Is now a good time to buy in Spain
Brexit is coming
With regard to Exchange Rates: Is now a good time to buy in Spain in 2019?
If you have been looking to buy a property in Spain this year, you will have no doubt seen the price of the Euro and therefore property prices fluctuating in the past months. Now that Britain has secured an extension before leaving the EU, what’s in store for exchange rates, and how can you plan ahead in uncertain times?
What might happen next?
The latest deal to be struck during the Brexit negotiations in Brussels has confirmed that UK citizens will have their rights to work, live, study and retire in the EU protected. People currently living in Spain and those who move there before Britain’s final exit date will not experience any change in their status.
However, freedom of movement will be severely restricted, and while UK citizens who are resident in Spain may stay on just as before and retain the same rights, they cannot move to another EU member state at the drop of a hat. The rules for going on holiday to another European country after Brexit are not expected to change much, but moving from Spain to live in Italy, for instance, will present serious barriers after Brexit. The same goes for those who move to Spain from Britain after Brexit is officially put into practice, so if you were thinking of moving out to Spain, you’d be well-advised to do it now rather than later.
If you live in Spain all year round, we strongly advise you to apply for Spanish residency. If you do not register yourself as a member of the Union before the UK breaks away, you will be stripped off a series of rights and entitlements to which you would otherwise have been entitled. You may also be regarded as an illegal alien in EU territory by the Authorities, which may even lead to your deportation to your country of origin.
What do I need to do before Brexit happens?
1. Attain a NIE number
A NIE number is a tax identification number for foreigners which identifies you before the Spanish Tax Office and allows you to file and pay taxes in Spain.
2. Join the Registry for citizens of the Union
If you are going to spend over 3 consecutive months in Spain, it is mandatory you enrol. You must attain a Certificado de Registro de Ciudadano de la Unión. This is the equivalent to the former residencia card. Attaining Spanish residency ensures your EU rights and entitlements will be respected post-Brexit. If you do not register, and continue living in Spain, you will be stripped of a series of rights to which you would otherwise have been entitled. You may also be regarded as an illegal alien in EU territory by the Authorities, which may even lead to deportation to your country of origin. Take heed, this is the most important advice we can give you by a long shot.
3. Enrol in your town hall census
In Spanish, this is known as empadronarse. By law, if you spend more than 183 days in a calendar year in Spain you must register in your local town hall.
4. Swap your UK driving licence for a Spanish one
If you are a Spanish resident, you must change your UK driving licence for a Spanish one. You only have 2 years to do this without a penalty.
5. Submit your resident tax returns
- IRPF: Spanish residents are taxed on their worldwide income and assets. You will be required to file an income tax return once a year. If you work in Spain, lease property or derive any income in Spain (or abroad) you need to submit IRPF.
- Wealth tax (Patrimonio): This tax is only paid by affluent taxpayers; most people do not have to pay it. As a Spanish resident you have a personal tax allowance of 700,000 euro per partner. So, a couple would have a combined tax allowance of 1,400,000 euro. In addition, residents have a further allowance of 300,000 euro on their main home, per taxpayer. So, for a married resident couple, the combined tax-free allowance would be 2,000,000 euro. If your net wealth exceeds this amount, then you must file Patrimonio once a year.
- Modelo 720: All residents in Spain with assets over 50,000 euro abroad, must report it by filing the Form 720 tax form. There is no tax to be paid on completing this tax return. Its sole purpose is to act as means of control on assets held abroad by Spanish residents and nationals.
6. Apply for an EU Social Security card
It is strongly advised that you apply for one to have unfettered access to Spanish healthcare.
7. Apply for permanent residency
If you are able to demonstrate a continued legal residence in Spain for a period of 5 years, you may now apply for permanent residency, which grants you unconditional residency.
8. Apply for Spanish nationality (optional)
After 10 years of continued and legal residency in Spain, you may opt for a Spanish nationality.
Unlike in the United Kingdom, where we can hold dual nationality with other countries, Spain is very restrictive. It only allows you to hold dual nationality with a limited number of countries with which it has strong historic ties (mostly Ibero-American, the Philippines, Portugal, Andorra and Equatorial Guinea). This means that if you decide to take up Spanish citizenship you will be forced to relinquish your nationality of origin by the Authorities. Becoming a Spanish national is by no means necessary and is purely optional.
What are the benefits of becoming a resident in Spain before Brexit?
Lots of people ask Should I become resident in Spain?
Brushing aside the fact that if you remain more than 3 months in Spain, you must apply by law for residency, the fact is that becoming resident in Spain offers some great (tax) advantages.
What are the Tax advantages of becoming a resident in Spain?
- From a taxation point of view and From a healthcare point of view: How to Apply for Healthcare in Spain
Did you know that if you become a resident, for example in the region of Andalusia, there is no inheritance tax to pay? As in nil.
Did you know that if you are resident, there is a national tax allowance of 95% in inheritance tax on the main home for the surviving spouse and children? Several autonomous regions improve on this increasing it to 99.99%
Did you know that EU-residents can knock off 70%, or more, from their tax bill on renting out as they qualify for lenient landlord tax relief?
Did you know that as an EU-resident you are taxed at the lower tax rate of 19%, as opposed to the 24% applied to the rest of the world? That’s 21% less tax if you do the Maths.
Did you know that on selling your property you will not be withheld 3% of the sales proceeds by the Spanish Tax Authorities, unlike non-residents?
Did you know that under 65-year-old residents can apply for a rollover relief on their capital gains tax liability on selling up? Meaning no CGT is paid.
Did you know that over 65-year-olds may benefit from absolute relief on selling their main homes? Meaning no CGT is paid.
These are just a small sample of the many benefits that await you on taking up residence in Spain.
Seek tailored legal advice on your particular circumstances.
At the same time, economic data releases continue to influence exchange rates, and any sign of the UK’s economy suffering at the hands of the uncertainty of the winter could also send exchange rates lower again.
Is it a good time to buy in Spain now?
If you are concerned about the coming months, and falling exchange rates potentially stretching your budget too far, you can talk to a currency broker, who can offer you fixed exchange rates in advance, with a forward contract, as well as guidance to help you through the Brexit muddle. A forward contract is a popular way to secure your property price in Pounds sterling, at the time of putting down your deposit; so there will be no nasty surprises should the exchange rate move against you between agreeing on the sale and your completion payment.
A currency broker will also often save you a small fortune compared to using your high street bank for all your international payments,
With some buyers currently delaying their purchases, it is also something of a buyer’s market in Europe currently, helping you to negotiate; add to that, exchange rates holding up better than you might expect, and in fact, there is an opportunity to buy now at good value, and without exchange rate risk.
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