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Brexit flag up, Spanish Property issue, Scotland Research Service

Brexit flag up, Spanish Property issue, Scotland Research Service
Brexit Flag up
 
Our VAT/Customs specialists have flagged up a few things to me recently some of which maybe time sensitive. I therefore attempt to share these thoughts with you on the attached notes.  
 
Spanish Property Brexit Dilemma
  • Do you have any UK resident clients who rent out Spanish properties? If you do you might want to flag up a potential problem for them after 31st December 2020.
 
  • From 1st January 2021, your client will be treated as a non-EU resident for Spanish tax purposes. This will mean that your client will be taxed not at the present Spanish tax rate of 19% on their net rental income but 24% on their gross.
 
 
  • After taking account of the tax credit against the UK tax lability under the terms of the UK/Spanish tax treaty, there may be an excess element of Spanish tax that cannot be recovered. This will be worse for basic rate taxpayers than higher rate ones.
  •   
Example: (Assume the exchange rate is £1:1 Euro)
 
Tom Pope rents out his Spanish villa for 1,300 euros a month with mortgage and other costs 900 euros a month.  He is a 40% UK taxpayer.
 
At present: Tom would suffer Spanish tax on his net rental income (15,600 euros – 10,800 euros) x 19% = 912 euros. This would be credited against his UK rental tax bill of £1,920 leaving him to pay £1,008 across to the UK tax authorities.
 
From January 2021:  Tom would suffer Spanish tax on his gross rental income 15,600 euros x 24% = 3,744 euros. This would be credited against his UK rental tax bill up to £1,920 leaving him with excess Spanish tax which is not presently refundable of 1824 euros/pounds.
 
Scotland Research Service (SRS)
 
  • The Scottish Government have set up the Research Service for those Scottish businesses who have historically sourced their supply through the EU.
  • This is to help those businesses to look at the possibility of re-sourcing the supply to within the UK, either on a short, medium or long term basis.
  • Once a new UK supplier has been selected, the SRS can provide a company profile, credit report and background media check.
Brexit Thoughts and Issues
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