An Expat’s Guide to Moving to Spain
Spain has been a popular destination for British expats for decades. The lively and rich culture, low living costs and laid-back lifestyle, it’s no wonder that over 280,000 Brits have chosen to make Spain their home.
The process of relocating can be daunting, especially when it comes to knowing what to do with your finances. The Spanish tax laws and policy changes post – Brexit can be overwhelming to navigate.
Our comprehensive guide to moving to Spain will help you navigate the financial aspects of moving; from paying your taxes and finding property, to pensions and inheritance law.
So, whether you’re planning on retiring, starting a new job, or studying in Spain, your finances will be one less thing to stress about as you prepare for your new life in the sun.
Article Summary
01 Expats In Spain: Visa Requirements
Although Brexit has made things slightly more difficult, it is still possible for British citizens to move to Spain. Although previously Brits could work, live and stay in Spain and anywhere in the EU without visa restrictions or maximum stay limits.
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On top of this, in an attempt to increase housing availability and affordability for Spanish people, the Government has ended their ‘golden visa’ policy as of April 2024. This previously allowed Britons and other non- EU nationals to stay in Spain if they had purchased high value property or made large investments into the country.
Now, a maximum stay of three months applies for UK passport holders, and anyone planning on staying longer will need to apply for Spanish residency. Those who plan on working in Spain will need a visa or work permit.
Retirees wanting to make a permanent move can apply for Spain’s ‘Non- Lucrative Visa’. This entails an agreement that you will not work in the country, and requires you to provide a clean criminal record, proof of adequate health insurance, and be able to show that they can support themselves (and any dependents) financially from a pension or other income source to apply for residency.
This visa is technically for those committing to becoming a resident in Spain, meaning that you will spend 183+ a year in the country, and pay Spanish taxes.
With these documents, you will need to apply for your residency permit, or Tarjeta de identidad de extranjero (TIE) within 30 days of your arrival to Spain, as well as registering for a NIE foreigner tax number.
Although there are more requirements now than before, once you acquire residency status, you will have the same rights, pay the same taxes and be able to purchase property in Spain, just as you would have before Brexit.
02 Working in Spain
For those wanting to work in Spain, you will now need to first find an employer to sponsor your working visa. In this case they will have to convince the Spanish government that they could not find a European citizen more qualified to fill your position.
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It may be worth checking if you are qualified for any of the jobs on the Spanish Government’s official job shortage list.
To help with your move to Spain, it’s always advisable to consult a legal adviser or immigration specialist, to ensure you are prepared with any documents you may need and to prevent any complications or delays to the visa or residency process.
03 Paying Taxes in Spain
The Spanish tax year runs from the 1st of January to the 31st of July. Spain has a tax treaty with the UK, which means you will only have to pay tax in either of the countries of which you are a tax resident.
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You will be considered a tax resident of Spain if:
You spend more than 183 days a year in the country (even if you do not have formal residency)
Your main economic activity (employment or self- employment) is in Spain
You own a residence in Spain
Your spouse or any dependents of yours live in Spain (regardless of the number of days you spend in the country)
As a Spanish tax resident, you must pay tax on your worldwide income, and pay tax including income tax and property tax.
04 Foreign Asset Reporting Law
Spain enforces a strict foreign asset reporting law, meaning that if you are a tax resident, you must declare any assets outside of Spain more than €50,000. This includes bank accounts, property, stocks and life insurance policies.
These assets could benefit from a variety of tax efficient strategies, and you should consult a financial adviser or tax specialist if you wish to reduce your tax bill.
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Income Tax
How much income tax you will pay in Spain will vary depending on which region you live in, as the rates are divided into two categories of tax, State and regional. It’s important to speak to a tax adviser to understand which rates you will be subject to depending on where you live. As an example, the current rates for the community of Madrid are as follows:
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Capital Gains or Investment Tax
These income sources are taxed as ‘Savings Income’ and include any income from interest, dividends, life insurance contracts and capital gains from selling assets. The rates are as follows:
07 Property Tax
If you own a property in Spain and live in it for any number of days in a year, you must pay property tax. The amount due will vary depending on which region you live in, and whether your property is a new build or pre-owned.
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For new build properties, you will be charged VAT of 10% as well as a stamp duty (the rates of which can vary).
For pre-owned properties, you will need to pay a ‘property transfer tax’, (again, the rates will depend on the region in which the property is located).
Council tax will also be applicable, which will be calculated in accordance with the value of the property.
To ensure that you can budget for your property taxes accordingly, it’s essential to seek professional advice.
08 Wealth Tax
Your wealth tax bill will be calculated annually based on the total value of your worldwide assets if you are a tax resident of Spain, and of your Spanish assets if you are not a resident.
Every resident is entitled to a personal allowance of €700,000, with an additional allowance of €300,000 for a residential home. This means a couple living together could have a combined allowance of up to €2 million if they have joint accounts.
09 Andalucian Residents
The region of Andalucia has abolished wealth tax, although it’s important to note that the temporary ‘solidarity tax’ will remain in place for the 2024 tax year.
10 Solidarity Tax on Large Fortunes
This tax measure was implemented in 2022 in an effort to help with the cost-of-living crisis. It applies to estates with values more than €3 million, but it is set to end in 2024.
The amount owed will depend on the region you reside in, so consult a professional for advice to ensure you are paying the correct taxes and to avoid any penalties.
11 What Happens To My State Pension If I Move To Spain?
If you become a resident of Spain, you can still receive your full British occupational and state pensions in your new home country. Be sure to notify the DWP and HMRC that you are moving your pension abroad as soon as possible to avoid any delayed payments.
Private or other taxable pensions can be complex to navigate, so it’s best to seek personalised advice to protect your money.
The Wealth Genesis are highly experienced in helping expats move their pensions to Spain and making their money go further, read more about some of the options we can offer you.
Our Verdict
The life of a British expat in Spain can still be as enjoyable as ever, but the financial landscape has become complicated.
With frequently changing laws and varying taxation rates between regions, it extremely difficult and overwhelming to navigate. If you intend to move to Spain for the long term, it’s more important now than ever to seek financial advice before moving abroad.