Following the UK’s vote in favour of Brexit galiciaproperty.com takes a look at what the likely implications for British owners of Galician property are.
First up we have to define Brexit, and this is not that easy when the UK government currently defines Brexit as “meaning Brexit”! As much as anything this circular definition is probably to leave as much political wriggle room as possible for something that may take a very different form to that presented by the Leave camp before the vote or that may never even happen.
Based on the central themes of the Leave campaign, however, a Brexit-as-proposed would feature:
A) Britain formally leaving the EU
B) Britain no longer having an unrestricted freedom of movement treaty with EU countries
…and so for this article we’re going to look at the effects that would have on British property owners in Galicia.
First we’ll take a look at the position for property owners who are not resident in Spain.
1) Right to own property
Many countries place restrictions on foreign nationals owning property, but Spain isn’t one of them and so British owners of Spanish property wouldn’t face any problems in this regard.
2) Right to travel freely between the UK and Spain
Currently there are ideas being floated around to require post-Brexit UK nationals (and nationals of any other non-Schengen area country) visiting Europe (the Schengen area) to complete a visa waiver form, for which a £10 admin fee would be charged, several days prior to travel .
There is some political expediency about this information coming out whilst the post-Brexit vote political posturing is ongoing, and so this might not happen as proposed. Even if it did the likelihood of any actual restrictions on travel between the UK and Spain is negligible.
3) Tax treatment of Spanish properties owned by UK nationals
Spanish law currently doesn’t discriminate between non-resident EU and other nationals and so there is no reason to expect any change in this area.
Under Spanish law, however, as well as payment of the annual property tax (IBI) and garbage collection tax an annual tax declaration is in fact required from all non-resident nationals owning property in Spain, and even if the property is not rented out a tax based on its assumed rental value is due each year. You can see details about this here:
Many UK non-resident owners of Spanish property don’t know about this and have never complied with this law, which up until now has typically not been enforced, probably due more than anything else to the inefficiency of Spain’s vast bureaucracy.
Increasing digitisation of records is, however, making information exchange between Spanish authorities much easier. Add to that the fact that UK nationals are probably the biggest non-resident owner group and it has to be anticipated that for both political and financial motives there would be a crackdown on payment of these taxes, quite probably backdated and with penalties.
If this did happen foreign property owners who hadn’t paid these taxes would be in an extremely weak position – it is the law, Spanish assets (the Spanish property) can potentially be charged against or seized due to non-payment, and any challenge would have to go through the Spanish courts.
If you are paying this tax already then there is no reason to anticipate any post-Brexit changes or problems in this area. If you aren’t, start!
4) Value of the pound vs euro
Before the possibility of Brexit started to be taken seriously the pound was sitting at around 1.4€. Since the Brexit vote it has fallen to around 1.18€. On the plus side, in pound terms the value of Spanish property has risen, but on the minus side so has the cost of maintaining a Spanish property. If, as an example, a Spanish property costs 10.000€ a year in mortgage payments, taxes and upkeep, whereas in 2015 this would have cost £7,140 it now costs £8,475, which is a significant increase.
This pretty much covers the position for non-resident owners, which is some relatively minor negatives, but fundamentally unchanged.
Next let’s take a look at the position for property owners residing (and working) in Spain on a UK passport. As well as the issues above, which also affect residents, there are the following considerations:
1) Right to reside & work
Currently you can legally reside and work, as an EU citizen, in Spain on the basis of a British passport, as can a Spaniard in the UK on a Spanish passport.
As perhaps the major theme of the Brexit Leave campaign was controlling immigration the assumption has to be that if Brexit happens there will no longer be a freedom of movement treaty with the EU, and that Spain will be unlikely to have any separate treaty with the UK covering this.
This would mean that Spaniards would be unable to go to live and work in the UK without having to apply for a visa. Assuming this it’s politically unthinkable that Spain wouldn’t apply the converse and that there would no longer be an automatic right of residence and right to work in Spain for British citizens and to either live or live and work in Spain UK citizens would have to apply for a visa.
The likelihood is that there would be relatively easy visa requirements, but these would probably be along the lines of company sponsored (i.e. a company wants you for a specific job in Spain) visas or visas to reside based on economic means (i.e. you have to show enough savings/income to support yourself for the duration of your visa) but that don’t include the right to work in Spain and don’t provide state benefits such as healthcare (this type would be primarily geared towards British pensioners).
There is one major possible exception to a visa requirement and that is a bilateral one covering EU citizens living in the UK before a cut-off date and British citizens living in the EU before that same date.
This idea of guaranteeing rights to live and work for people who had moved between the UK and the EU prior to Brexit has been aired fairly frequently of late by the UK government, and as more opposition from the UK than from the EU would have been expected (because immigration issues fuelled the Brexit vote and because the UK has a proportionately high number of low paid EU workers) it has to be viewed as likely to happen. The remaining question would then be what is selected as the cut-off date – the day of the Brexit vote, when the UK invokes article 50 of the Lisbon Treaty,???
If this does come into play then the way to ensure eligibility for it is to ensure that you are properly registered as resident in Spain, which is done in two ways:
* You have a NIE and are registered with the Spanish police (oficina de estranjeros)
* You are on the Padron (empadronado) in the Concello you live in
It might also be a requirement to have been filing tax returns with the Spanish tax authorities as a resident.
2) Right to healthcare
Whereas the British healthcare system is based on residence (it’s available to all UK residents) the Spanish system is based on social security contributions. Different groups are likely to be affected by this in different ways.
Currently, under EU law, EU citizens of retirement age who worked the majority of their working life in country A but who move to country B are entitled to full state healthcare (equal with citizens of that country) provided by country B but paid for, via an S1 form, by country A (who also have to provide an EHIC card).
As many British pensioners retire to the EU (particularly Spain, France and Italy) but comparatively few EU nationals retire to the UK it’s reasonable to assume that the current system (for retired British citizens living in Spain, Spain provides healthcare which the UK pays for) could continue if the UK wanted it to …but the chances are that it won’t, as evidenced by the lack of similar provision for UK nationals who retire to (ex-)Commonwealth countries such as Australia and Canada.
The probability, therefore, is that retired UK nationals living in Spain will have to buy private medical insurance, and that proof of this will be a visa requirement.
As with residence rights, though, it’s possible that there may be some exception made for UK nationals already living in the EU at some Brexit cut-off date.
* People paying social security contributions
Nationals of any foreign country who are resident in Spain and paying social security contributions currently receive full state healthcare, and it’s unlikely to see this situation changing.
* Economically inactive but not of retirement age
UK nationals who are resident in Spain but not paying social security contributions were eligible for free state healthcare before 2012, but since then have only been able to get cover for any period an S1 form from the country they were previously resident in provides (which in the UK is up to 2 years, based on social security contributions over the last 5 years).
As with pensioners the likelihood is that this group would be required to have private medical insurance and that proof of this would be needed to obtain a visa to reside in Spain.
Galicia, however, is rare amongst Spanish autonomous communities in that it does have some provision for people who do not have the right to medical cover paid by the Spanish state but who live legally in Galicia and have insufficient economic means to buy private medical insurance.
This is applied for from the Xunta de Galicia, and you can find details here.
Whether and how this might change for UK nationals living in Galicia post-Brexit is hard to say, but as this program currently does not discriminate based on nationality the hope is that it would continue to be available.
3) Right to benefits
Spanish benefits (child allowance, unemployment, etc.) typically aren’t generous in comparison with those of the UK, but do still provide some income for some UK citizens living in Spain.
As most benefits available to UK nationals living in Spain are mandated by EU law the likelihood is that these would no longer be available to UK citizens in Spain after a Brexit, although contributory benefits such as unemployment or Spanish pension would presumably continue to be available to any legal Spanish resident who had made sufficient Spanish social security contributions.
Again it is possible that two different sets of rules will come into force here, one for UK nationals who moved to Spain before a certain date, and a different one permanently thereafter.
4) Pension inflation
UK pensioners living in another EU country have their pension raised in line with those of UK pensioners, which is EU law. On the basis that this same benefit is not available to UK pensioners living in most (ex-)Commonwealth or other countries, it is reasonable to assume that in the future the same general rule (the pension amount is frozen on the date of leaving the UK) would apply to UK pensioners living in Spain.
As with other rights and benefits, this is another area where some special case provision might be made for UK citizens who had moved to the EU before a given cut-off date.
5) Voting rights
UK citizens currently living in Spain are entitled to vote in local (Concello) and European parliament elections. As Concello voting rights are based on legal resident status and being registered on the Padron this would not be affected. European parliament voting rights would presumably be lost on the basis that UK citizens would no longer be EU citizens.
UK citizens living abroad have the right to continue voting in UK national elections and referenda (in the constituency of their last UK address), but this right is lost after 15 years living abroad.
6) Right to Spanish nationality
Anyone who has lived legally in Spain for 10 continuous years has the right to apply for Spanish nationality (and there are various exceptions such as being married to a Spanish national that reduce this period). Part of the criteria for obtaining nationality are speaking Spanish, integration in society and a Spanish citizenship test.
The major negative for most UK citizens is that Spain, with a few exceptions for Latin American countries, etc., does not allow dual nationality and so UK citizenship has to be surrendered in order to gain Spanish citizenship.
As the UK already allows dual nationality in most cases, and as the granting of citizenship remains very much under the control of individual nations within the EU, there isn’t an obvious basis for a bilateral deal offering exceptions in terms of dual nationality to UK citizens living in Spain before a Brexit cut-off date, but it’s not an impossibility.
In summary, whilst there are potentially very serious implications for UK citizens living in Spain there is really no clear picture of how this unprecedented process of a country leaving the EU is going to (if it happens) work out.
For those caught in the middle the only policy is to wait and see, but at the same time to ensure that they are properly registered and paying all due taxes in Spain at the earliest opportunity so that if exceptions are made for UK citizens residing in Spain before some Brexit cut-off date they are able to take full advantage of these.