Speaking to International Adviser, the firm’s director Jason Porter said a vote for Brexit on 23 June would mean that British citizens living in the EU will lose the right to challenge unfavourable tax conditions via the European Court of Justice (ECJ).
“One of the consequences of the UK leaving the EU would be that those owning real estate in mainland Europe would no longer benefit from the European Court of Justice (ECJ) interceding on their behalf where there is an inequality in the tax rates applied to resident and non-resident taxpayers.
“If we are outside the EU, the higher, non-EU rates of tax and unfavourable methods of calculation which applied pre-ECJ would likely return,” he said.
Porter, whose firm provides international tax and wealth management advice to UK expats living in France, Spain, Portugal, Cyprus and Malta, said it is “quite common” for European nations to penalise non-residents with higher tax rates.
Under the current system, the ECJ can bring a case against a nation if it feels the government is imposing an unfair tax regime on EU citizens from outside the country. If successful, all 28 member states are obliged to accept the consequences of the ruling, implementing them in their national law.
“If we are outside the EU, the higher, non-EU rates of tax and unfavourable methods of calculation which applied pre-ECJ would likely return,”
Referring to several high-profile cases, Porter said the ECJ’s involvement has helped UK residents who own holiday homes in Europe by challenging disparate CGT tariffs.
“In the past decade, the EU has increasingly influenced member states’ direct tax systems. The focus of this attention has been not so much on the adoption of EU tax legislation but more the influence of the European Court of Justice (ECJ) in direct tax matters.
“The ECJ’s involvement has resulted in the benefit of the same methods of calculating gains, and the same, lower rates of CGT as would apply to residents in France, Portugal and Spain on property disposals,” he said.
In 2008, Portugal was forced to amend its legislation after the European courts ruled that non-residents living in the EU can opt to be taxed as a Portuguese citizen on gains, thereby qualifying for the same 50% reduction in tax.
In Spain, the government accepted an ECJ verdict in September 2014 that found the CGT it charges non-residents, which in some cases could be as high as 35%, should be on par with the 19% resident’s rate.
Last year, France followed suit with expats with non-resident status now paying the same 19% domestics rate, instead of the 33.3% they were charged previously.