency will have these rights taken away after Brexit.
Case study: ‘It’s the uncertainty that we’re struggling with’
Malcolm Pearce, a 67-year-old retired academic, and his wife, Diana, a former senior civil servant, have owned a second home in a village near Saumur in the Loire Valley, France, for the past 28 years. With great reluctance the couple, from Co Durham, have put it on the market. “We’ve always intended that at the age of 70 we would sell,” Mr Pearce says. “Then the Brexit vote came and we accelerated our plans.” They are worried that they’ll have to pay higher taxes if they sell when Britain is no longer an EU member, as well as facing greater difficulty repatriating their money. “It’s the uncertainty that we struggle with — the not knowing,” Mr Pearce says. The couple also say that a slowdown in demand caused by the ambiguity around Brexit talks means they have had “little interest” in their two-bedroom home since they put it on the market in July last year for €86,000 (£78,000). They are considering reducing the price to €55,000.
Source : David Byers, The Times, August 25, 2018