How much tax will Brexit cost 2m British expats?

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A vote in favour of Brexit could turn into a nightmare scenario for 2 million British expats living in Europe.

The European Union has no procedures in place to deal with a state pulling out of the bloc, just a two-year breathing space to try to dissipate the economic fall-out of a sudden break in the relationship.

Leaving is more of a long goodbye than a sudden departure.

That means expats face two years of uncertainty while London and governments in each European state discuss new trade and tax treaties.

Most European nations already have tax treaties in place – and the UK also has similar treaties with numerous non-European governments.

Tax treaties ripped up

The fear for expats is that the EU laws regarding freedom of movement for citizens and capital mean governments cannot discriminate between nationals of different EU states will be ripped up as politicians wipe the slate clean to renegotiate better terms.

One example is France, where home buyers and sellers pay a 39.5% tax of which some is offset between double taxation treaties between European states.

For British buyers, the tax is capital gains of 19% with a surcharge of up to 6% and social security charges of 15.5%. Some of the CGT is offset against similar taxes in the UK.

For buyers from outside Europe, the taxes add up to 48.5% – so a Brexit could see British expats or second home owners paying up to 10% more tax that if a ‘in’ vote prevailed.

Welcome mat for Brits pulled away by EU

British expats may also find moving to EU countries much harder. Rather than the freedom of movement rules applying so citizens of one state can effectively settle wherever they like within the union, immigration rules would apply.

These would be set on a country by country basis.

For instance, Portugal and Malta offer tax incentives to wealthy foreign expats which are unavailable to others, and these would mean expats would have to invest significant amounts of cash in business and property to move permanently to Europe.

British expats would lose the EU welcome mat they country enjoy and would be subject to immigration quotas and visa requirements to move to EU states from the UK.

 

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Chris Ferguson

About Chris Ferguson

Chris formed Credence to bring credible financial advice to the offshore marketplace. Chris has been in financial services throughout his whole career, with experience in the GCC, United States, United Kingdom and Australia. Chris entered the financial services sector to enable as many people as possible benefit from freedom and choice in life by making good decisions rather than experiencing stress and anxiety over money.

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