BREXIT | Property Venture

Home buyers and owners in France and Spain – watch out

One of the biggest changes for Britons buying or owning homes in an EU country since the start of 2021 has been the length of time you can stay.

And there is another…… taxes

As non-EU citizens, Britons no longer benefit from EU exemptions. What does this mean in practice?

Let’s take a homeowner in France

Vendors in France are usually subject to both Capital Gains Tax (CGT) and social charges which fund the services in France – of which there is no direct equivalent in the UK.

Social Charges increase from 7.5% to 17.2% if the seller is not an EU or EEA citizen. More than double the rate for non-EU citizens.

Combined with 19% CGT, it means that a property vendor pays a total of 36.2% in tax, with CGT and social charges combined, on the profit they make from their home at the point of sale.

There are also increased property expenses

As an EU citizen there is no need for a “fiscal tax representative”, which charges around 1% of the sale price to do a capital gains tax declaration. But as a non-EU citizen a Briton is obliged to make a capital gains declaration supported by a tax representative accredited by the French Tax Authority.

There is a glimmer of hope… in bureaucracy and exemptions

With France it is always a good idea to get financial and tax advice, as there are exemptions available to sellers and various ways of buying a property in a ‘Special Purpose Vehicle’ (SPV) of which there are many forms in France, all with upsides and downsides..

Apart from setting up in an SPV, there can be exemptions when buying personally. For example if you’ve held the property for more than 30 years – you are not liable to social charges or CGT in France on the gain.

Or you can plan for this in a similar way to the UK, by moving into the home in France and making France the primary residence, thus in theory enabling a house sale without attracting CGT using the main residence exemption.

As in the UK there are rules around this, so tailored advice is needed.

How about homeowners in Spain?

Another popular country for Britons buying a holiday or retirement home, but where the tax regime is different for non-EU citizens.

Income tax is levied at 19% for EU citizens but 24% for residents of a ‘3rd country’

And whilst it is still ok to get mortgages, banks might not lend as much money against the value of the property. Banks in Spain are tightening loan-to-values and post Brexit mortgage lending is typically at 60% LTV, lower than the 70% LTV for EU citizens.

This means having more cash available as a home buyer in Spain, given a 40% deposit is likely to be needed and along with buying expenses at 12-13% as a home buyer you may therefore need 52-53% of the value of the property in cash.

Increased cross-border visibility of tax affairs

Whilst Brexit has fragmented our relationships with Continental countries somewhat, we live in a world of increased traceability. It is worth taking note that there is a Directive (2018/822) called DAC6, an EU mandatory disclosure regime that imposes mandatory cross border reporting on tax matters for tax residents in one or more EU State, meaning there is greater cross border reporting of tax affairs.

Double Taxation Treaties are international and exist between the UK and most Countries around the world, meaning you don’t pay the same taxes twice.

Whilst these fiscal changes are more enduring, let’s hope stock blips of British products on the Continental supermarket shelves are only temporary and the logistics and transportation challenges get resolved soon.

If you would like help finding the right property for you then please get in contact.

My business focuses on helping time-strapped expats and busy business people who don’t have the local presence, or capacity, to acquire the ‘right’ properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.

Disclaimer: Property Venture® is not a tax adviser but has outlined information in layman’s terms to enable top line comparisons, nor is it offering advice.

With regard to in-country legislation, letting licences and taxation laws, then you must take appropriate legal or taxation advice during your purchase process, at which time your solicitor or advisor will discuss with you up-to-date legislation and costs

Tags: BREXIT, holiday home, retirement

European Homeowners – where has Brexit left you?

We have been waiting a long time to find out about the situation for Homeowners and Homebuyers in Continental Europe, following the 11^th hour deal between the UK and EU and what it means for:

Travel and moving around the European Union (EU)
European Homeowners
Finances / Taxation / Pensions
Health
Spain – a snapshot for homeowners
France – a snapshot for homeowners

Travel and moving around the EU

From January 2021 the right to free movement guaranteed under EU rules ended for UK residents, who will only be able to remain within the Schengen-free zone ( most EU member countries), for a maximum of 90 days, within each 180 day period as a tourist. And this is irrespective of whether it is for work or leisure, in that country, or any other in the Schengen zone. There is a 180 day allowance over the entire year.

This is a challenge for people who have got used to homeworking and the idea that work can be non-location specific. This means some employed and self-employed Brits are feeling the draw to move to and work from countries like France, Spain or Portugal.

What if you want to stay longer?

Staying longer than 90 days in any 180-day period, to work or study, or for business travel, you will need to meet the entry requirements set out by the country you are travelling to. This could mean applying for a visa or work permit. Periods of time authorised by a visa or permit will not count towards the 90-day visa-free limit.

Passports and travel

You will need at least 6 months left on an adult or child passport to travel to most countries in Europe (not including Ireland). As a non-EEA national, different border checks will apply when travelling to other EU or Schengen area countries. You may have to use separate lanes from EU, EEA and Swiss citizens when queueing and you may need to show a return or onward ticket.

Different rules will apply to EU countries that are not part of the Schengen area and each country’s travel advice will need to be checked for entry requirements.

Driving Licence

A UK driving licence will continue to be valid to drive in EU countries. The exceptions are people who only have a paper licence, not a photocard one, as well as those with licences issued in Gibraltar, Guernsey, Jersey or the Isle of Man. In these cases an International Driving Permit (IDP) may be needed.

You will need a green card, which is a document you get from your insurer to prove your car is covered if you are driving in Europe. Motorists should contact their insurers six weeks before travelling, to ask for a green card. Separate green cards are needed for trailers and caravans. The green card is only proof of a minimum level of third-party cover – it will not necessarily match the level of cover that you pay for in the UK.

If you want to take a UK-registered vehicle to the EU for longer than 6 months of the year it is likely to be needed to be registered within the country and you may need to pay some taxes.

European Homeowners and homebuyers

If the ’90 day’ limit is too restrictive you might consider other options like residency or citizenship. A resident is a person who is legally living or working in a particular locality, a citizen legally belongs to a country. Once you become a citizen of a country, you can then apply for a passport, whereas residency status is usually conditional and you can only apply for a travel document such as an ID card.

Residency in an EU country will enable you to travel more freely, a bit like a Schengen visa, but you only have the right to reside in that specific country. Citizenship in an EU country means you have the right to live, work and study in any other EU member country, which opens up access to other EU countries.

There are a number of countries which offer a so-called ‘Golden Visa’ programme, which tend to be conditional on investment in the country of concern which includes investing in property. Residency, offered contingent on buying a property of a certain value, can often be upgraded to citizenship.

Some countries that offer this type of incentive include Portugal, Greece (Residency only), Cyprus, Malta, all at differing investment thresholds.

Finances/Taxation/Pensions

The UK arguably has a reasonable taxation system and some Continental European countries have higher personal taxation regimes. Becoming resident of another EU country can mean being taxed in that country on worldwide income and potentially assets too. If you are not a resident, you will usually only pay tax on income that came from that European country.

If you are a property investor, filing tax returns in an EU country, the UK has double taxation treaties with most countries and this gives protection at an international level (not EU legislation level) that – in essence – you won’t get taxed twice on the same income.

It is worth checking the taxation protocol of the country of concern to see if the tax regime changes for citizens of ‘3^rd countries’

Pensions

Whilst State Pension payment should not attract bank charges being paid, expats might incur extra charges for Private Pensions being paid into foreign bank accounts

Health

A replacement for the EHIC card is being introduced – a UK Global Health Insurance Card (GHIC) gives you the right to access state-provided healthcare during a temporary stay in the European Union (EU). In the meantime EHIC cards are valid until the expiry date shown and it’s a question of ensuring travel insurance covers other medical needs which might not be covered.

Spain – Homeowner Snapshot

If you were legally resident (and correctly registered) in Spain before 1 January 2021, you will be able to stay.

The Spanish system Tarjeta de Identidad de Extranjero (TIE) is being rolled out to register permanent foreign residents – but there is a backlog. So proof of application is meant to be sufficient at this point in time by way of the ‘Green Certificate’ a green A4 certificate or credit card-sized piece of paper from Extranjeria or the police. This is still a valid document and proves your rights under the Withdrawal Agreement.

You can exchange your paper ‘Green Certificate’ residence document for the new TIE but you are not obliged to. The Spanish government recommends obtaining the TIE because the biometric card is more durable and may simplify some administrative processes.

You will also need your NIE – Número de identidad de extranjero (similar to a National Insurance number).

If you have not yet applied for a residence document, you should carry evidence that demonstrates you are resident in Spain. This could include a tenancy agreement or a utility bill in your name, dating from 2020.

EHIC European Health Insurance Card and State healthcare: S1

If you have a registered S1 form (for Spanish Healthcare) and were living in Spain before 1 January 2021, your rights to access healthcare will stay the same e.g. receiving a UK State Pension

If you are not an S1 holder, but are registered for public healthcare in Spain in another way and are travelling outside of Spain, you may need to apply for a Tarjeta Sanitaria Europea (TSE – a Spanish-issued EHIC) for travel to countries outside the EU.

You ought to buy comprehensive travel insurance to cover anything not covered by your TSE, or EHIC. An EHIC is not a replacement for comprehensive travel insurance.

Working in Spain

If you were legally resident in Spain before 1 January 2021, you have the right to work, as long as you remain legally resident. If you are planning to go to Spain to work, you may need a visa or permit. You should check with the Spanish Embassy in the UK.

France – Homeowner Snapshot

For those of you with homes in France you visit but want to stay for longer periods then the new system in France will be of interest.

British citizens living in France will have to apply for a residence permit. For those living in France prior to 31 December 2020 they can apply online by 1 July 2021 in line with the Withdrawal Agreement. You need to have your new residency permit before 1 October 2021.

British citizens who arrive in France after 31 December 2020 will need to apply for a standard residence permit at a Prefecture de Police.

All UK nationals resident in France need to apply for the new residency permit. This includes UK nationals:

with a European carte de séjour (even if it is marked “permanent”, or has no expiry date)
without a European carte de séjour (it was previously optional)
applying for a second nationality
married to or in a civil partnership with (known as PACSed) FR or other EU nationals

If you have been living in France for over 5 years, you will be eligible for permanent residency and a 10-year renewable residency permit. If you have been living in France for fewer than 5 years, you will be eligible for a card with 5 years’ validity. You will need to provide evidence of your personal situation (e.g. employed, financially self-sufficient).

If you are a British national who has already worked in France, you will be issued a residence permit valid for 5 years. If not , you will be issued an APS (Admission exceptionnelle au Séjour), valid for 6 months and renewable once, if actively seeking realistic job opportunities (there is a likelihood of being hired within a reasonable period of time).

Conclusion

Moving around and doing business has become more challenging, but there are ways to make life easier for yourself by becoming familiar with the procedures and paperwork which are necessary.

Over time as officials, travellers and homeowners become more familiar with the process travelling and living in EU countries should become easier

Disclaimer

Please note this information is provided as a guide only and has been expressed in layman’s terms. Definitive information should be obtained from the Spanish or French authorities and the Foreign, Commonwealth & Development Office (FCDO) or the NHS.

This blog provides guidance on the rules – ignoring any prevailing Covid restrictions which change continuously

If you would like help finding the right Home for you then please get in contact.

My business focuses on helping time-strapped expats and busy business people who don’t have the local presence, or capacity, to acquire the ‘right’ properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.

Compliant members of the PRS scheme and on the Advisory Board of the Association of International Property Professionals (AIPP) the business has been vetted, approved and voluntarily commits to Industry Regulation and the Professional Code of Conduct. We are known for our quality customer service and non-pressurised approach to sales. This is what our clients say

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: BREXIT, France, holiday home, Spain

From Covid Chaos to Brexit bluster for homeowners abroad

Just at the time we might be able to travel again and move about a bit more freely at some stage in 2021, then another challenge rears its head for Continental European homeowners.

From January 2021 the right to free movement guaranteed under EU rules ends for UK residents, who will only be able to remain within the Schengen-free zone (encapsulating most EU member countries), for a maximum of 3 months, within each six month period, regardless of whether a post-Brexit trade deal is done or not.

And this is irrespective of whether it is for work or leisure, in that country or any other in the same Schengen zone. There is a 180 day allowance over the entire year.

This is a challenge for people who have got used to homeworking and the idea that work can be non-location specific, as has become more ingrained in our psyche. This means some Brits are feeling the draw to move to and work from countries like France, Spain or Portugal, potentially still for UK-based enterprises.

However in spite of this, individual EU countries have some discretion, with some offering longer stays for non-Europeans who invest in property above a minimum threshold level. Or in other assets. This arrangement has been dubbed a Golden Visa.

Currently a work-around is for Britons to change their formal residence from Britain to one of the 27 members. Although from 1.1.2021 this becomes more complicated.

There are other also other considerations, like, taxation. The UK currently has a reasonable taxation system and some Continental European countries have higher personal taxation regimes. Becoming resident of another EU country can mean being taxed in that country on worldwide income and potentially assets too.

Then there are healthcare and pensions to consider. On the upside, a replacement for the EHIC card may yet still come, but in the meantime it’s a question of ensuring travel insurance covers medical needs, which we tend to do anyway. Expats might incur extra charges for Private Pensions being paid into foreign bank accounts (although State Pension payment are free).

What isn’t yet clear – given no agreement has yet been reached on the future relationship between the UK and the EU – is to what extent bi-lateral agreements between countries might be reached. Countries like Spain and Portugal have long-standing relationships with the UK and will want to maintain the status quo. London is France’s ‘second city’ on account of the number of French people living in the city, so has vested interests. What are your thoughts?

Tags: BREXIT, Covid-19, holiday home, Visa

What next for property investors in UK and Europe?

Well we are all expecting that not much will change in the UK during the ‘Transition Period’ in 2020, or at least have been told as much.

Given the UK is outside the Schengen Zone – which provides for unchecked border crossings in a common-visa area – border checks for holiday-makers and business travelers have been the norm travelling to and from the UK during membership of the European Union. There is anecdotal evidence that some Continental European countries are tightening up border checks, where previously they may have been more relaxed. For example some border mountain passes between France and Italy have been reported to be tightening up on identity checks for ski instructors who have, until now, traveled back and forth freely on a daily basis.

Houses of Parliament: London UK Property market

Thinking beyond the ‘Transition Period’, the renewed gusto with which the UK government is brandishing the potential ‘Hard Brexit’ mantle has been unsettling and it is hard to unpick the political rhetoric and negotiation posturing from the reality.

For expat and entrepreneur UK property investors some of the things you will want to know are:

Am I still going to see my investment property perform?
How might mortgages be affected?
How will the economy and job creation fare?
How much red tape will be stripped away or created when investing for European-based expats?
How might my portfolio in UK and Continental Europe be affected?
What will be the changes, if any, travelling to and from the UK?

So just to focus on a few of these..

Am I still going to see my investment property perform?

Your property’s investment performance, whether a buy-to-let or HMO or Serviced Accommodation, that potentially serves an international tenant base, depends a lot on attracting the right type of tenants and minimising voids. Arguably many of the Europeans who intended to leave, may already have done so and the situation may not get that much worse. In 2018 it was estimated 3.35 million people with EU, EEA, or Swiss nationality were living in the UK. Of these 2.8m people had applied for Settled Status, about 80% of the total number. If the relationship between the UK and Europe worsens significantly this could be exacerbated in the short term. However the UK will remain an attractive place to be for non-European nationals.

Raising finance – mortgages how will they be affected?

The City and financial markets could be hit by the renewed talk of a ‘Hard Brexit’. The stance has been that the city wants to continue trading with the EU as now, meaning equivalence rules across fund management and investment banking. Divergence could have an impact on savings and pensions. There might be a sweet spot where some divergence could work and could be acceptable to EU regulators, which could make a difference to British savers and mortgage borrowers. There is now more talk of ‘outcomes-based equivalence’ meaning third-country regimes do not need to be identical but must have the same “outcomes” as EU rules to give access to its markets.

How this might affect mortgages at this point in time is difficult to assess, but affordability tests could be affected.

In the short term we might notice some subtle differences when travelling, but it might not be until the end of 2020 we get to see what is political-posturing versus economic reality.

As for the economy and red tape it might be too early to tell. However it does feel as though the UK is far more engaged since the December 2019 General Election in pro-actively shaping its future.

If you would like to discuss your situation or find out more then please get in contact.

I work with time-strapped expats and entrepreneurs who don’t have the capacity, local presence or gaps in their know-how to build property portfolios in the right way for them. (Or who are simply stuck with little progress). This means you can carry on your day-to-day lives without spending disproportionate time getting sucked into investing.

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Property Venture® is an award-winning, European investment property specialist and sits on the Advisory Board of the Association of International Property Professionals (AIPP) the business has been vetted, approved and voluntarily commits to Industry Regulation and the Professional Code of Conduct. We are known for our quality customer service and non-pressurised approach to sales. Take a look at what our clients say

Tags: BREXIT, European Union, Expats, UK investment

Property Investor Brexit Strategies

During these times of prolonged uncertainty, businesses are spending money on contingency planning and in some instances stockpiling.

What about individual investors?

Some of them are stockpiling money and playing a wait-and-see game with investments.

Consequences of this investment strategy?

Well money can sit in banks, earning a low interest rate. Whilst inflation is currently contained at under 2%, many savings rates of return do not exceed this, or marginally so, particularly for higher rate tax payers.

But if you would like to shake off the early ‘hibernation’ and do something with some of your money, or dip your toe in the market then there are options out there.

Think about this

There are other investors out there who are making the most of this uncertainty and investing in keenly-priced stock. And for overseas investors or expats buying in the UK then the GBP Sterling exchange rate is very favourable currently.

And then there is the Property Cycle

Whether you are an advocate of the cyclical nature of property or not, there has tended to be a bounce back in prices after a period of sluggish house prices in some areas. Whether you think of it as a 10 year or 18 year cycle.

The Brexit-effect depends on the nature of your investments. Whilst we are in unchartered territory, as an investor it could be an optimum time to invest in new properties and spend time refurbishing or developing them. If an upturn is due you could be paving the way to profit once the next phase of the cycle hits.

Either way it makes sense to build in more exit options and greater levels of padding to your financial contingencies, so you are financially prepared to hold that property until the time is right.

An alternative way of investing

Some landlords and property investors are seeking ways of continuing their property businesses in a way that will give some reprieve from the landlord red tape and tax in the UK. It is a way of diversifying and getting exposure to a number of different investment categories; either different geographies, or different types of property, for example commercial vs residential property.

Alternative investing can include Crowdfunding or lending to developers.

So consider a developer who has end user ‘blue chip’ clients lined up, who knows what the end-user demand is before embarking on developments, one who works with big companies like McDonald’s and Starbucks. They also have Build-to-Rent as part of their offering, working with local authorities and sometimes pension funds, to build to demand. They have also bolstered their resources to navigate better the increasingly challenging planning approval process. And have a cross-functional board which evaluates rigorously development opportunities.

Getting exposure to this type of developer, can be done in a measured way, in bite sized chunks. Some investments start at £5,000 or £10,000, some lower, particularly if part of an IFISA (Innovative Finance Isas), where entry levels can be £1,000. Investing via an IFISA, can be tax-efficient, when used as part of a personal Isa allowance, so returns can be tax free for UK residents.

What are the upsides of alternative investing?

The returns on offer can be inflation-busting and much higher than other forms of investing. They are not always correlated with economic returns, so helps spread risk during different economic cycles. They also usually offer defined timeframes (although there are no guarantees) so this can help with planning.

It is important to note that alternative investing provides an alternative way for entrepreneur investors to get exposure to all that property can offer, but none of these ways of investing are guaranteed. Capital is at risk and returns are projected, not guaranteed. This is why many of these types of investments, whilst being accessible tend to be only available to individuals with a certain asset base or income, or who aren’t investing too much of their money in any one of these investment types.

If you would like to discuss your situation or find out more then please get in contact.

I work with time-strapped Expats and Entrepreneurs who don’t have the time, local presence or have gaps in their know-how to build property portfolios in the right way for them. (Or who are simply stuck with little progress).

Our clients get regular updates on hot deals and the latest changes in the property market. Want these? Go here

Tags: Alternative investing, BREXIT, investor stragtegies, UK investment

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