BREXIT and what it might mean for Brits in Bulgaria

From nytimes.com

From nytimes.com

The vote by a small majority of British to leave the EU sent shock waves around the world. It was a result, no one really expected, especially the leaders of both sides, all of whom have now quit and left the mess for others to sort out. The fall out has started, with the pound plummeting and numerous questions being asked. Of course no one can know what will or will not happen, there will likely be years and years of uncertainty but here I’d like to cover the main points and possible outcomes of Britain leaving the EU, focusing on property ownership and residency issues here in Bulgaria.

I think the first important point to note is that at the moment nothing has actually changed. The UK is still part of the EU, British people are still EU citizens and it is likely to be a minimum of 2 years before any of this changes. Second, both the Bulgarian President and the Bulgarian Prime Minister have already made it clear Bulgaria welcomes British people (and others) and if you can meet the requirements, then there will be no problem gaining residency and citizenship.

In theory leaving the EU means that British citizens can no longer (if and when it actually happens) guarantee the right to live, work and own property in other EU countries. But the initial reaction from most involved in property abroad is that little will change – except for a weaker sterling making it more expensive to buy overseas.

The Vienna Convention on the Law of Treaties is a treaty concerning the international law on treaties between countries and in its simplest form basically says that any agreements between states e.g. such as about allowing property ownership or residency, cannot be revoked. In effect this means that anyone that has acquired rights to property ownership, a right to reside in a particular country etc cannot have those rights removed. The Vienna Convention states that people keep the rights that they once exercised under a treaty, even if that treaty is later terminated. Therefore expats in Europe would retain their “acquired right” to stay there, but it would not apply to people who move abroad AFTER the UK has left. This applies to anyone looking to buy in the next couple of years before the UK officially leaves.

But there are those that say the Vienna Convention governs only the actual state and not the citizens of those states and so cannot be completely relied on. But it would cause a massive upheaval and many problems for the millions of Brits living in places like Spain, France, Ireland, Bulgaria, Greece etc if there were drastic changes so seems unlikely rights would be revoked.

But free movement of people and immigration was a fundamental pro-Brexit argument. If the UK decides to take a hardline approach to this and restrict rights and freedoms of movement to others coming into the UK, then other EU member states may very well feel less well-disposed to the idea that they should allow Brits the freedom to live and work and retire easily to their little haven in the sun in another EU country. For many matters it is likely there will be a general overall agreement between the UK and the EU but where not possible or not agreed, there will need to be individual agreements with each EU country and the UK.

Being a fairly new member of the EU and with various rules about residency still in place, the overall feeling in Bulgaria is that little will change. Many British came here and bought property and moved here before Bulgaria was a member of the EU and apart from a bit of extra paperwork and the need to own a house and land through a company, it was not much different. Some say it could revert back to this situation with regard to property ownership.

It is very important to keep in mind that many non-EU citizens live, work and own property here in Bulgaria without problems. AND REMEMBER that many Brits own holiday homes in places like Florida, Turkey, Canada etc….non EU countries, places that require visas and so forth and are not deterred. Citizens of America, Canada, Russia etc own property through out Europe and they are not EU citizens. Clearly Britons are not going to be prevented from owning property in Europe. Its also vitally important to remember that some of the most popular places for Brits abroad are America and Australia….non EU countries yet it does not deter people going there, buying property there, moving there…..

If there are large changes, there is likely to be far more upheaval for Brits in places like France and Spain, where you can currently reside without the need to apply for a special residency permit or (like in Spain) where you get access to free health care and can still claim various UK benefits. The requirements for a visa to travel to any EU country is a situation all countries will want to resolve quickly due to the amount of revenue related to tourism.

For those of us living or contemplating a move to Bulgaria, little will change. To reside in Bulgaria long term you currently have to apply for your long stay visa anywhere. There is the possibility this could become a little more expensive and may need renewing every year instead of every 5 years but that is about it.

Health care is a big issue for many considering a move to Bulgaria. Again the UK leaving Bulgaria should not really effect those living in Bulgaria or considering coming here to live. What will likely be affected is access to free or reduced emergency treatment under the EHIC card. Those travelling to Europe from the UK (after an eventual split from the EU) will maybe not be accepted on these scheme and will need private medical travel cover. Of course most sensible people have this anyway. For those living in Bulgaria, then your EHIC card is not valid anyway. As a resident of Bulgaria you should either be paying into the health care system here or take out private health cover. And if you are paying into the Bulgarian health system then you can apply for the Bulgarian EHIC card and use this around Europe (maybe not in the UK of course if it leaves). It costs around 100 Euros a year to pay into the Bulgarian health system or private medical insurance is around 200 Euros a year depending on coverage you want and excesses you are prepared to accept. Private medical treatment in Bulgaria is very good and extremely cheap in any case.

If the UK leaves the EU then Britain may no longer be able to issue the S1 form allowing British pensioners the right to free health care in their chosen EU country and so you would need to either pay into the local health care system or go private, something that is far more expensive if you are living in countries like France or Spain, than for Bulgaria. You would no longer be able to claim “free” NHS care on trips back to the UK. Currently there are agreements in place where care given in the UK is reimbursed by the EU country where you are resident. This authorisation system may no longer apply so you could not just nip back to the UK for treatment. On a personal note, having experienced the NHS and the health care system here in Bulgaria, I would most definitely choose to be treated here in Bulgaria, where 5 star private treatment in exclusive hospitals if very affordable.

Another issue at the fore front of many people is how pensions will be affected. If the UK leaves then British pensioners living abroad may no longer get annual increases in their pension inline with inflation. Currently under the “Triple Lock” system, pensioners living in other EU countries see their pension rise by the higher of wage or price inflation subject to a minimum of 2.5%. Again this is more likely to have significant effect on those living in EU countries with high social charges and taxes, where various agreements have meant refunds and exceptions from such social charges and capital gains on property sales. Bulgaria has one of the lowest tax rates in the EU at just 10% personal and co-operation tax and so being a Bulgarian tax resident comes with definite tax advantages.

Mortgages for British nationals wanting to buy abroad may become harder to obtain. Again this is unlikely to affect many people buying and living in Bulgaria as property prices tend to be so much lower and non-Bulgarians have struggled to get a mortgage here anyway, with most property purchases being cash buys.

Various benefits may become non-exportable, but again many of these cannot be claimed in Bulgaria or if they can, are so small anyway it will not make a significant difference to many.

British driving licences may only be valid for a finite period before you have to exchange for one from the country you reside in. Again it is fairly easy to exchange for a Bulgarian driving license here and no test is needed, just a medical (I think).

Being an EU national has with it a certain level of protection, especially with regard to taxation on property in other EU countries. France for example is very tough on non-EU citizens, imposing a capital gains tax of 49% and a social surcharge on any profits made on a sale. Where as if you are an EU citizen this is only 19% on gains or rents. Having equal tax rules comes under the principle of free flow of capital within a single market. Whether Britain will remain as part of this single market is as of yet uncertain. But here in Bulgaria there is no separate capital gains charge and any profit is taxed at 10% as if it was income for that year.

Crucially the double taxation treaties between the UK and other countries will remain as these are made individually with each country and not dependent on EU membership. These agreements ensure people are not taxed twice on the same money.

Flights may become more expensive, but those used to travelling to Bulgaria over the past few years have up until recently not had the advantage of numerous cheap airline carriers offering tickets for 30 or 40 Euros one way. It is only in the last few years that EasyJet and Wizzair have expanded in Bulgaria and in the autumn there will be many more cheap flights with the new RyanAir hub opening in Sofia.

BUT the more immediate issue facing many is the drop in pound to Euro rate. Many have seen their income here drop by a large percentage as they have gone from getting around 2.5 levs to the pound to around 2.2. Anyone who’s income comes from the UK in Sterling is now a fair bit worse off. But Bulgaria is still one of the cheapest places in Europe to live.

And of course if you are selling property here, listing it in levs or Euros, then the property has just become an awful lot more expensive, making it more difficult to sell to those coming from the UK. HOWEVER, if you are a holiday home owner here and will be taking the sale proceeds back to the UK, you can now use the drop in the pound to your advantage to get a sale more easily by dropping the Euro or lev price. For example if you have a property here in Bulgaria and you were marketing it for say 20,000 Euros a few months ago in the hope of getting say £15,300 in your UK bank account after a sale (using a rate of 1:3 Euros to the pound as it was a couple of months ago), you can now still achieve the same sterling value by dropping your asking price to 17,700 Euros (1.16 Euros to the pound).

So its certainly not all doom and gloom. The pound is actually only back at the same rate as it was back at the end of 2008 start of 2009 after world recession, although forecasts say it could fall further. There are still many (if not more) reasons to buy in Bulgaria in the near future. Or if you are selling to go back to the UK or use the sale proceeds in the UK, you can lower the Euro price and still get the same number of pounds in your pocket and hopefully a quicker, easier sale.