Registration in Spain
If you buy property in Spain you will need to register yourself for a NIE, and if you move permanently to Spain you need to register yourself with the authorities in two main ways:
- Anyone with an economic interest in Spain (including a non-resident who owns a house in Spain) is required to have a NIE (Número de Identidad de Extranjero), which is an identity number and also effectively doubles as a NIF (Número de Identificación Fiscal) once registered with the Agencia Tributaria (Spain’s tax authority).
You can register for a NIE at either the local Policia headquarters or at the Agencia Tributaria, but if at all possible you should do the registration with the Policia because that NIE does not expire, unlike those provided by the Agencia Tributaria which last only 3 months, after which you need to reapply and will get a new and different number. As the NIE is used for identification for all manner of things in Spain it is REALLY annoying to have one that expires or changes.
- Once you are living permanently in Spain you should register as a resident in the concello in which your house is.
To do this you simply go to your local ayuntamiento (Mayor’s office) and ask to register yourself as “empadronamiento”. They will spend a few days confirming this, which may entail the Policia Local turning up at your house and sometimes your neighbours’ houses to ask if you live at the address provided, and you will then be given a certificate of empadronamiento which you will need for various applications (such as for healthcare provision, registering a car, etc).
Prior to July 2012 it was very simple for immigrants from other EU countries to register as residents in Spain and get the same range of services and benefits as a Spanish national. Since then this situation has changed considerably and, although EU nationals have a right to reside legally in Spain they are only able to obtain legal resident status by providing:
- A valid EU passport from their home country
- Proof of a job offer within Spain OR registration as self employed (including paying the 3000€ per year social security contribution) OR a certificate from a Spanish bank stating that they have sufficient funds not to have to seek social security assistance from the Spanish state.
The level of funds defined as sufficient not to have to seek social security assistance is defined by IPREM (it’s not easy to get the necessary figure from this website, but as of Jan 2015 sufficient funds was defined as something around 11,000-12,000€ for a couple).
- Proof of health insurance that provides private or public medical cover equivalent to that provided by the state.
You can find advice about this on the UK government’s residency requirements in Spain webpage.
This situation, where you have a right to reside but may not fulfill the conditions for legal residency, is something of a grey area that has largely been created in response to the current economic crisis (and has parallels with most other EU countries), and EU law is evolving that may change what either Spain or your home country has to offer in this situation.
One related issue of note for UK nationals is the uncertainty over the UK’s future membership of the EU, with the Conservative party campaigning in the 2015 election for an in/out referendum. As controls on immigration, contrary to the EU principle of freedom of movement, seem to be the main focus of this campaign it is far from impossible that a UK with renegotiated membership of some kind may withdraw from that aspect of the EU charter and that UK emigrants living in EU countries such as Spain might as a result lose their rights to reside where they are already legally residing.
My guess is that if this eventuality were to come about there would be some solution for people who had immigrated before a specified date, but it is far from certain and it might take the form of a right to apply for Spanish nationality, which normally requires applicants to renounce all other nationalities.
Going in any depth into taxation is getting a bit beyond the scope of this website, but there are a few tax issues anyone moving to Galicia should be aware of:
- If you are a non-resident property owner in Spain you will be liable for the annual IBI property tax (council tax equivalent) and garbage collection charge paid to the local council, but also for an annual tax based on the assumed rental value of your property which is calculated as your property’s official valuation (valor catastral) x 1.1% x 24.75% paid to the Spanish inland revenue.
- If you are a Spanish tax resident then you are liable to taxation of gifts and inheritances (including within a family and even between spouses) typically at a rate of around 18%, although there are many factors that greatly vary this amount, especially for inheritances from direct family members where there is often little or no tax payable.
- Spain has a law of fixed heirs which means direct relatives (children, parents, grandchildren) have automatic inheritance rights to property and other assets. If you are tax resident in Spain these laws will typically apply to you.
If you are non-resident (tax residents who are foreigners can, in actuality, often benefit from the same rule) then a valid will made in your home country will normally take precedence.
- All businesses and self employed people in Spain are required to charge and pay to the government IVA (VAT) at the rate relevant to the products or services they provide (normally 21%). Unlike the UK’s VAT threshold there is no minimum amount earned before IVA applies.
- Spanish residents must make an annual tax declaration and must declare any foreign assets if these are worth over 50,000€ in total in any given category of assets.
- When buying property and certain other registered items such as cars or boats there is a 10% tax payable to the relevant autonomous community, although there are currently lower rates (that you have to fight hard to get them to agree to) of 8% for purchase of a primary residence by people owning less than 200.000€ (plus 30.000€ per dependent) of assets and of 4% for people under 36 or with a disability and with the same wealth limit.
- When buying a new property IVA (VAT) is charged at 10%. This should be included in the listed price, but always check this.
- When buying land for development IVA (VAT) is charged at 21%.
If you are unfamiliar with the Spanish tax system and plan to move here then it’s worth getting advice about how Spanish taxation will affect you and also how you can arrange your affairs prior to becoming a Spanish tax resident to optimise your tax situation or to protect assets you plan to leave as an inheritance.
This firm of online lawyers has native English speakers, provides a great deal of current information and advice and will also provide specific advice for a fairly low fee.
Capital gains tax
A common issue for foreigners selling property in Spain is capital gains tax, and even if you are buying a Spanish property with no plan to sell it it is worth understanding this issue. The key points are:
- Capital gains tax (ranging from 20-24%) is levied on property sale price minus (original property purchase price + allowable deductions).
- The original property purchase price is what was declared in front of the notary (which, historically, is often less than the actual price). There used to be an allowance for inflation applicable to this price but it was abolished in 2014.
- Allowable deductions are the various costs associated with the original purchase and with the sale and also significant improvements to the property, BUT only to the extent that you have IVA paid receipts for these. Anything done yourself or without IVA paid will not be deductible.
Like most developed countries, Spain has a capital gains exemption for a person’s primary residence. The important points relating to this are:
- Proving that a property is your primary residence is done by showing that you were on the empadronamiento (registered with the local concello as living at that address) for 3 years before the date of sale. Bear in mind also that claiming a primary residence in Spain could, in theory, open you up to Spanish tax demands for those three years if you were living and earning elsewhere during that time.
- The exemption applies to the amount re-invested in a new primary residence anywhere within the EU within the 2 years of the sale (currently this has been extended to 3 years because of the crisis). Any amount of the sale price not reinvested in a new primary residence within this period is subject to capital gains tax.
- There is an additional exemption for anyone aged over 65 whereby capital gains tax is not charged on the sale of a primary residence (presumably to allow people to sell their home and use the proceeds to pay for a care home, or similar).
Spanish law & bureaucracy
Spain is rather infamous for its bureaucracy, and not completely without justification. As an incomer you will be required to go through a number of bureaucratic processes and are likely to be a little staggered by the plethora of national and regional authorities you will need to deal with, each of which seems to own a good chunk of the prime real estate in every town and city.
You are then likely to find that things move at a frustratingly slow pace and that the various bureaucratic organs appear entirely content to send you shuttling left right and centre (often misdirected) with absolutely zero regard for your time and your mileage, which can be a major issue if you live some distance from the nearest city.
On top of this, once you finally find the right office you will almost invariably find that you lack one form or other, or photocopies. I know not one immigrant to Galicia who doesn’t find that this video resonates to at least some degree!
Experiences like this make it very tempting to adopt the view that Spanish bureaucracy is absurdly inefficient, laws are inconsistently applied and liable to abrupt change often based on corrupt vested interests, none of the locals abide by most of the laws anyway, and so you’re going to ignore all of it, keep your head down and it’ll probably be fine.
…which not be too far from the truth, however:
- A high percentage of incomers to Spain don’t speak the language particularly well and also have no real knowledge of how the systems work. They are, however, used to having reasonable knowledge of a system and speaking the relevant language fluently, and so for this reason they are impatient and liable to get angry and/or disillusioned quickly.
- As an incomer it is likely that regulations may not match expectations based on experiences from your home country and that complying with them can be an arduous and time consuming experience due in part to the inefficiency of the system but often in equal or greater part due to a lack of language skills and knowledge of the system.
- If you persist with the system you will normally find that you get to more or less where you wanted eventually and that you do a fair amount of useful learning along the way.
- Additionally, once you have got to a legal and stable state in Spain you will find maintaining it to be fairly easy and that there may also be tax and other advantages, and certainly a lot less anxiety, in being legal ….which is probably not unlike the position you were in in the country you left behind.
It’s my experience that most government offices do have their share of people who either (or both) seem incapable of the basic intellectual demands of their job or will go to any lengths to avoid having to deal with foreigners who typically have more complex, badly articulated problems and insufficient language skills to understand the reply (and the computer system won’t accept their NIE because it has a letter at the end!).
However there is normally also at least one person in every office who is friendly, helpful and knows their job extremely well.
This may seem wrong, but to deal effectively with Spanish bureaucracy you need to first try to identify who the good people are in any office you need to deal with, and second be as friendly, personable and charming as you can with them so that they are then disposed to help make things go more smoothly for you.
If you identify someone good, or if one person knows your case and it seems to be progressing well, then avoid seeing anyone else in that office. This can be achieved by:
- When you deal with a good person and know you need to come back again, ask them if it is possible to get an appointment (“cita previa”) with them as they understand your case and your Spanish isn’t very good.
- Take one queue ticket when you first enter. Wait for someone else to enter and take the next ticket, and then you take another. If your first number comes up for someone you don’t want to talk to then ignore it and they will wait 30 seconds and buzz for the next person, leaving you with a greater chance of getting the person you want. Needless to say this gets complex in an office with 7 or 8 desks!
- Get the name of the good person and claim that they are the only person whose Spanish you can understand. Normally at least the useless people will be only too happy to pass you over to them without further questions.
If you want to abide by Spanish law but lack the language skills and/or knowledge you should seek the services of a gestor (ideally one who speaks your native language).
As many Spaniards either lack the confidence and/or time to deal with Spanish bureaucracy there is an established sector of people called gestors who act as your representative in all matters bureaucratic.
Gestors are normally fast, efficient and don’t cost all that much. They will also be able to alert you to the benefits of some of the processes you are complying with, for example claiming a tax deduction for building improvements, and additionally are likely to be well connected with the local authorities and professionals whose services you may want to use (architects, builders, etc.).
Complying with or avoiding the system
There are plenty of incomers to Spain who have been driving UK registered cars around and have restored their property without any permissions and then gone on to rent it out without declaring the income, etcetera all without any problems whatsoever for years or even decades.
Furthermore in rural areas it can often be reasonably claimed that a lot of people do building work on their houses without the relevant permissions and that problems only arise in the event that a report is made to the authorities (a denuncia) by someone living nearby.
The moral decision about such a course of action is one each incomer has to make for themselves.
In practical terms the summary of the situation is, really, that the UK and other north European countries are sufficiently efficient and assertive in enforcing their laws that not complying with them is not worth the risk, but Spain is seen as sufficiently disorganised to mean that non-compliance with the law is often quite safe and that even if caught the consequences typically aren’t too severe.
This may have been true, and especially so in remote areas with little immigration such as Galicia, in recent decades but the reality is that this is gradually changing, largely driven by closer EU integration of systems and most of all by data analysis possibilities offered by new IT technology.
These days if you are caught the fines tend towards the draconian and you will find little sympathy from a Spanish legal process which you will not be able to just ignore.
Aside from anything else, if you aren’t complying with laws that apply to you you are effectively digging a deeper and deeper hole for yourself in that legalising your situation will become continually less easy to do.
This will add a stress component to your life, make you extremely vulnerable to future government crackdowns in the relevant areas (which may become much easier for them to do with new technologies), and will also render you vulnerable to anyone living near you – perhaps someone who wants you to buy some land from them at an inflated price or a rival person giving English lessons – who wants to cause trouble for you.
If inclined that way, it is worth a long, hard think about whether extensive non-compliance is worth it.
The caveat to all of the above, however, is that north Europeans are accustomed to complying fully with a clear law, and in Spain a slight change of mindset is needed.
“Mas o menos” means more or less in Spanish, “un minimo” means a minimum, and “enchufe” means plugged in or connected (able to do what the hell you like if you’re the mayor’s brother, in the extreme form …although watch out if the opposition get in at the next election!), and these are all important factors in compliance with regulations.
Broadly speaking, if you have at least a minimum level of compliance with regulations that more or less fit what you’re doing and if you’ve had some engagement with the local authorities and shown them that you’re willing to work with the system you’ll be just fine in practical terms, and morally you’re probably slightly better than the norm.