New Time Caps On Brits With Second Homes In The EU

Carlie: Hey there, it’s Carlie with the Expat Focus podcast.

The end of 2020 marks the end of the Brexit transition period, and one of the big changes for UK nationals is how long they can spend at second homes in the EU. Up until now, British nationals have been able to spend up to six months a year at another property on mainland Europe without running into any issues around residency.

But that all changes from 2021. My guest, Jason Porter – a director at Blevins Franks in the UK – is going to explain why you’ll most likely need to keep a closer eye on how much time you spend outside the country.

Jason, what’s the current time allowance for Brits in Europe under freedom of movement laws, and how will that change in the new year?

Jason: Well, as part of the withdrawal agreement and the transitional period, freedom of movement effectively remains in place until 31st December. So, for what’s remaining of the current calendar year, UK nationals can pretty much come and go as they please. But from 1st of January, this all falls away.

Effectively already, the UK is no longer an EU member state, and freedom of movement is one of the four basic freedoms that apply to all EU members. But as the UK is no longer a member, freedom of movement falls away from 1st January. Now, whatever happens in the negotiations, effectively, the UK is not an EU member.

So, you kind of find it difficult to imagine how any form of freedom of movement could form part of those negotiations, because it is so fundamental a part of being an EU member. So, without anything special being put in place just for the UK that has never been applied to any other state that’s negotiated with the EU, you’re pretty much looking at the fallback rules, which are for third states.

And a third state is effectively a state that’s not part of an international agreement that applies to a number of parties, which the UK will be. And there are 60 odd of those that EU has set out as being EU third states. It falls into that camp, which means that you can spend up to 90 days in any rolling 190-day period.

Now, that is something that, potentially, the swallows – those that go in and out of the EU – will have to keep an eye on, and [they will need to] understand the rules, their role, because it’s not just a simple 90 days in and 90 days out calculation. You do have to keep quite a careful eye on that.

Carlie: Well, I was going to ask, what is the consequence of overstaying that 90 days from next year?

Jason: Well, in actual fact, that rule has always been there. Even within the EU, for a member of one EU country – one individual going from one EU state to another – that rule has always been there, but freedom of movement has kind of overridden that.

So, most countries have not really required you to keep an eye on the number of days, even to the extent where many UK nationals that are actually living in the EU and have been for a good number of years – particularly where they haven’t needed to get access to public healthcare, where they might have private healthcare in place – haven’t even sorted out their residency permits, etc. Because freedom of movement has meant that they’ve not been required to, and some of the countries have not been particularly observant.

But the consequences, going forward, of someone not either staying under 90 days in any 180-day period or obtaining a residency permit, could be that they are ejected, or fined, or refused admittance for a year, or however long, in the future.

Now, people look at it and say, ‘Well, no-one’s ever said anything so far. I don’t imagine that the immigration officials are going to be that observant.’ We have to remember what kind of world we’re living in now, with the digitalisation and computerisation that’s in place. And the EU has been getting far, far better at linking up all of its systems across the EU.

And what we have from 2022 is two new systems coming in, which is the ETIAS system, which is a bit like the US system that you have for non-US citizens, where you have to get some form of a permit for a two-year period that you have to renew, if you’re a regular visitor to the US. It could be very similar to that. And it has to be put in place every three years. It’s a very simple system, and it only costs about seven euros every three years.

Then there’s also the EES (entry/exit system), which again comes in as part of this, which effectively is going to keep a much tighter digital control over your movements in and out of the EU and across the EU member states. And that’s going to allow EU member states to keep a much tighter control on the comings and goings of people. [And they are going to know] what’s going on relatively up-to-date, rather than perhaps catching up six to 12 months down the line.

Carlie: Jason, if you do have a second home in the EU, and you want to retain that flexibility to spend time there without keeping an eye on the calendar every visit, what is your option when it comes to applying for residency? Can you apply for residency in an EU country while you’re also living in the UK?

Jason: You can do, and an awful lot of people have done this. We did a kind of company seminar in Spain, including the British consul there. And we asked for people, when they registered for that seminar, to include questions that they might want to be raised.

And it was incredibly surprising, the number of people that said to us, ‘I’m a regular visitor to Spain, and I obtained a residency permit 10 years ago [or however many years ago], and I’ve now got a permanent residence card.’ But they were just people that moved in and out. And there has been quite a blind eye paid to those people over the years.

And many people think this is a potential option, that you can obtain a residency permit in an EU member state, but only spend between three and six months there. It allows you that freedom to go over three months, but in most cases, people want to stay under six months, so they don’t become tax resident in that particular country as well.

It has been an option for people in the past. Again, with these new systems that are coming in, there’s going to be much tighter control on people. And it affects all of the new types of cards that have been brought in for people that are obtaining residency permits under the withdrawal agreement rules – kind of state that you should not be going for one of these residency permits, unless you’re going to be spending more than six months in the country.

So, it’s a real problem here for people that are in that three-to-six-month window, who know either they’re going to go over three months in a six-month period or are looking at spending a protracted period … Or they want the freedom in case of emergencies or illness, or having to rush over to the country for, say, a burglary at their villa … They need that flexibility.

Or perhaps they want the healthcare cover in that country. They’re not able to obtain it under UK S1 facilities. They want the flexibility to have that. I think this is something that will have a closer eye on it going forwards. And again, people will find, potentially, that their residency permits are going to be cancelled or denied, because they’re not using them in the correct way.

So, we have a long-winded way to get there, but in terms of options, I think the only option for people is really going to be keeping an eye, if there’s nothing in the deal, on that situation of 90 days in any 180-day period and using it.

So, it’s one of those things where you’re looking backwards – at what you’ve done in the past – but with an eye on what you want to do in the future. Because you may well be thinking, well, you’re still under three months in Spain (or wherever) at the moment, and that’s fine. But actually, in a month’s time, you might have to go out again for another month, so, for instance, in that situation, you really have to limit what you’re doing now, to allow you that flexibility of a month in Spain in a short period of time.

So, it’s something that, at the moment, I don’t honestly think there’s any way round. In various representations to the government, one of the organisations that I’ve come across on the internet has been presenting something along the lines of 190 days in any 360, which kind of fulfils what you think would be required, because, as I say, most people want to stay under six months, so they won’t become tax resident.

So, restricting you to six months in any 12 actually gives you a bit more flexibility and allows you to say, ‘You know what, I’ve spent four months of the summer there. I’ll just come back for just under two months in the winter.’ But there’s nothing written in stone at the moment. There are no special allowances for UK nationals that are being shown in their negotiations at the moment.

So, at the moment, it really is a restriction of if you go for a residency card but you’re not going to be spending six months there, then the danger is that that could well be withdrawn or cancelled. Your alternative is to restrict yourself to 90 days in any 180.

Carlie: Are some countries notoriously strict? I mean, I know you said that there is technology coming in in the next couple of years … Countries are really going to be putting more scrutiny on this. But are there some European countries where they’re a little bit more relaxed, where they would rather ensure they have the investors and the seasonal visitors coming than be too harsh on the residency rules?

Jason: I think it’s a natural extension of all those places where Brits like to go on holiday, because that then extends into people saying, ‘I like this country. I’d like to buy a holiday home here and spend three, four, five, six months a year here.’ You’re looking at France, Spain, Portugal, Greece, Cyprus, those kinds of places.

And I think those kinds of places are going to be, if they’re not already doing it, certainly pushing in 2021, when there’s a realisation of what these rules mean, that we need to do something post-withdrawal agreement, post-transitional period, to try and make sure that we can keep those UK nationals happy and not selling their property. And certainly not those who are in the market for buying property now, not turning those people away, and those kinds of people in the future.

Those countries, I think, we’ll be negotiating with or trying to push for something different for UK retirees and UK swallows, as they’re called – something different for those. In terms of what’s going on at the moment, there are two different ways that countries can insist on you making your residency formal.

The system – and I can’t remember the exact terms for them – one of them was constituted and I can’t remember what the other one was. But basically, one of them says you have to go out and get a residency permit. And the other one, which is what France has always done in the past, is that you have to make sure that you could get a residency permit if required.

So, therefore, you satisfy the rules of what is required for a residency permit. You just haven’t got one. And a lot of these countries, now, are moving over towards you having to have a residency permit going forward. Some of them aren’t – looking through the lists of EU member states – but a lot of them are.

In terms of those people that are traveling or are already living in the EU, some countries aren’t even introducing their legislation for people that are resident. They are already UK nationals until 1st January. And then there is only six months for people to get the residency permit in place.

Some of them have already introduced it – a bit like Spain, which came in on 6th July, with a whole new residency permit card for those people, shortened to TIE. France has been trying to get theirs off the ground with an online website, which keeps falling apart and being pushed back. I think it has been brought in now.

But there are quite a few of them that aren’t releasing theirs until 1st January. So, in terms of people after that date, we’ve got no idea what the rules are in terms of residency permits at the moment. But yes, there are certain countries that are a bit more lax.

For a lot of them that aren’t, it’s basically because, if you want to get access to the healthcare system in that country, you need to have a residency permit in place. So that kind of forces people to go out and do that and make sure they’ve got one. Whilst in others, you can get around it a bit, if you know the system.

Carlie: It really does sound like Brexit negotiations are really going down to the wire. Not all of these countries are prepared and organised. So perhaps next year there’ll be a bit of a grace period – six months, 12 months – where British nationals could possibly keep doing what they’re doing. Or do you think that’s a bit of a risk to think of it like that?

Jason: Well, there’s always going to be a risk involved, but I think what we’re seeing here is so much of the negotiations’ time has been devoted to the officiary side of things, a level playing field/state aid situation, that it certainly appears to the general public – from what’s hitting the press – that nothing has been discussed around other issues. Even things like financial services – they seem to have been put on the back burner.

And certainly, things like citizens’ rights – there has been very, very little said of those. And if you read any of the documentation that’s out there, whatever is said is only really about workers. And certainly, from a big company’s perspective that wants to move its workers around, I can’t see any issues that are occurring at all. The system’s going to be similar to what is now.

But in terms of normal citizens who are moving either for retirement or who are going to be living off capital, there’s not a great deal out there at the moment.

Now, what we don’t know is, because these issues are relatively easy and simple and the expectation on both sides might be that we know what we want on those – we’re not particularly concerned about them, and therefore we can ignore them until we actually get to signing a deal, because we know that we’re both agreed on those …

It’s a bit like it was on the withdrawal agreement. It was relatively up in the air, right until the last moment, what the citizens’ rights situation was going to be. But it was because that had already been pre-agreed in the negotiations. Here, we’re not quite sure what it is. Has the fishery situation and a level playing field taken all the time? We don’t know.

But I do feel that there’s not been a lot said on these things. I do feel, also, that even if it doesn’t make up part of the deal … And certainly, from looking at the press recently, the deal is looking like it’s going to be pretty sparse, in terms of what it’s going to be consisting of.

If there’s not a great deal in there on citizens’ rights, I do think there will be separate agreements around that next year, particularly from those countries that I mentioned, who are seeing that it’s having a real impact upon people that are visiting their villas, purchasing new villas, etc.

I think they will be looking at their coastal communities and potentially seeing a reduction in business, a reduction in trade, or a reduction in the real estate markets in those areas as potentially damaging to economies that are going to be trying to recover after the Covid-19 situation – in countries that were only still just recovering from the 2008 situation that we had.

So I think it’s something that will, if there’s nothing in the agreement, be re-examined, probably in the first six months of next year. So it might be that people find themselves curtailed in terms of what they could do initially. But I do feel that there’s going to be something on this side of things going forward. It may not happen immediately, but it’s something that might happen in the first six to 12 months of our new situation, when we’re free of the EU.

Carlie: Thanks so much for your insight on this issue, Jason. It’s appreciated.

Jason: Thank you very much.

Carlie: That’s it for this episode. If you want to continue this conversation, head over to expatfocus.com, and follow the links to our Facebook groups. Be sure to check out our other episodes, including a recent chat with tax expert Oliver Heslop on key Brexit issues for British Expats. If you like what we do, we’d love to read your review on Apple Podcasts, and I’ll catch you next time.