British residents in Spain and Brexit

On the 29th March 2019 the UK will officially leave the European Union, of which it has been a member since 1973. What is the impact of this on British residents living abroad, particularly in countries such as Spain?

To begin with, the EU and UK have agreed upon a 21-month ‘smooth landing’ transition period, but right now all eyes are on the all-important negotiations between the two parties, as they will most likely determine whether there is to be a soft Brexit with a deal or a hard Brexit with no established trade agreement in place. If it is to be the latter, this will naturally have a greater impact on those UK citizens living abroad.

The transition period effectively means that the post-Brexit relationship between the UK and EU comes into effect from 1st January 2021. What is agreed now – or not agreed –will come into effect then, and it will have a far-reaching effect on trade relations, travel, security and the status of EU citizens in the UK and vice versa. Specifically, it will set import tariffs, border control regulations, the details of mutual security arrangements and other cross-border collaborations, and define the rights and obligations of those who live, work and travel between the UK and the countries that make up the EU bloc.

There is a growing campaign for a new referendum but the powers that be, both the Conservatives and the main opposition Labour Party, are opposing it, keen as they are to push Brexit through – deal or no deal. One of the key issues is that all EU regulations and laws will no longer apply to the UK upon Brexit. For British people living within EU countries such as Spain, there is a worry about residency rights, work permits and access to free (emergency) health care.

Countries such as Spain will, of course, want to be lenient, especially as the UK is an important tourist and second homebuyer market for the country, and especially those who have established themselves in the country before 29th March 2019 will see their rights and privileges enshrined in what is likely to be a reciprocal agreement with the UK. But the Spanish authorities will also want to make it possible – and convenient – for British nationals to visit and buy in Spain, so no harsh measures are expected with regard to their residency, healthcare and work status even after Brexit comes into force.

Both the UK and EU want to avoid the need for visas for travel between the two, and this forms a unifying element in the negotiations, though longer study, work and residency requests will theoretically become more complicated than they are now, yet countries benefiting greatly from tourism and residential tourism like Spain are expected to find ways to smooth the process out. Even if there is no Brexit agreement those people who arrived in Spain after the cut-off date in 2019 will probably have to apply for residency status, obtain local ID documentation and then apply for Spanish health care coverage. This is likely to be easier for pensioners and investors than for those seeking work or moving without means, but if you come with a job your company will do much of the arranging for you.

Moreover, those who have work here, paid taxes and/or contributed to Spanish social security will be entitled in proportion to what they have put in, as is the case with non-British citizens in the UK, but one thing that will change after Brexit comes into force is inheritance tax, where “British inheritors of assets in Spain will see their tax-free allowance dropped to €17,000 per heir, while income tax will be charged at the applicate rate of 24% with no possibility to offset incomes from rentals expenses incurred in keeping the property in good condition, nor from paying property taxes and community fees,” says Adolfo Martos Gross of Gutiérrez del Álamo Abogados in Marbella.

Conversion rates

The pound has suffered since Brexit, dropping to a level that is currently 15% lower than it originally was against the Euro, although rising with each promise of a deal whilst dropping whenever the latter seems unlikely. A soft Brexit would see the pound rise again, which would of course be beneficial for British homebuyers and tourists, while the uncertainty involved in a hard Brexit with no deal could see sterling drop further.

Summary

While much uncertainty still surrounds Brexit, both for the UK and to a lesser extent the EU, it seems the rights of British residents in Spain will certainly be protected, although while new regulations will officially make things harder for those who arrive post 29th March 2019, it is certainly in the interest of countries like Spain to keep the flow of tourists, homebuyers and indeed investment from the UK flowing with as little incumbrance as possible.

 

 

 

Adam Neale | December, 2018