For many, finding a place in the sun to retire or work from sounds like a dream scenario. One such location you may have considered is sunny Spain, as this has long been a favourite for British expats.
In fact, interest in retiring to Spain seems to be growing, with research reported by IFA Magazine revealing that the average monthly searches from Brits about retiring in Spain has risen by 23% year-on-year.
However, if you’ve ever considered purchasing property on the Iberian Peninsula, you may have recently seen news that the Spanish government has proposed a new property tax that could have significant implications for non-EU buyers.
Indeed, under the new proposal, non-resident, non-EU people – such as British citizens – could face a tax of up to 100% of a property’s value when purchased.
While this remains a proposition for now and there are no details about how or when it would be enforced, it has resulted in discussion.
The proposal has been made as a potential way to tackle Spain’s growing housing crisis. Over the past decade, property prices in Europe have risen by 48%, nearly twice the rate of household income growth, FTAdviser reports.
Limiting foreign investment in real estate, could help the Spanish government to make homes more affordable for locals.
Continue reading to discover what this proposed change could mean for you, and how a specialist planner could help you retire abroad regardless.
The proposed 100% property tax could affect both prospective and existing expats
While the proposed property tax could mean you have to pay more – as much as 100% – on homes in Spain, it’s worth noting that property taxes have been relatively high there for some time.
Indeed, MoneyWeek states that international property buyers currently pay a rate of tax ranging from 10% to 12%.
A 100% increase on purchasing property in Spain would effectively double the cost of buying a retirement home, turning a €300,000 villa into a €600,000 investment.
Understandably, this could make Spain a far less attractive option for a retirement in the sun or second-home purchases.
There are also wider implications for the property market in Spain. Some experts are suggesting that the measure may turn away foreign investment, potentially cooling the real estate sector.
British expats who already own homes in Spain are also concerned about the knock-on effects of this; fewer international buyers could mean property values fall, reducing the value of their existing assets.
It’s also worth noting that the situation is complicated by the end of Spain’s “Golden Visa” scheme. This allowed non-EU nationals to gain residency by investing at least €500,000 in Spanish property.
With this now closed, if you’re hoping to retire or relocate to Spain, the 100% property tax may feel like another barrier
As a consequence, countries such as Portugal, Italy, and France might become even more attractive options as they may offer more favourable tax conditions for expats.
Working with a financial planner could help you retire abroad
While this property tax remains a proposal, it serves as a reminder of how financial landscapes can change.
If you’re a British retiree and would-be expat, the news highlights how important it is to stay informed about financial regulations – both at home and abroad – and how they could affect your long-term plans.
This is where professional and bespoke financial advice is invaluable. At Alexander Peter, our advisers (many are expats themselves) understand the unique challenges you may face.
As such, they could help you deal with complicated international tax laws and property options, while ensuring your retirement plans remain on track.
Whether you’re a British citizen planning a move abroad or an existing expat considering your options, please email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
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