In the aftermath of the decision of the UK population to leave the EU there is still much speculation on what this will mean, although it is unlikely that it will become apparent for several years.
In this article we look at the main concerns for private clients, including:
Fears have been expressed that mortgage rates will rise and that the deposit required to obtain a mortgage in EU countries may increase. In France the minimum deposit required to obtain a mortgage is 20% for EU nationals and 50% for non-EU nationals. If this happens, it will affect those entering the EU property market for the first time, but it may also have a negative effect on property prices, with owners of holiday homes and investment properties seeing the value of their investment fall.
It is worth bearing in mind that the UK property investor is a valued customer in many EU countries, who rely heavily on foreign investment and who would suffer if UK investors withdrew. This fact argues against the introduction of punitive additional charges. The English love affair with France is likely to continue regardless of issues of finance, and the unpredictable English climate is likely to mean that Spain remains a popular destination!
A large number of EU nationals own property in Britain and it will equally be in their interest to have bilateral arrangements in place - although these may take a while to negotiate.
The vote for Brexit has increased concerns about property inheritance. Although the UK is not a signatory to the EU Succession Regulation it is a beneficiary of it and UK nationals who own property in the EU can specify in their Wills that they wish English law to apply to the succession. This allows property owners to avoid the fixed heirship rules imposed by a number of EU-member states. Once the UK has left the EU it will become a 'third state' under the Regulation and its position is currently less certain in respect of succession law.
The Succession Regulation also envisages the introduction of a European Certificate of Inheritance across all member states, which would prove an individual's status as a legatee or as an executor. The UK will not now automatically be included in this stream-lining process.
There has been much discussion of taxation and the effect of Brexit on the tax position of UK nationals who own property and assets in the EU.
Agricultural property relief, which currently provides 100% relief against inheritance tax for agricultural land held in other EU countries is likely to be lost, along with the exemption from inheritance tax for gifts to EU-based charities. It is not yet clear how many people will be affected by these changes.
Other taxes imposed by EU states may be higher. French capital gains tax is capped at 19% for EU nationals, but is up to 33.3% for non-EU residents, and social charges of 15.5% apply to non-EU nationals in France.
From an income tax point of view, in some cases a non-EU resident will pay higher taxes on income arising in the EU, compared with EU residents.
However, most countries base their taxation systems on residence, rather than citizenship, and the UK has a number of tax treaties with both EU and non-EU countries that allow taxes to be offset, avoiding double taxation. Again, it may well be in the interest of EU-member states to negotiate agreements.
Nearly two million British ex-pats live and work in the EU. Visa requirements are obviously a concern for those people, as well as for those wishing to retire to an EU state, or wanting to visit holiday homes there.
A large number of EU nationals live and work in the UK and it seems likely that, in time, arrangements will be made to overcome problems concerning UK residency for these people.
Our impending exit from EU membership will have many consequences for EU nationals living here, for British people living and working in EU-member states and - not least - for the rest of us. It is in the interests of both the UK and the EU to agree new arrangements that will enable these economic benefits to continue.