News - Uk´s Eu Exit
UK´s EU exit
The announcement that the UK is leaving the EU has raised a number of questions.
With the announcement that the UK has voted to leave the EU, many of our clients are concerned about how this will affect their future as property owners, or potential property owners, in Portugal.
Those who run businesses or are resident in Portugal are also wondering how this will affect them.
As many people have already asked us to give our opinion, this short article has been written to use as a reference source, to help people understand what we think are the initial implications of the UK´s exit from the EU. It is also important to consider the future implications, but these can only be educated guesses.
What should I do now?
Nothing. At the moment the money markets are very volatile (which is to be expected) but, like a ripple in a lake, they will settle down.
Nothing is going to change overnight, next week, next month or even next year. One fact that we do know is that there is a minimum two year period for the UK´s exit to be finalised. During this period, Portugal will have to maintain all current rules and obligations.
I live in Portugal full time. What should I be considering?
Firstly, it is even more important than ever before to make your you are correctly registered as a resident, integrated in the health system, part of the fiscal system and are a bona-fide Portuguese resident. It is important to remember that the rights you have at the moment will definitely be maintained in the next two years, and it seems they are likely to remain in the future, as these rights will be difficult to extinguish.
For those that reside permanently in Portugal, but don't officially register their presence, now is the time to put their affairs correctly in order, which is no less than should be done in any case.
I have a second home in Portugal, should I be worried?
I don't think so. As a second home owner, there is no practical difference for EU and non EU citizens at the moment. Second home owners from the EU have no special benefits at the moment, so they have nothing to lose.
What about my driving licence?
At the moment, UK (and other EU) driving licences are valid, and can be used in Portugal until their expiry date, at which point they must be exchanged for a Portuguese licence. The only obligation is that the licence holder's address must be registered with IMTT, the entity responsible for motor vehicles.
Once the UK leaves the EU I presume that all UK licence holders will be obliged to exchange their licence for a Portuguese licence. This is not a complicated process, and the new points system is more forgiving than the UK system.
Of course this is only relevant for residents, visitors will be able to use the driving licence from their own country.
What about the exchange rate?
Exchange rates are like hot air balloons, they go up and down. Whilst in the immediate aftermath of the no vote the pound has weakened, it has settled at around 1.24. The highest rate before the vote was around 1.31. So, in the immediate wake of the vote, the pound has weakened around 5%.
If we look back over the last few years, the pound has been as low as 1.13 (early 2013) and briefly as high as 1.43 (July and November 2015).
There will always be fluctuations in the exchange rate and whether you are buying pounds or euros you need, as always, to plan ahead and be realistic about your expectations. When you feel that the time is right to purchase currency, you can fix the rate you buy at to protect your financial position.
What about health care?
At the moment, when someone becomes resident in Portugal, they also inscribe in the health system. So, for those already in the system the status quo will remain.
For those visiting, at present they have free health care as part of the EU agreement. In the worst case
What will this do to the property market in the Algarve?
(Rubs the crystal ball) It will affect different people in different ways. Because the property market is so diverse in the Algarve, there is unlikely to be one particular trend. I think the following could occur:
Those who already want to leave the UK will still want to do so, and once the furore dies down, will probably make sure they move within the two year exit window
People who are already planning to return to the UK from Portugal will accelerate their plans, or perhaps be keener to sell sooner rather than later.
Purchasers who are undecided will remain on the fence until the situation is clearer, or until they can see an advantage in purchasing in the short term.
Is there any chance that the UK will stay in the EU?
Strangely, yes. The result of the referendum is not binding, and this has to be ratified by the UK government. Time will tell, but nothing is certain.
What about taxation?
There are going to be changes in how taxes are applied to income and gains for UK residents, as the existing rules relate to EU citizens. It is for the Portuguese fiscal authorities to decide how they implement this, and it is quite possible that they choose to maintain the status quo.
The key points that we will be monitoring are:
Capital gains tax from property sales
Any changes to this will only have an impact on full time residents selling their primary residence and then returning to the UK. At the moment any profit created from a sale can be re-invested in a propety purchase within the EU, and is then free of capital gains taxes. Once the UK leaves the EU, this may no longer be possible.
There is no difference for those selling a second home.
Day to day taxes
One possible change that could occur is the treatment of taxation from other EU countries (double taxation agreement). There is a mechanism in place already to deal with non-EU income, so this is likely to be applied to UK income in the future.
The taxation alterations are something that we will monitor closely, with the assistance of local experts.
Portugal is a country where legislation is constantly changing and being updated, and we are used to reacting to the changes. The important point is to wait until the alterations are defined, and then consider how this affects you personally.
In the short term, our advice is not to make any snap decisions, whether you are buying or selling. If you already have a medium to long term plan, then stick to it, and make some allowances for the possible changes.
Above all, don't panic because all will become clear in the future, and there will be clear mechanisms to deal with any changes.