Spain Mini Guide

Spain Mini Guide - Halifax International

Offering a delectable serving of sunshine, averaging 320 days per year, outstanding healthcare, unrivalled golf courses, quality schooling, beaches among the world’s cleanest and best, the opportunity to commute to the UK and be home in around three hours, topped off with a generous British expat community for good measure, Spain’s reputation as an Expat Utopia is well-founded.

However, like other nations, Spain has not been spared from the impact of the world’s economic downturn. Its previously enviable growth rate has suffered, as have its businesses and property owners, leaving a bitter taste in the mouth for a number of British expatriates. Demand is down, unemployment up and uncertainty plentiful. And because of this it’s crucial that anyone considering investing or moving to Spain factors this into their thinking.

Nevertheless, prolific author and historian Thomas Fuller once wrote “A good garden may have some weeds”. And whilst Spain has its share of problems, it certainly is still that – a very good garden.

Whether you’re pursuing a dream of working or retiring abroad, looking to give your family a better life or working for a multinational that is offering you a transfer, emigrating to Spain can be successful and rewarding providing you do the homework and prepare thoroughly; having said that it’s surprising how many people base a move to Spain on little more than the presumption that living there will be one long holiday...

For individuals contemplating moving to Spain, the below guide provides comprehensive advice and information on a number of issues, from how to set up a local bank account and understanding your tax liabilities, to the property buying process and getting to grips with the local culture.

Tax

Taxes in Spain are of course as inevitable and unavoidable as they are in the UK. Presented with an unfamiliar system, it can be confusing knowing where to start and what to expect. Moving countries can be a bureaucratic headache but with a little bit of homework the pain can be dramatically softened.

Personal Income Tax (Impuesto sobre la renta de las personas físicas/IRPF) is a direct tax levied on the income of individuals, which may come either from work as an employee or by means of self-employment. Under Spanish law, taxable income is determined as the difference between income earned and deductible expenses and is assessed differently for residents and non-residents in Spain.

Non-residents' income tax liability

If you have money deposited with a Spanish bank, a property in Spain, or derive income from any business in Spain then you will be liable to pay tax.

So what formally makes you a Spanish resident? For income tax purposes, under Spanish domestic law and its Double Tax Treaty network, individuals are deemed resident for tax purposes if they spend 183 or more days in Spain during the Spanish Tax Year. A person will also be treated as resident for Spanish Inheritance Tax if 183 days have elapsed since they first took up residence. Plus, unless a person is able to prove their tax residence in a country with a Double Tax Treaty with Spain, temporary absences from Spain are not counted to reduce the tally for the 183 days rule.

It’s worth pointing out that as a Spanish resident you will be taxed on all of your worldwide income, gains and assets - unlike in other jurisdictions, which might affect those looking to optimise their tax.  To obtain more information on tax and your domicile status, contact the Inland Revenue and request an IR20 document.

On the other hand, recent fiscal changes in the UK which set a new top rate of income tax at 50% for those earning over £150,000, made Spain an instantly more attractive proposition to high earners owing to its 43% ceiling rate for those earning in excess of €53,407.

For those of you thinking about retiring to Spain, seek independent tax advice regarding the benefits of offshore banking.  Visit Halifax International’s offshore savings pages (http://www.halifax-international.com) for simple and easy ways to save offshore.

Notifying the Inland Revenue and National Insurance Contributions Service about your impending move is essential. The latter will also be able to inform you of whether your pension is payable abroad and whether your NI contributions should continue. People often believe that by leaving the UK they can avoid tax payments; however in many cases they might actually be missing out on a sizable tax rebate.
 
Finances

Good budgeting and knowing what to expect could help make the difference between a successful relocation and a disastrous one.  Before making the decision to emigrate, it’s essential to ensure your finances are properly planned and that realistic budgets are in place.

Retirees

Obtain and complete form BR19 from the Retirement Pension Forecasting and Advice Unit (RPFA) on 0044(0) 191 218 7585 and ask for a state pension forecast to work out your retirement income. If you have already moved, and are paying local Spanish social security payments, this forecast will not include your local contributions.
Write to The UK Pensions Service informing them that you are moving to Spain and give them your new address. Their address is International Pension Centre, Tyne View Park, Newcastle-upon-Tyne NE98 1BA Telephone: +44 (0) 191 218 7777; Fax: +44 (0) 191 218 3836.
For an insight into your Spanish pension rights, take a look at www.ukinspain.com/english/, a UK government website dedicated to providing information for those relocating
To obtain your UK State pension in Spain you will need to complete a claim form from the Pensions Service.

Local banking

Resident and non-resident bank accounts are the two types of bank account available to foreigners. The former (Resident) has cheaper fees and requires a Fiscal Identification Number known as an NIE card (NIE – numero de identificacion de extranjeros). Depending on what the bank offers, this will allow you to open an account in euros or in a foreign currency. If you don’t have an NIE card however and come from another country, you will need to open a non-resident account. Again, non-residents can hold bank accounts in Euros or in a foreign currency. To open an account as a non-resident, you must have a valid passport or the ID number of your country of residence. You must also justify your non resident status within 15 days of opening the account; this is because as a non-resident account, the bank does not withhold a percentage of the interest earned. The bank will generally get in touch with you every six months to clarify your status. Should you acquire resident status at any point after opening it you must notify the bank and provide them with your NIE.

The good news is that the Spanish banking system is well established and modern with all banking activity controlled by the Bank of Spain (Banco de Espana), it’s also got one of the highest ratios of bank branches per capita in Europe. However, not all of these will offer an English-language service. Banks in resort areas and in large cities will usually have at least one English speaking employee, although you shouldn't expect this. Banks in more rural areas generally won’t have any.

In comparison to the UK, Spanish bank charges are generally higher; there may also be annual fees, fees per debit card, even fees for sending mail out to you. Be careful especially when using ATMs to make a transaction, whilst they will inform you if and what charges are payable, paying €4.80 is not unheard of. Consequently, when looking into opening a local Spanish account, comparing the following fees will help you identify the most cost effective account:

% fee to/from a national non-local bank account
% fee to/from an international account?  In the same currency?  And how does this apply to small amounts of money
% fee to/from an international account otherwise
Does the account offer any additional services that might be of interest to expatriates
Fees for cheques
Monthly account fees
Annual maintenance charge fees
Annual standing order and Direct Debit charges
Cost of using ATM's

Eye on Spain (www.eyeonspain.com) has a very helpful banking forum that provides valuable insight into the pertinent issues surrounding Spanish personal banking. It provides recommendations by expats of good local accounts and will also enable you to post any more specific questions you have.
If finding a local bank still seems a little daunting, Banco Halifax Hispania (www.halifax.es), the Spanish arm of Halifax, could be a way of alleviating this by providing an English speaking service and a reassuring link to home through its Resident and Non-resident accounts:
http://www.halifax.es/halifaxing/acc/curracc.asp?sec=acc
http://www.halifax.es/halifaxing/acc/xtra.asp?sec=acc  

To remain known in the UK by financial institutions and retain a credit limit, many people opt to leave their UK bank accounts open, especially if they will have a requirement to make regular payments such as transferring UK pensions or rental returns from a UK property. An offshore savings account or offshore bank account may also be beneficial for long-term savings and for tax planning. Offshore savings can be held in various worldwide currencies.

Cost of Living

Spain’s “reduced cost of living” mantra has been at the centre of the Costa Del Sol’s advertising campaigns for many years, and is undoubtedly a key reason why it has won the hearts of so many expats. However as global economies continue to feel the impact of the downturn, it’s not surprising that this is less true than it has been in previous years.

In fact, a decision to move to Spain based on the low cost of living alone would be naïve in today’s climate. There’s plenty of evidence to show that the gap has narrowed between the UK and Spain, especially in the Costas where cosmopolitan living has created prices not markedly different to Northern Europe. Like the UK, depending on where you live and type of lifestyle you lead, the cost of living can vary significantly.

Whether you intend to work or are retiring also makes a difference. With a job secured in Spain, you’ll be paid in Euros and are less likely to be affected. But British pensioners, and those who receive a UK income are more likely to feel the pinch owing to the pound’s reduced buying power.

There are certainly lifestyle savings to be made however; deviating from UK brands towards a more localised shopping basket, can make for a far less costly option than shopping in the UK. Home Espania (http://www.homeespana.co.uk/newsletter/jan09-livingcost.asp ) and Othercountries.com (http://spain.othercountries.com) are an excellent resource, which provides access to typical annual living costs through to grocery costs. It is then possible to weigh up anything from the cost of running a small villa on the Costa Blanca, right down to the average price of a bottle of red wine or even a single red pepper.  In addition, keep an eye on the utilities sector as there are lots of changes occurring in this sphere.

Property

It is undeniable that the Spanish property market has declined over the last two years. And with this there have been a number of unfortunate expat casualties. There have been many horror stories regarding people who have invested in property abroad only to experience inconceivable difficulties from developments not being finished on time or at all; to tales of properties being subjected to threats of demolition and shrewd vendors taking advantage of the unwary British purchaser. But it doesn’t need to be like this.

UK buyers should, however, pay very close attention to fluctuations in the exchange rate between Sterling and Euros, and the significant differences between buying a house in the UK and buying a house in Spain as these are unquestionably where some of the greatest pitfalls lie.
 
In order to own property in Spain you must have a Fiscal Identification Number (NIE – numero de identificacion de extranjeros) as well as a Spanish bank account, here are a few other key factors to be aware of:

Weigh up the risk of being a currency gambler: In recent months Sterling has fluctuated dramatically which can have serious ramifications for your property purchase: if the pound strengthens your property will cost you less, if the Euro strengthens it will cost you more. Choosing a ‘fixed’ exchange rate can help mitigate this risk if you are not prepared to gamble.

Find a Spanish legal specialist: Britons often experience problems buying in Spain because they simply don’t ask the right questions. Spanish solicitors see their role as facilitators of your purchase, so unless your solicitor knows exactly which avenues to explore it’s possible they could overlook something essential. Banco Halifax Hispania has an approved panel of English speaking, qualified solicitors and surveyors that can help with all aspects of the purchase.  These solicitors and surveyors have local knowledge and experience of acting for British customers.

It’s all in the detail: Boring and time-consuming as it may sound, if you are going to relocate and live in Spain all year round, be a stickler for detail in your property search. Taking a 'preventative rather than cure' approach could save you from future ills and bills. Whilst that four bedroom marble lined villa with a crystal blue pool is likely to be exceptional in the summer months be mindful that the majority of older properties developed in Spain were constructed primarily for summer use. That stunning marble floor that has a refrigerating quality in the high summer – will be equally freezing in mid winter. And with temperatures falling to degrees in single digits in winter you could be faced with phenomenal heating bills. Choosing a newer property that has either under floor heating, hot and cold air conditioning and/or tiled or wood floors could save you thousands. Also, are you familiar with the costs of maintaining a pool? A property with communal facilities could certainly help minimise these.

Be in it for the long term: Like the UK, the Spanish property market has suffered and buying a property and selling it quickly for a quick profit is not likely in today’s market. Instead taking a long term investment view is advisable. Spain will always be a popular destination for expats and holiday makers, so demand for your property long term will always exist.

Location & Marketing: If you’re hoping to supplement your income through holiday rentals, location is key. Some of the best examples of popular buy to let property in Spain are those which offer easy access to the airport, golf, beach and facilities. If all of these can be offered within a relatively easy drive (or even within walking distance), then this could prove to be a good buy to let investment. Consider if your chosen destination will attract holiday-makers, and then consider the type of tourist that would want to stay in your chosen property. For example, the typical high season for a small 2-bed beach apartment would be from June to September, but if there are few year-round facilities or golf courses in the vicinity the property may rarely be used in the winter months. While a ground floor flat, for example, could appeal to parents wanting to keep an eye on their children by the pool, or to disabled or infirm travellers. Tapping into the best websites that attract the highest number of rental enquiries for Spanish holiday homes is also critical. Whilst the proof of the pudding is in the eating with services such as these, the testimonials section of a website is a good place to start.

Be a Star: If you’re feeling a little more flamboyant, check out the forums on property websites, TV companies will often post advertisements looking for house-hunting contributors.

Mortgages: You must ensure that if you need a mortgage you have secured approval before you make any offers on a property: otherwise you risk losing your deposit. Banco Halifax Hispania, provides a range of mortgages and bank accounts designed for people who want to buy a property in Spain.  The bank offers an Agreement in Principle service, offering customers the assurance of knowing how much they can borrow before they look for a property.  All dealings with its customers can be carried out in English and there is also a UK based, specialist customer service team for those customers that wish to sort out their finances before they leave the UK.  The team can be contacted on 0845 600 3603.  

As with all mortgage products, it is important to choose a deal which is right for you, taking into account any fees, rates and conditions. Also, make sure your provider can supply all your forms in English as you should never sign anything in a language you are not fully fluent in.

Culture & Lifestyle

If you’re a fan of big cities, nothing beats Madrid and Barcelona, with their exuberant nightlife, stunning art and architecture, and mouth watering cuisine. If the quieter life is more your scene however, Spain has an abundance of precious small villages steeped in history, where you can enjoy the warm and friendly hospitality of this country.

In the rush to start a new life in Spain many expats can overlook fundamental differences in local lifestyle. It may be a cliché but if you want to settle in Spain, then getting to grips with the term ‘Manyana’ will go a long way. Be prepared for a much slower lifestyle where things take a little longer to get done than they do in the UK.

Daily life can be unsettling at first, but in today’s society where people have become increasingly isolated from their neighbours it is refreshing to find that Spain is still very community-minded: every single city, town and village, no matter how small, has its own special day of celebration – a fiesta - when most residents will take to the streets and socialise with their neighbours, each one a unique mix of spectacle, music, dance, parade, drama, food, fireworks and costumes.  Almost all fiestas mark dates in the Catholic Church calendar, and are closely connected with religious beliefs.

Bullfighting is a contentious and emotive subject but it is still a part of mainstream Spanish culture. Not every Spaniard is an enthusiast and you need never see a bullfight while living in Spain if you choose not to.

Most businesses split their opening hours into two distinct blocks, with a 2 to 3 hour break in the middle. Dinner is also served later than the majority of places in Europe – around 10pm - which for the revellers of you out there will influence what time you head out to Spain’s nightlife as many clubs don’t even begin to open their doors until midnight.

Spaniards are fervent about football – they call it 'Deporte Rey' or 'King of Sports.' The country literally grinds to a halt when an important match is being played.

Employment

In February, the British minister for consular affairs in Spain intimated that expatriate unemployment rates in mainland Spain are rising. This is worrying news for existing expats and for anyone contemplating a move. Akin to the UK, the job market is tough, particularly outside the major cities. Coastal areas have suffered tremendously owing to the drop in tourists.

For an expat, landing a job in Spain can also seem like finding a needle in a haystack. Advertised job vacancies represent about 15 percent of the actual employment possibilities, as only a very small portion of the jobs available are publicised through newspaper advertisements,

It’s certainly not all doom and gloom though. There are services and skills that are in demand in Spain including IT, nurses and teachers for example. Also, the Cabinet has fixed the Minimum Wage at €624 (€20.80 per day), which represents an increase of 4% compared to €600 in 2008.

Here are a few tips and websites to consider:

Learn the language – for anyone who needs a job to maintain their lifestyle a good grasp of Spanish is a must, especially for well paid jobs
Have a firm job offer prior to leaving the UK
Think outside of the traditional ‘expat job’ box – look for services and skills that are in demand in Spain
Strong networking skills, personal contacts and persistence are valuable qualities in a Spanish job hunt - instead of publicly advertising their staffing needs, many Spanish firms fill vacancies through direct personal references or internal promotion. This "hidden market," making up 85 percent of actual employment positions, can therefore make it very difficult for foreigners to access
Gain a TEFL (Teaching English as a Foreign Language) qualification. English language teachers are in huge demand in Spain, where learning English has become a national obsession in the last decade

Www.Payscale.com is a useful resource, particularly for forward planning. So comparing the median salary per City, you can discover that you are more likely to earn a higher salary working in Madrid (€36,699) than Alicante (€22,364) or Malaga (€19,726). Or perhaps you might want to compare your median hourly rate by job, which indicates that Registered Nurses or teachers could earn around €23 per hour, electricians €11 per hour and waitresses €8 per hour. It is also possible to research skill sets the Spanish deem important and average commute times

Self Employment/Freelance – Spanish rules governing emergency days off are known to be quite inflexible. Being self-employed can allow you the freedom to travel back and forth to the UK at the drop of a hat. There are many freelance jobs that can be done on-line – being a translator for example – as well as lots more businesses that can be set up and run over the Internet. If you’re thinking about starting your own business in Spain, http://www.spainexpat.com/ provides some useful articles ranging from starting a bar through to business etiquette.

Conclusion

The prospect of moving to Spain may seem daunting, but can be highly rewarding given proper research and planning.  Being realistic is also crucial in today’s climate. Accepting that you may incur some unanticipated uphill struggles is part and parcel of changing cultures. Taking professional advice on as many topics as possible as well as talking to those who already live, or have lived, in Spain will give you the greatest chance of success.

There are a vast number of expat blogs, website and forums out there, where you can find a wealth of on-the-ground information that will ensure that you come as close as possible to ensuring that the reality lives up to the ideal.