What's new in the EU: Asset ownership after Brexit.
As the UK settles into its new role as a ‘third country’ in the wake of 31 December 2020, Britons need to explore and understand the new rules relating to their much-loved French gîte, Swiss chalet or Mediterranean yacht.
Following plenty of scaremongering throughout the 2020 negotiations, we are beginning to see a clearer picture of how Brexit will impact overseas property owners. So if you own assets in the EU, or perhaps you are contemplating investing, here is what you should be considering.
Those who own property in an EU country are widely protected by the United Nations Universal Declaration of Human Rights and the European Convention on Human Rights, both of which ensure individual property rights must be respected.
However, each member state has the freedom to implement their own laws and regulations for foreign property owners and it is possible that a member state’s attitude towards Brexit will sway how Britons are taxed and regulated there going forward.
This means that it will be necessary for British purchasers and owners to familiarise themselves with each individual regime and engage local advisors to stay abreast of changes in stamp duties, conveyancing processes and the impact of currency changes. For investors, post-Brexit currency indications so far show that investors are likely to see fewer Euros for their Pounds.
Although Britons do not need to be resident in a country to buy property, they are likely to require a bank account (and ideally a local correspondence address) and a visa could become more commonly required in the absence of free movement.
How long can your EU visit be?
The EU’s freedom of movement agreement previously allowed Britons to visit their property in the EU as often as they wished and for any length of time.
However, the EU limits the stays of non-EU citizens in its territory to a maximum of 90 days within any 180 days period. In practice, this means Britons will be eligible to stay six months per year so long as they are careful not to stay more than 90/180 days. The 90 days rule applies to the total number of days for all countries in the Schengen area.
Although no formal travel visa will be required for British nationals for these types of short visits, overstaying can lead to a fine and even deportation and future travel bans.
Although there has not been significant change in this area since Brexit, it is still important to consider the possible routes of succession when you own property in the EU. The EU Succession Regulations were introduced in 2015 and allow an individual to choose that the law of the country in which they reside or of their nationality should apply to assets that are situated in an EU state.
For Britons who wish to select the law of England & Wales, this is a sensible way to avoid European forced heirship rules from applying to your overseas property (both moveable and immoveable). You should express your choice of law clearly in your will, by making an appropriate election.
It is always advisable to seek local legal guidance to ensure that the provisions of the law you have chosen are not contrary to local public policy.
This is an area where there are instant changes. For instance, an EU citizen pays rental income tax in Spain at 19% whereas a non-EU citizen will pay at 24%. The same can be said for France where the rate will increase from 19% to 25% for rental income.
Value Added Tax (VAT) on asset purchases such as yachts is also an essential issue to consider. VAT was established by the EU and is levied by the government of each state. UK yacht owners who wish to sail between the EU and the UK after 31 December 2020 have been encouraged by HMRC to carry evidence of the vessel’s VAT status on board at all times in preparation for checks by customs officials.
This is due to a change in VAT treatment whereby owners who bought their vessels in the EU (but who have not yet brought them to the UK during their ownership) will be liable for a repeat UK VAT charge unless they return to the UK before June 2022, even if they paid EU VAT on the initial purchase.
Non-EU vessels visiting EU territorial waters may stay for up to 18 months without being liable to pay VAT. Leaving the EU (such as a quick sail to Turkey) and returning to the EU again will reset the 18-month clock.
The road ahead
Of course, there is no reason why third country citizens would be discouraged from property ownership and tourist visits to EU countries. Many European countries will be trying harder than ever to promote this after a year of pandemic restrictions.
That said, as non-EU citizens, those of us who are lucky enough to enjoy property ownership overseas will have a longer list of due diligence to tick off.
If you have any questions, or would like to discuss this further, we would be happy to advise on or help with any aspect of raised in this article, please speak to your usual contact at Maurice Turnor Gardner LLP or email us at firstname.lastname@example.org.
These notes do not contain or constitute legal advice, and no reliance should be placed on them.
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