WHAT BILLS & TAXES TO EXPECT WHEN MOVING TO SPAIN

by AH Solicitors

11TH MAY 2020

Spain is deservedly popular as a place for people from the UK to start a new life – it’s warm, welcoming… and a bit of a minefield if you’re not prepared.

“Moving to another country is a big step for anyone and there’s a lot of things you have to keep in mind.”

It’s easy to be distracted by visions of sun and sangria and forget the need to think about essentials like paying taxes and bills in Spain. Here’s a quick guide to what to expect.

TAXES IN SPAIN

You are treated as a Spanish resident once you’ve been living in the country for more than half of a single calendar year – so 183 days. It’s the total amount that matters, so two periods of 100-day residence with a break in the middle would be enough. The reason this is important is that, once you cross the threshold, you will be treated like a Spanish citizen for tax purposes. That means that you’ll have to send a tax return (Modelo 100) to the Spanish authorities and – something which you need to be prepared for – pay tax thereon income you’ve earned anywhere in the world, not just in Spain itself.

The regional governmental structure of Spain means that tax rates vary a bit from place to place, but they’re broadly similar wherever you are. All first-year residents have to file a Spanish tax return, but after that, it will depend on your status. As everyone with an income of over 22,000 euros, who receives more than a tiny amount of rental income or who runs a business in the country is liable, it’s very likely that you will be. There’s also a special form (Modelo 720) for those with more than 50,000 euros of overseas assets. It’s not all bad when it comes to planning, though: unlike in the UK, the Spanish tax and calendar years both begin on 1 January.

To register for Spanish taxation, apply within 30 days of arriving in Spain at a police station or Oficina de Extranjeros, which deals with foreigners’ affairs. You’ll need to register your status on a Modelo 30 form, which tells the Agencia Tributaria (the equivalent of HMRC) that you’re now a Spanish resident. Tax rates are proportional, rising from around 20% on the lowest incomes to about 45% for those in the highest band (over around 60,000 euros). These figures vary slightly because of Spain’s semi-devolved fiscal structure; Madrid generally has the lowest rates and Andalucia the highest.

OTHER BILLS AND EXPENSES

Spain has a state health service, although it operates differently from the British NHS. This is largely funded by taxation and social security payments (similar to National Insurance) deducted from workers’ pay packets. You’ll need to apply to your nearest health centre for a Tarjata Sanitaria Individual card, similar to an NHS card except that it must be renewed every four years. Treatment in hospitals and by GPs is free, but prescriptions can be quite expensive as you must pay 60% of the cost yourself. Dentists will charge, so many people take out private insurance for around 15 euros a month.

Living costs in Spain have fallen recently, thanks to a drop in accommodation prices: 500 euros a month can get you a pleasant two-bedroom apartment in Madrid. For essential utilities, such as water, electricity and rubbish collection, budget around 120 euros a month. (Mains gas is considerably less common than in the UK.) Transport costs vary: petrol is only a little cheaper than in the UK, but the price of bus and taxi travel is considerably lower. Eating out in restaurants can be wonderfully cheap, but this is balanced out by the generally high price of even basic clothes.

Find the most popular areas for British expats to buy a property in Spain here.

Interested in buying property in Spain? Get expert advice, book a free consultation with us here.