Holiday homes in the EU

Having dominated the news from mid-2016, Brexit took something of a back-seat behind COVID-19 during the past 24 months. However, issues arising from the UK’s departure from the EU continue to surface and one of these is the impact on those with holiday homes in the EU.

Those of you with a holiday home in the EU have faced a double whammy: not being able to get to your place in the sun (or on the slopes) when COVID-19 restrictions were in place, then when those restrictions are lifted, Brexit-related rules limit the time you can spend there without a visa.

The inability to visit such properties due to COVID-19 has masked the Brexit repercussions for those who own a home in the EU. They were once citizens of an EU member state, able to come and go between the UK and their EU holiday home as much as they pleased. Now, as citizens of a ‘third state’, they cannot spend more than 90 days at a time in the EU within a 180 day period (whether for work or pleasure) without a visa.

Those looking for long-term visas are in the same long, slow application process as all other non-EU travellers. Some countries are offering ‘Golden Visas’, which gives homeowners unlimited time in the Schengen area subject to purchase of property at a certain value.

‘Third state’ status also comes with higher taxes in some EU countries where the tax system differentiates between non-resident EU citizens and non-resident non-EU citizens, with higher taxes for the latter.

Owners of holiday homes in the EU need also to be aware that they will face duties and charges on the import of personal belongings and household goods to Great Britain (different rules apply in Northern Ireland). Before Brexit this would only have applied in relation to imports from non-EU countries. An exemption applies for those transferring their normal place of residence to the UK if specific conditions are met but no relief is available for goods imported from second homes and holiday homes. Those disposing of a holiday home in the EU or overseas (and not purchasing a replacement) may wish to consider selling it together with some or all of the contents.

The one area where Brexit has not had a direct impact is the EU Succession Regulation. The regulation aimed to simplify succession rules across the EU by determining which law applies to the succession of someone’s estate when they die.

This is important because many countries in Europe have ‘forced heirship’ rules which set out that a certain proportion of an estate must pass to spouse and children, rather than the system of testamentary freedom which applies in England and Wales.

The default position in the EU is that succession of an estate as a whole will be governed by the law of the country where someone is ‘habitually resident’ at the time of their death.

One exception to this rule is where someone has expressly chosen to apply the law of nationality instead.

It is often therefore beneficial for British nationals to opt for English and Welsh law to apply to their assets in the EU, for example passing the holiday home outright to the surviving spouse (instead of the children taking a share at that time) so that the best inheritance tax treatment is available.