The possibility of Britain leaving the EU and the upcoming referendum on 23 June has naturally made British buyers and owners of property in Europe wonder what effect a possible Brexit will have on them.
Peter Esders, commercial director of legal services company Judicare, explores the potential impact of leaving the EU on overseas property owners and purchasers.
The ability to buy and own property
At the moment within the EU we have the right to buy property without having to apply for permission from the government of that country. That will not change under the Cameron deal. On the other hand, if there is a full exit from Europe then in theory this may be necessary.
In some countries foreigners are not allowed to buy properties and in other countries you have to get permission from the authorities to buy property. Would this be the case if there was a Brexit? We think that this is unlikely as the mechanics of unravelling the current situation would be too much to consider.
With so many British people owning property in Europe and Europeans owning property in Britain, if there was a full exit then new treaties would have to be signed with each country allowing the reciprocal right to buy property otherwise you would have a total stagnation of the property market for foreigners buying property within Europe and a major problem for those who already have properties.
The ability to visit, live, work and retire within the EU
It is difficult to get accurate figures for the number of Brits who live or work abroad in Europe. It is estimated to be around five million Brits living abroad and figures seem to vary from between 1.5 million and two million of those are within Europe.
Under the deal negotiated by Cameron there appears to be no change to those people in that they can continue to live and work within Europe. Under a full exit then potentially all these people would have to apply for a visa to live, work or retire within countries within the EU. How this works in practice for those who are already living within the EU nobody seems to know but it would seem sensible that there is a transition period within which they have a certain period of time to apply for a visa to continue living in that country.
How that visa would work (i.e. whether you have to apply for it each year or it is valid indefinitely) again seems to be unclear but it would be likely that the British government would have to negotiate treaties with the individual countries so this may vary from country to country. Many Brits have bought properties in Europe rather than further abroad due to the ease in travelling to European counties in terms of flight times and lack of visas. If you had to apply for a visa each time you travelled to your holiday home (even for a long weekend) would this put people off from buying abroad?
Finance, pensions and health care
Most of the focus on the European deal has been around finance and migration. At the moment, and under the deal there is the free movement of money to Europe and Brits living or visiting European countries have the benefit of free medical care. If we had an exit from Europe then it might be that the movement of money abroad may become more difficult. Certainly until new treaties are struck with individual countries, visitors are likely to have to take out private healthcare or travel insurance rather than being able to rely on the European Health Insurance Card (EHIC) as they can at the moment.
At the moment within Europe people who have retired from the UK to Europe have the benefit of annual increases in the state pension. This does not happen in some countries outside of Europe. Would an exit mean that pensions for those living in Europe are frozen or would new treaties be drawn up to replicate the existing situation.
In terms of exchange rates (which affect not only property prices but also the cost of living and the cost of visiting a European country) there are so many other factors that come into play that it is difficult to see how either staying in Europe or coming out would have an effect. Undoubtedly once the result of the referendum is known this will have an immediate effect one way or another but after that initial change other economic factors will also have an effect.
Tax
When you own a property in Europe and rent it out you should declare income tax in that country and also declare that income tax in the UK. Similarly if you sell property abroad you should declare the Capital Gains Tax in that country and also in the UK. Similar principals apply for inheritance tax paid on assets in Europe. You don’t however need to pay tax twice as we have double taxation treaties with various countries so that you can offset the tax paid in that country against the tax you would have paid here.
These treaties should not be affected should we come out of the EU and therefore as far as tax for property owners is concerned a Brexit should not be affected. Having said we have seen situations in, for example, Spain where governments have had a different rate of tax for residents and non-residents and have been forced to equalise the rates as they were considered discriminatory by the European Court of Justice. Could an exit allow a return to discriminatory tax treatment of British people as they are no longer within the EU? We doubt as it would be difficult to apply one tax for non-residents who are inside the EU and one for those who are outside the EU.
Conclusion
The effect of staying in Europe with the terms negotiated with the other European countries would have very little effect for most people who live, work or visit European countries. The right to buy property, work, retire and receive healthcare would continue as it does at the moment.
If we have an exit then the effect would be that all of this would disappear but as there is already so much interaction between the countries and so many Brits living and working in Europe and even more who own property it is likely that it would be necessary to put into place treaties to recreate the situation that we have at the moment or at least allow those who are already in the system to continue as they are.
