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Expats will find that managing money in Spain is easy but expensive, and the cost continues to rise owing to soaring inflation in the country. Banking facilities are generally modern and function quite efficiently, but bank charges and commissions on international transfers are hefty when compared to most other countries in the European Union.
Additionally, filing taxes and organising large purchases can often turn into bureaucratic nightmares. It is often necessary to employ the help of a Spanish-speaking specialist to untangle the web of red tape.
Currency in Spain
Since 1999, as with the majority of other EU member-states, Spain has used the Euro (EUR) as its official currency. One euro is divided into 100 cents.
Notes: 5 EUR, 10 EUR, 20 EUR, 50 EUR, 100 EUR, 200 EUR and 500 EUR
Coins: 2 EUR, 1 EUR; and 50, 20, 10, 5, 2 and 1 cents
Note that the Spanish separate large figures into thousands with a full stop rather than a comma.
Banking in Spain
Spain has one of the highest bank branches per capita on the European continent and most offer online banking with fast, easy transfers. Recently, many mobile banking options have become available in Spain, with banks such as BBVA offering mobile wallets for card-free transactions.
When choosing a bank as an expat without knowledge of the local language, it is best to select a branch with English-speaking staff and the option for statements and documents to be translated into English.
Banking fees in Spain are notoriously steep and a variety of charges might be encountered, including debit card transaction fees, correspondence fees (when the bank communicates with a customer) and transfer fees. Most banks also charge a small sum for opening an account.
There are quite a few international banks that offer services in English and allow free transfers between branches around the world, as well as multi-currency accounts. HSBC and Barclays are popular with Brits moving to Spain.
Banks in Spain generally open from Monday to Friday, 8.30am to 2pm, and on Saturday mornings from around 9am to 1pm. There are some banks that open on Thursday afternoons instead of Saturday mornings, so it is worth checking the specific opening hours of each branch before visiting.
Opening a bank account
Expats can either open a resident or non-resident bank account in Spain. Non-resident accounts hold foreign currencies and normally have higher fees, while resident accounts usually offer more services and have higher interest rates and lower commissions. Resident accounts can only be opened by those with a Spanish tax identification number or Número de Identificación de Extranjeros (NIE).
ATMs and credit cards
ATMs (cajeros automáticos) are widely available and accept foreign cards. Expats who are yet to open a local bank account will find that these machines provide the best exchange rates, but transaction charges apply.
Alternatively, currency exchange offices (cambio) can be found at most airports and in most tourist areas. The exchange rates they typically offer are less attractive than those provided by banks.
Debit and credit cards are widely accepted in Spain, although transaction charges will apply if using an international debit or credit card.
Taxes in Spain
It is important for expats to check whether their home country has any tax treaties with Spain and the European Union, such as a Double Taxation Avoidance Agreement (DTAA). This ensures that they will not be double-taxed at any point. There is a double tax treaty between Spain and the UK.
Income taxes must be paid for any year that an individual spends more than 183 days in Spain – at this point, a person becomes a formal Spanish tax resident and is liable to be taxed for their international assets and accounts as well as those within the country. An individual will be deemed a Spanish tax resident if Spain is their main base or centre of commercial activities or economic interests. The annual tax year starts on 1 January and ends on 31 December.
Expats living in Spain need an NIE, which can be obtained at the local police station, to be identified by the Spanish revenue service (Agencia Tributaria).
Expatriates who work on a freelance basis or who run a business will also have to register as an autonomo with the local government. It is worth hiring a tax assessor to help navigate the complex Spanish system.
It is important for non-European expats to keep all receipts since value-added tax (VAT) is paid back when they leave the country or the Eurozone. This could be a hefty sum for expats who have lived in Spain for an extended period of time.
Income tax rates in Spain
There are two types of income tax in Spain: general taxable income and savings taxable income. Savings income will include dividends, interest and capital gains. General income will include all other income, typically employment income. The tax rates for savings income start at 19 percent for the first EUR 6,000 and rise to 27 percent for savings income above EUR 200,000. The tax rates on general income start at 19 percent and rise to 45 percent for income over EUR 60,000. In addition to income tax, social security contributions are paid on salaries and wages, up to a maximum of EUR 4,496.
Personal income tax is not levied on the employment income of expats who are tax residents in Spain but whose work is effectively conducted outside the country, up to the limit of EUR 60,100 euros, providing that various requirements are met. Although expats who work in Gibraltar must declare their Gibraltar income and PAYE tax, in practice the Spanish tax authorities allow credit for the tax paid in Gibraltar.
Spanish tax on UK pensions
Expats who are residents of Spain will be required to pay tax on any income from either state or occupational pension schemes. To avoid double taxation, UK expats must inform HMRC that they are tax residents in Spain.
There is a wealth tax in Spain, that is levied on Spanish tax residents' worldwide net assets. Although the rate goes as high as 3.5 percent of an individual's worldwide assets, there are several reliefs that expats can explore, and most individuals consult a tax adviser to ensure their asset structure is efficient for tax purposes.