How is Brexit likely to affect non-resident's Income Tax in Spain?

If you own real estate in Spain, but are not resident in the country, you are liable to pay non-resident's income tax. You must submit an annual return every year and will be asked to pay an annual tax, if you are using the property as a holiday home.

What you will be taxed will depend on the rateable value of your Spanish property. The amount is usually not very high, as it is based on a taxable amount of 1.1% of the rateable value of your property.

However, if you are letting the property to tourists - or even friends and money exchanges hands on a regular basis - you must submit quarterly returns in which you declare the income you have received and declare any expenses that you have incurred during the quarter. You must pay quarterly tax on the net income earned. The tax is payable quarterly in the first 20 days of January, April, July and October.

At present, nobody knows for certain how Brexit will affect British owners, who will then be categorised as non-EU citizens, who pay a 24% rate of tax on net returns (income less expenses) on property rentals. EU-based owners and taxpayers residing in Iceland and Norway, who do let out their properties, pay only 20% tax on their rental returns. Owners who do not rent out their properties pay 20% of 1.1% of the rateable value of the property.

Negotiations are still taking place between the UK government and the EU, so this may not happen, but UK owners of Spanish real estate should prepare for this taxation scenario to happen.