British owners of holiday homes in Spain will be paying more tax on their property, as a result of the United Kingdom’s withdrawal from the European Union. With the Modelo 210 tax rate rising by 25% in 2021. Which means British owners will now be paying the same higher tax rate as other non-EU resident property investors.
According to the Local.es, the Spanish Government estimates that there are somewhere between 500,000 and 700,000 British holiday homeowners who will be impacted by this tax increase.
Previously, British holiday homeowners who were not resident in Spain paid tax at the same 19% rate as locals and other EU nationalities. But now that the UK has left the EU this rate will rise to 24% (a 25% increase).
Modelo 210 Non-Letting Tax
This increase applies to both the Modelo 210 non-letting tax and letting tax rates, as well as capital-gains. Which means that owners who do not rent out their property at all will still find themselves facing an increased tax bill in 2021.
Modelo 210 Letting Tax
In addition, British owners who rent their property out to holidaymakers or on a long-term basis will no longer be able to claim any expenses accrued (such as mortgage interest or insurance) for deduction versus tax. This will also apply to the owners of commercial property.
This change is likely to have a significant impact on the return on investment previously enjoyed by British second homeowners in Spain. With some media such as TheLocal.es suggesting that the average tax liability will triple in size as a result.
The 90 Day Rule
As well as increased taxes, British holiday homeowners also face limits on how long they can physically stay in their property in Spain.
Whereas owners used to be able to visit their property for as long as they liked, now they can only stay for 90 days maximum within any 180-day period (and 180 days maximum per year), without a visa.
According to the schengenvisainfo.com website, this 90-day period applies on entry to the entire EU Schengen Area – so if for example you choose to drive through France to reach your property in Spain, this journey time still counts as part of your overall 90 day stay allowance.
They also advise that simple dodges, such as leaving the EU’s Schengen Area for a day or two after spending 90 days there and then returning are not permitted. You will instead have to wait 180 days before you can return.
You can of course break this 90-day allowance down as you please – so for example you could spend 30 days in Spain, return to the UK for a few days and then fly back to Spain for another stay of 60 days.
It is important to remember that the UK’s withdrawal from the European Union has only just taken place. Current arrangements are not set-in stone and may change over time.
There are, for example, already reports circulating that the Portuguese Government are mulling over a scheme that would allow British investors and owners to visit their holiday homes for as long as they like, visa free.
Currently however, no such plans are afoot in Spain. So short of applying for Spanish residency the only way to enjoy an extended stay at your holiday property currently will be by applying for a visa.
Visa Applications – Extending Your Stay
Can you extend your stay by applying for a visa?
The good news is yes, you can. If for example you are retired or want to take a sabbatical in Spain then you can apply for a Non-Lucrative Visa.
This document requires proof of income – up to €33,000 per couple, as well as medical insurance and a clean criminal record. The application fee is £516 per person.
Initially this allows you to stay in Spain for one year, but it can be renewed and extended. There are also a number of other different visa categories available to those seeking to take employment or start a business in Spain. As well as the so called Golden Visa which applies to purchases of property in Spain in excess of €500,000.
Visit the Spain Visa Application Centre Online at https://uk.blsspainvisa.com to find out more about the process.