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Can UK citizens still eye a place in the sun?

As the initial post-Brexit negotiations between the UK and EU fades in the rear-view mirror, we approach the point when both sides will issue their proposals on a draft deal, each setting out their own individual wish-list. It is only then will we see how far apart each side really is. As the experts offer their predictions, it is worthwhile considering what the worst-case scenario might be for UK nationals retiring to the EU.

Whilst freedom of movement will no longer exist after 31 December 2020, you will still be able to spend up to a maximum of three months in any rolling six-month period in an EU member state. If you want to stay beyond this, then you will need to apply for a residency permit.

Those arriving after 31 December 2020, who know they will stay more than 90 days, will have to apply for a long stay visa at the relevant consulate in the UK before they leave. On arrival, they will need to have the visa validated as a residence permit.

The main requirements for the “economically inactive” is having sufficient financial resources and comprehensive health insurance. The former may well increase to each particular state’s national minimum wage from 1 January 2021, from amounts, which are considerably less than that.

But these hurdles are worth surmounting, as the quality of life and the cheaper living costs in most countries where Mediterranean waters lap at their shoreline makes it all worthwhile. And this is often further enhanced by the attractive tax regimes available to retirees.

Portugal has a specific regime for the first 10 years for new arrivals, where pension income is taxed at only 10%, and dividend income tax free. Malta operates a 15% tax rate for new arrivals, and where those of non-Maltese origin can transfer in non-Maltese gains (and non-Maltese income from a previous tax years), they will not suffer any tax. Cyprus has a 5% tax regime on pension income, the potential for zero taxation on pension commutation, and just a 17% “defence contribution” on UK dividends. Even France has a low tax rate of 7.5% on the receipt of pension lump sums.

In addition, all of these jurisdictions have attractive structuring options for holding and drawing down on investments, which should mean the tax suffered is considerably less than what it might have been if the same assets had been owned directly. Θ

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