Buying a Property Overseas

IN ASSOCIATION WITH BLEVINS FRANKS FACILITATED BY RICHARD BERTIN, MEMBER OF THE ICAEW PERSONAL FINANCIAL PLANNING ADVISORY GROUP

•

POLLING QUESTION – why have you joined this webinar?

• For personal interest

• For advice when advising clients

• Both

• France • Spain • Portugal • Multiple

JASON PORTER BUSINESS DEVELOPMENT DIRECTOR BLEVINS FRANKS

Jason Porter Director | Blevins Franks. London Agenda

. Blevins Franks…Who we are, what we do . A Second Home… Don’t Forget the Foreign Tax Factor . The Inbetweeners… Trusts & Companies under the spotlight (again) . Brexit…how long can I spend in the EU? . Closing Comments Blevins Franks Who we are and What we do Who are Blevins Franks?

The leading international tax and wealth management advisers to UK nationals living in Europe Blevins Franks Group

Advising clients for over 40 years 7 countries 22 Offices 43 Partners and Private Client Managers 200+ Employees 5,100 Families €2.5 billion Funds Under Advice. Blevins Franks Group OFFICES IN EUROPE What do we do? …tax driven financial planning and wealth management advice Comprehensive Financial Planning

Cross-Border Estate Planning Tax Planning

Pensions Advice Investment Advice and Planning Blevins Franks Specialist Advisers

. Deep understanding of UK Nationals living in France, Spain, Portugal, Cyprus and Malta . Cross-border expertise . Based locally in the country where our clients live . Qualified and Regulated – UK & EU A Second Home… Don’t Forget the Foreign Tax Factor A Second Home… Two main scenarios –

. Buying a holiday home . Moving abroad whilst retaining a UK home Buying a holiday home A Second Home… Buying a Holiday Home . Simplest scenario . Subsequent sale at a profit - CGT liability in the UK, and in the country where the property is located . DTT – allows tax paid overseas to be set off against the UK tax liability A Holiday Home…

France Spain Portugal Tax Rate 19% 19% 28% Surcharge 2% - 6% Social Charges 7.5% (EEA) 17.2% (Non-EEA) Reductions Taper relief on tax Option - tax as Portugal and social charges. res. 50% gain, and Eliminated at 22 and inflation relief after 2 30 years respectively years. Add to income. Moving abroad whilst retaining a UK home Moving abroad whilst retaining a UK home . Common for UK expatriates to retain their UK home when they move overseas…  A fall back option  To rent out  Retaining a foothold in the UK property market . But now liable to new jurisdictions tax rules, reliefs and exemptions on the eventual sale of the UK home . Can be completely different to those of the UK. Retaining UK main home France… . Exempt provided it is your habitual/actual residence at time of sale . ‘All-or-nothing’ relief – just main home at point of sale . BUT - leave property before sale, and could lose relief entirely, even though may have been your main home for many years . There is no ‘time-apportionment’ for periods of occupation . An exemption of up to one year can apply year from the date the main home is vacated by occupant . Taxpayer must show he has done his best to sell the house Retaining UK main home Spain… . Main residence relief on sale of UK property if:  You lived in the property for a continuous period of at least 3 years  You buy new main home within a period of 2 years before/after sale  Must live in the new property for minimum of 3 years  Full proceeds are re-invested in new main home in Spain or EEA  Partial reinvestment – partial CGT liability . Fall foul of any of these exclusions and potentially whole UK gain is taxable in Spain! Retaining UK main home Spain… Over 65 years - . No requirement to reinvest whole or part of sale proceeds . But – must be Spanish resident at point of sale . Would not exempt Spanish home after exiting Spain

Savings Income & Capita Gains Rate Up to €6,000 19% €6,000 to €50,000 21% Over €50,000 23% Retaining UK main home Portugal…

If Non-Habitual Residence (NHR) regime applies… . Will need to hold NHR certification, and sale of UK property during first 10 years of residence in Portugal . Under NHR, gain is exempt in Portugal if it may be taxed (under the DTT) in the country of source . UK/Portugal DTT says that property gains may be taxed in the UK, so gains are exempt in Portugal. Retaining UK main home Portugal…

If NHR does not apply… . Resident in Portugal – taxable on worldwide property gains . Main residence relief on sale of UK property if:  You lived in the property for a continuous period of at least 3 years  You buy new main home within a period of 3 years, from the date of sale, or two years before  Full proceeds are re-invested in new main home in Portugal or EEA  Partial reinvestment – partial CGT liability Retaining UK main home Portugal…

If NHR does not apply… . Tax treatment same for Portuguese and overseas properties . Only 50% of gain taxable . Held for more than two years - inflation relief . Net gain added to other income and taxed at scale rates of tax (max 48%). The Inbetweeners… Trusts & Companies under the spotlight (again) Structured Overseas Property Purchase Trust & Company Structures… . Common tax planning in Spain and Portugal, as both countries welcomed international investors in late 20th C . Still a significant number of properties owned this way . Most advice has never been updated since inception . Overseas issue never really highlighted by UK advisors, even after the HMRC’s “shadow director” - Dimsey v Allen push. Structured Overseas Property Purchase Trust & Company Structures… . Civil law jurisdictions - no concept of trusts . Assumed the structure and therefore the property fell outside of the domestic tax system . 1991 - Spain issued Real Decreto 1080/1991 – a list of countries considered tax havens . 1998 - Spain began taxing non-residents owning property . 2016 - Portugal introduced laws taxing trusts Structured Overseas Property Purchase EU’s Fifth Money Laundering Directive (2018/843)… . Need to establish the Ultimate Beneficial Owner (UBO) . Member states to set up beneficial ownership registers for corporate and other legal entities by 10 January 2020 . Trusts and similar by 10 March 2020 . Central registers, connected via the European Central Platform required by 10 March 2021 . EU member state tax authorities will be able to access these registries freely. Brexit… How long can I spend in the EU? Brexit… How long can I spend in the EU?

. Legal residency is the right to live in a state . Brexit will have an impact on:  UK nationals who visit their EU holiday home regularly  UK nationals who permanently move to the EU . Strictly when you know you will exceed 90 days – must apply for residency permit . BUT - Freedom of Movement has meant UK nationals come and go as they please. Brexit… How long can I spend in the EU? A Soft Brexit… . A “Transitional Period” until at least 31 December 2020 . Move then and obtain temporary residence card during Freedom of Movement . Have up to 6 months after Transitional Period ends to obtain permit . Renewable annually for five years . If already present for 5 years – apply for a permanent residence card. Brexit… How long can I spend in the EU? A Soft Brexit… . To qualify for residency permit during Transitional Period:  Proof of sufficient resources, so the individual is not deemed a burden on a Member State’s social care system  Proof of medical insurance . Sufficient resources… “…shall not be higher than the threshold below which nationals of the host Member State become eligible for social assistance, or, where this criterion is not applicable, higher than the minimum social security pension paid by the host Member State.” Brexit… How long can I spend in the EU?

A Soft Brexit… . After Brexit existing residency cards would be replaced by new-style cards . No certainty what “sufficient resources” might be . Expectation is those arriving pre-transition - requirements will remain the same. . But - those arriving after Brexit could find it more difficult. Brexit… How long can I spend in the EU? A Hard Brexit… . “Cliff-edge” legal residency scenario for UK nationals who spend more than 90 days a year in the EU . Become restricted to 3 months in any 6 month period . Only alternative - obtain a residency permit . Move to the EU after UK leaves - much more onerous requirements to become legally resident, particularly around income. Brexit… How long can I spend in the EU? A Hard Brexit… . UK would fall to become a “third state”, to the EU where sufficient resources rules may become far more onerous . Other third state agreements - have a minimum income level . Often the state’s legal minimum wage. . Eg., France - currently €18,250 per annum . Also, must apply at the French embassy or consulate in their own country of residence before the expiration of the first three months in France – not in France itself. Closing comments Closing Comments

. Keeping up to date with UK and EU tax and legal changes is a constant battle . EU states becoming far more adept at gathering data and aggressive in chasing tax avoiders and non-disclosers . EU states changing tax law far more quickly and often than before . Brexit means the position for UK nationals is even more difficult to predict and plan for . Taking advice is more important than ever. The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice. All figures quoted in this presentation are for illustration purposes only. Blevins Franks Financial Management Limited (BFFM) is authorised and regulated by the Financial Conduct Authority in the UK, reference number 179731. Where advice is provided outside the UK, via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of the UK. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts and companies. Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z. Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Tax Limited provides taxation advice; its advisers are fully qualified tax specialists. This promotion has been approved and issued by BFFM. Any questions?

•