Moving abroad? Buying property in Spain
Who hasn’t dreamt of sunny climes when slogging through a slushy northern European winter?
The recent pandemic has given many of us wanderlust. For some, the possibility of remote work-from-anywhere in our hyperconnected world glitters before our eyes. For others, retirement beckons.
A place in the sun
“Any reasonable, sentient person who looks at Spain, comes to Spain, eats in Spain, drinks in Spain, they’re going to fall in love. Otherwise, there’s something deeply wrong with you. This is the dream of all the world.”
Spain is amongst the most popular destinations for European expats, especially for the British. Spain boasts more than 5.5 million expats, one third of whom are British. Over 300,000 of them are pensioners1.
The average age of the British ‘swallows’ in Spain is 54, higher than most other nationalities, but more younger people come for work, cultural experience and adventure.2
El elefante in the room: Brexit
The United Kingdom formally left the European Union in January 2020, beginning an eleven-month transition period ending 31 December 2021. After the divorce, the UK became a “third country”: no longer a member of the EU, EEA, or EFTA, or the Schengen area.
During the transition period, many UK residents flocked to Spain, but others sold up because of the uncertainty3 and the limited time they could spend in their holiday homes, increased taxes and more stringent income requirements.4
If you had been living in Spain for a period of five years or longer prior to Brexit, you would have been required to apply for permission to stay indefinitely, which needs to be renewed periodically. If you had been living in Spain for less than five years, you would need to stay in Spain until your five-year residency was completed in order to apply for residency5.
For the time being, it is reported that Visas are not yet required for a stay of less than three months, but after May 2023 an ETIAS Visa waiver will be required of all ‘third country’ residents. Further, our research indicates visas are also required for students wishing to study in Spain for more than ninety days.6
Third country visitors to the Schengen area are allowed ‘short stays’ (no more than 90 of every 180 days) without a visa, and are required to show proof of funds.7
Check with your travel agent about the new tourist requirements, and your solicitor and tax professional about what you need to do to remain, work, or relocate.
Check in any time you want…
But you may have to leave. Again, under Brexit rules, our research indicates UK residents are allowed to stay in a Schengen-area country for only 90 days of every 180 without a visa.
Spain has a relaxed vibe, but relocating is not without red tape or bureaucratic hurdles. Learn the phrase los trámites burocráticos.
We are advised that establishing residency, for the short or long-term, requires proof of funds or income as well as proof of health insurance (or proof of eligibility to qualify for Spanish insurance). You will also need to apply for a Spanish driving licence.
If you are relocating for your job, your employer’s global mobility team will likely help you manage all the paperwork. If you’re a freelancer or digital nomad, or are coming to Spain to find a job, you will need to provide proof of funds or income as well. 8
Startup Spain and the digital nomad
In 2021, Spain proposed a framework for developing and supporting the entrepreneurial ecosystem of the country in order to retain and attract international talent and financing for startups. The Anteproyecto de Ley de Fomento del Ecosistema de Empresas Emergentes, or Draft Law for the Promotion of the Ecosystem of Emerging Companies, is proposed to take effect in 2025, offers income and corporate tax incentives, and more favourable terms for non-residents moving to Spain for work.
The Startup Act, as it is known, makes a proviso for special visas for ‘digital nomads’: for third-country nationals working in Spain remotely, and for employees of foreign companies who are working in Spain. The digital nomad visa will provide non-resident income tax benefits for up to five years.
Other countries, including Greece, Estonia and Croatia already offer ’digital nomad’ visas.
Look before you leap
So you’ve found the perfect little villa and fallen in love: truly, madly, deeply. As in any heady relationship, it would be prudent to get to know each other a bit before taking the plunge. Here are some things to think about if you are buying:
You should retain an independent solicitor and/or notary—unbiased and independent of your estate agent--to help you determine ownership of the property to be sure it is not encumbered and is indeed for sale. Don’t forgo an inspection of the property. You’d also be wise to compare the sale price, the appraisal value and the tax valuation as that will determine the property tax.
In addition, you should consult with a tax specialist. If you are earning money in Spain but maintain a residence in the UK, or receiving a UK pension, you may need to continue to file taxes in the UK.
Are you planning to occupy the property full time, or use it as a rental property for at least part of the year? The tax structure may be different for each use. Non-EU rental property owners can pay a higher tax on rental income than EU property owners.9
If you are selling your property to buy your new home, or taking equity out of your current home to pay for your property, consider speaking with your banker or mortgage holder to determine your options. If you plan to finance your property, engage with a local mortgage broker. It will likely take much longer than a cash deal, and you will need a substantial down payment.
“There are no foreign lands. It is the traveler only who is foreign.”
-Robert Louis Stevenson
A good assumption is that everything will cost a bit more, and take a bit longer, than you expect.
As they say: love is patient.
Money makes the world go around (the world go around, the world go around…)
“It is in Madrid only that you get the essence. The essence, when it is the essence, can be in a plain glass bottle and you need no fancy labels.
Finding the property of your dreams is just the beginning of your expat life. The next step is managing the practical matters of money: buying your home abroad and managing your cross-border obligations.
A bank-to-bank transfer to exchange your home currency to euros to pay for your property can be expensive. Your bank, and the seller’s Spanish bank, may charge fees on both sides of the transaction.10
Further, exchange rates are variable and not always transparent. Typically, a business trading in high volumes would receive a more favourable exchange rate than an individual.
Find a wingman…or wingwoman
There are ways, though, to potentially save money on your transactions. A currency broker or foreign exchange specialist can offer competitive transaction fees and favourable exchange rates, and a free multi-currency facility that allows you to hold value in pounds, dollars, or euros.
Make sure that the company you select is fully regulated and has a global footprint. You might be wise to search a comparison site as well, but be sure you understand the rates, the fees, and the process before diving in.
The timeline from contract to ownership can also be protracted, so you –or your FX broker--will need to keep track of exchange rates. You may be able to lock in a favourable rate for a specific period with a rate order, or a forward contract (which may require a small deposit to hold the rate until the purchase is completed and the money changes hands). Again, your FX provider can guide you through the foreign exchange part of the process, potentially saving you money and/or helping reduce or eliminate surprises from currency fluctuations.
Ongoing and incidental expenses
Are you regularly receiving funds from a UK or other non-EU pension, or from an employer in your home currency while you are working abroad? Depending on the jurisdictions involved, your FX specialist can make those transactions just as easy as domestic ones, and can probably save you money on those conversions as well.
You will likely also need a local bank account for incidentals and walking-around money. Opening a bank account in Spain can take time and patience. Required documentation can include proof of income or source of funds, passport, your residential permit and more. Often banks offer multi-currency facilities, but there may be a monthly charge11. Make sure you fully understand the maintenance fees the bank will charge for the account.
You may also need to keep a local bank account at home to cover expenses, such as property maintenance, a mortgage, or tuition payments for your children. Your FX broker can also exchange euros to pounds or other currency and send those payments. If your provider offers a multi-currency facility, you can hold funds in one currency until you need to exchange them.
Your FX provider can effect the necessary currency exchanges from one account to another, potentially saving you on bank transaction fees as well as on the exchange rate.
Take your time and do your research. An FX provider can help you navigate the payment process, simplifying the international money transactions .
La buena vida
“I would sooner be a foreigner in Spain than in most countries. How easy it is to make friends in Spain!”
The paperwork is behind you at last, and the keys are in hand. You’re all unpacked and are settling in. The Wi-Fi is working.
Study the language (you may need it if you decide to become a Spanish citizen!)12. Make new friends. Practice your Spanish with them.
Enjoy the food and the wine—and learn to cook it. Invite your solicitor, your estate agent, and your tax accountant to dinner along with your new friends. Invite your northern friends for a respite in the sun (and indulge a little frisson of pleasure from their oohs and aahs).
Travel widely. Immerse yourself in the culture, the art, the music--everything the expat life has to offer.
Find a favourite walk, a favourite restaurant, a favourite beach—and enjoy la buena vida.
ADDITIONAL SOURCES AND RESOURCES