From villas overlooking the rolling hills of Tuscany to coastal retreats on the Côte d’Azur, thousands of Britons own property in the EU — for many, buying a home there is the culmination of a long-held dream.
However, recent demonstrations in Spain, Italy, France and Portugal against “overtourism” and the rise of second home ownership have caused some to question that dream.
Protesters blame short-term holiday rentals from platforms such as Airbnb for driving up rents and property prices, forcing locals out of cities such as Barcelona and Madrid. In Brittany, campaigners insist the high numbers of second homes are making some towns and villages feel dormant in the winter months.
The response has been for authorities across the continent to implement a growing array of local and national regulations that have made it more costly and complicated for owners to let their properties to holidaymakers.
Originally from Wiltshire, Rupert Springfield runs two holiday rentals in the Dordogne with his husband Franck. “Ten years ago when people bought property [in France] to let them out they could pretty much do so without doing anything,” he says. “There were mostly only rules around swimming pools or smoke alarms and fire extinguishers. That has changed. But the main difference,” he adds, is that these days “it’s impossible to fly under the radar.”
In the past, some owners of occasional holiday lets in France did not even bother declaring rental income or registering their homes with the local mairie (town hall). This is no longer possible. Mayors can now impose fines of up to €10,000 on owners who do not register furnished tourist accommodation, and failure to declare rental income can result in fines and back taxes.
I have been affected by the tougher regulations myself. More than a decade ago, I moved from the UK to the south of France, buying a property and running it as a chambres d’hōtes (essentially a B&B) and occasionally also offering the whole house as a holiday let.
But even “casual” holiday letters — whose owners might rent them out for only a few weeks a year — are impacted by these rule changes. And the number of these are growing, according to specialist mortgage broker Simon Conn, particularly from UK owners.
Since Brexit, UK nationals can only spend a maximum of 90 days in the EU in any 180-day period unless they have a visa. As a result, Conn says more choose to rent out their properties during periods when they can’t be there — and these owners need to follow local and national rules as closely as professionals like me and Springfield.
So what do you need to look out for if you plan to buy a holiday home in the EU?
FT Money examines the growing tangle of red tape that buyers from outside the bloc need to consider before making a purchase.
The first thing to check is whether a property you are interested in buying needs a licence to be rented out. In Spain, for example, homes require a licence even if they are going to be rented for just short periods annually.
“If the property already has a licence, that’s OK [as it can be transferred],” says Peter Esders, legal director at Judicare Law, which specialises in international property and probate matters. “But if it doesn’t have a licence that can be a problem, as in some areas they are not issuing new ones.”
Barcelona is a case in point, having ceased to issue new licences in 2014. Last year, the city authorities went a step further, announcing they would revoke all tourist licences by 2028, potentially affecting around 10,000 properties. This move is being closely watched in other European capitals.
And Spain is by no means the only country requiring licences. Portugal has the Alojamento Local, issued by local councils, which covers short-term holiday lets while Italy requires a Codice Identificativo Nazionale (CIN), a unique identifier issued by the Ministry of Tourism, for all holiday lets. And EU-wide rules, which will require hosts to list their property details on a digital registry, are on the way. The aim is to increase transparency of the sector and make it easier to spot illegal operators, although full details for implementation are yet to be finalised.
Annual limits on the number of nights that homes can be let can also apply, particularly in larger cities. In 2019, among other restrictions, Amsterdam introduced a 30 nights per year cap on owners of short-term rentals, with fines for non-compliance starting at €1,500. In cities such as Barcelona and Paris, the number of days for short-term rentals is limited to 90 days a year. In some cities, owners of second homes are also barred from renting out their properties, with short-term Airbnb-style lets restricted to individuals’ primary homes only.
Even some smaller towns and departments are introducing their own rules. Some villages in Provence have imposed caps on the total number of properties available as holiday lets in order to restrict supply, and in Chamonix, a popular ski resort in the French Alps, short-term lets are restricted to one property per owner.
Italy has taken a different tack by banning key boxes popular with many Airbnb-style listings, reacting to public disquiet over often high concentrations of unsightly key safes in tourist hotspots. Failure to remove a key lockbox in Florence can result in a fine of up to €400.
Owners should also be aware of rules surrounding energy performance certificates, which rate the energy efficiency of properties. In France, these are now applied to short-stay accommodation and, by 2034, holiday let properties will need a rating of D (denoting average) or higher.
Fail to comply with the rules and the results can be costly: Spanish authorities recently removed almost 66,000 listings from Airbnb, mostly because the properties did not have the required licences or breached other rules. In June, Booking.com was forced to remove more than 4,000 tourist rental adverts in Spain.
Also beware of additional rules or higher taxes on rental income from holiday lets. In Spain and Portugal there are tax advantages to renting out your property as a long-term let as opposed to a short-term rental, for example. In Portugal, if you’re a non-EU resident, you also need a fiscal representative in the country to ensure you comply with your tax obligations. Taxes on rental income can also be higher for non-EU residents in some jurisdictions.
There can be additional costs on second homes too. France has removed the taxe d’habitation (similar to the UK’s council tax) on primary homes. But it is still applied on second homes, and local authorities have the freedom to increase the rate by up to 60 per cent. France also imposes a wealth tax on French property assets, payable by residents and non- residents alike. For non-residents, taxes are due where the net assets (the value of property less any mortgage loans) of property owned in France surpass €1.3mn.
Spain, too, has a wealth tax and charges a tax on second homes based on the property’s notional rental value. The latter tax is calculated based on an assumed rental income of 1.1 per cent of the official value of the property (if this has been updated within the past 10 years, otherwise it is 2 per cent). Non-residents who live outside the EU pay tax on this sum at an increased rate of 24 per cent.
And more stringent rules may be on their way. Spain is considering a draft law to impose a 100 per cent tax on second home purchases by non-EU buyers. David Morley, head of wealth structuring at tax and wealth advisers Blevins Franks, is sceptical whether this law will ever see the light of day, but he and his colleagues do expect the rules around second home ownership and holiday lets to become even stricter in Europe, particularly Spain.
There are still positives to owning a holiday home on the continent — and not just the food, climate and the culture.
Mortgage rates across the Eurozone, although much higher than they were even just a few years ago are currently lower than in the UK, according to Conn, typically falling within the 3 to 4 per cent range.
And even though there are often large numbers of holiday lets vying for tourist dollars, the returns can still be lucrative. This attracts more overseas owners of prime property to rent them out for at least part of the year, according to Alex Balkin, executive director for the French Riviera and French Alps at estate agent Savills. “One week of rent as a holiday let can often be the equivalent of one month’s rental on an annual basis,” he says.
For Britons choosing to retire or move to the continent, there can also be significant tax advantages, particularly when it comes to inheritance tax — an attraction that will only become more compelling from 2027, when pensions are due to become subject to UK inheritance tax.
While moving abroad purely to benefit from advantageous inheritance tax rules will be too big a step for many, this more favourable environment across much of the continent is an added bonus for the many Britons who choose to spend their twilight years overseas.
In the UK, inheritance tax is payable at 40 per cent on estates in excess of £325,000, or over £500,000 if the residential nil rate band, an additional allowance which covers the main home, is included.
In Italy, by contrast, inheritance tax is paid by the recipient and the country has generous personal allowances of €1mn each for relatives such as children, parents and grandparents, below which inheritance tax is not payable. Above this, tax rates are low, starting at just 4 per cent.
Portugal does not impose inheritance tax as such, applying instead a 10 per cent “stamp duty” on assets passed on at death, paid by the recipient. It has a notable perk in that assets passed to both spouses and children at death are exempt from the tax.
A further boon is that, in Portugal, overseas assets are exempt from the tax. Similarly, if you are resident in Spain, your non-Spanish assets, such as UK property, are not subject to inheritance tax in Spain, once inherited by a non-Spanish beneficiary.
This latter point is of particular interest following changes to the taxation of non-domiciled individuals introduced in the UK in April. Under these new rules, if you live for more than 10 tax years outside the UK, your worldwide assets — such as property owned abroad — escape the UK inheritance tax net. So, if you have lived for more than 10 years in Portugal, for example, UK inheritance tax should only be applied to your UK assets, with just your assets in Portugal subject to that country’s stamp duty rules.
In all cases, however, it is advisable to get expert advice to ensure you fully comply with the tax residence rules.
You should also watch out for “forced heirship” rules in countries such as France and Portugal, which can require you to pass on some of your assets to children on death, though you can elect for the “Brussels IV” regulation to apply, giving you freedom to bequeath your assets to whoever you like.
Again, you should take advice on how this could impact your tax affairs, particularly in France, where legislation introduced in 2021 gives protected heirs the right to make a claim against assets located in France, though this has yet to be tested in the courts.
Tax advisers also recommend having a will in the country where you own a property, as well as one at home, with both wills cross referencing each other.
“It’s important to review your will when you buy a property in the EU,” says Angharad Lynn, a private client partner at solicitors Russell-Cooke. “Don’t assume that it can pass under your English will without any issues. English wills usually provide for assets to be left on trust and, as trusts are not recognised in many civil law jurisdictions, this can cause problems when the estate comes to be administered and can mean unforeseen tax consequences.”
Yet despite such complexities, Mark Harvey, head of the international network at estate agent Knight Frank, says countries such as Portugal and Italy are proving attractive relocation and retirement destinations as “they are all much cheaper than Switzerland, which is the traditional go to fiscal destination”.
For many others, however, the allure of owning a property abroad has never changed. It’s always been about savouring that glass of rosé at sunset, buying your seasonal vegetables at the local market, and immersing yourself in a foreign culture that you call home.
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