Your guide to expat life in Spain

Money in Spain

Finding accommodation. Organising healthcare plans. Sorting out schools. There’s lots to think about when you’re moving to another country. One of the most important things you need to do is make sure your finances are in order.

In our 2016 Expat Explorer Survey, 30% of expats said their finances have become more complicated since they moved abroad. (This figure rose to 46% for expats earning more than $250k a year.)

Our survey also found that some of the biggest challenges are having financial commitments in both your home and host country, juggling finances in different currencies, moving money between countries, having more money to manage, and dealing with a more complex tax situation.

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Currency

The official currency is the euro (EUR), which is divided into 100 cents.

The euro is available in the following denominations:

Notes: 5, 10, 20, 50, 100, 200 and 500 EUR

Coins: 1 and 2 EUR, and 1, 2, 5, 10, 20 and 50 cents

Tax

Expats often find their tax situation becomes more complicated when they move abroad. Getting advice from an expert in international tax is essential. As well as helping you understand your new tax obligations, they’ll also look at how you can manage your finances in the most tax efficient way.

Local information

Tax Authority Agencia Española de Administración Tributaria (AEAT)
Website www.agenciatributaria.es
Tax Year 1 January to 31 December
Tax Return due date 30 June
Is joint filing possible Yes
Are tax return extensions possible No

2016 income tax rates

Total tax liability consists of the tax liability computed under the general rates plus the tax liability computed under the autonomous community rates. Consequently, the final maximum marginal rate depends on the marginal tax rate of the autonomous community where the taxpayer resides.

Income derived by non-residents is generally subject to a final tax of 24% (or 19% for residents of other EU member states). However, other rates may apply depending on the type of income. Dividends and other income derived from holding a participation in a company, interest and other income obtained from assigning capital to third parties are subject to tax rates of 19%, 21% and 23.%.

Taxable Income band National Income Tax Rates
0 - 12,450 19%
12,451 - 20,200 24%
20,201 - 35,200 30%
35,201 - 60,000 37%
60,001+ 45%

Cost of living

The cost of living in Spain is low compared to other expat destinations in Europe – you’ll pay less for nearly all the basics, including accommodation, food, transport and utilities. But things could be tight if you’re living on a Spanish wage.

Prices are higher on the Costas and in city centres – and things like clothing and school fees can be expensive. You’ll also have to budget for the relatively high cost of private healthcare if you can’t (or choose not to) use the public system.

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Accommodation (monthly rent)

Furnished two-bedroom house 1,000 EUR
Unfurnished two-bedroom house 650 EUR
Furnished two-bedroom apartment 600 EUR
Unfurnished two-bedroom apartment 400 EUR

Groceries

Milk (1 litre) 0.84 EUR
Loaf of bread 0.95 EUR
Chicken (1kg) 6 EUR
Eggs (dozen) 1.69 EUR

Transport

Taxi fare (per kilometre) 1.05 EUR
City centre bus fare 1.50 EUR
Petrol (per litre) 1.29 EUR
Metro fare (short one way journey) 1.50 EUR

Eating out

Three course dinner in mid-range restaurant 50 EUR
Big Mac Meal 7 EUR
Cappuccino 1.71 EUR
Coca Cola (500ml) 1.5 EUR

Utilities/household expenses

Mobile call rate (mobile to mobile per minute) 0.16 EUR
Internet (uncapped ADSL or cable - average per month) 35 EUR
Basic utilities (average per month for small household) 160 EUR
Hourly rate for domestic cleaner 10 EUR

Prices vary across the Spain - these are average costs for Madrid in July 2016.

Banking

Having the right banking arrangements is a key part of expat life. Your money should be easy to access and transfer between countries. Financial security is also important – so choose a reputable bank that complies with international regulations and has a solid capital base.

Most expats have a bank account in their home country and a local account in the country they’ve moved to. You should also consider opening an offshore account, as this can be the most effective way to save, invest and manage your money while you’re abroad.

Before you move

It’s best to have your new banking arrangements in place before you move because local banks usually require a credit history and proof of address, which you won’t have when you arrive.

To avoid the difficulties of opening an account in a new country, you can open an offshore account before you leave home. This will give you easy access to your money when you arrive.

If you use a bank with a global network, they may be able to open a local account and transfer your credit history so everything is ready for you on the day you step off the plane.

Expat banking

Many expats choose to open an offshore bank account. Offshore banking simply means you have a bank account in a location outside the country you're living in. This location is usually a low tax jurisdiction that offers economic and political stability.

Having an offshore account gives you the opportunity to keep your money in a central location - so you can stay with the same bank, wherever life as an expat takes you. It also makes it easier for you to access your finances and move money around the world.

For some expats, one reason to open an offshore account is because it gives them a tax efficient way to save and invest, but these potential tax benefits very much depend on your circumstances. It is your responsibility to disclose your income to any relevant tax authorities

Talk to the experts

Before making any decisions about your new banking arrangements it’s important to get advice from someone with experience in expat finances. The sheer variety of banking services targeted at expats can seem daunting, but a good financial adviser – or a bank that specialises in expat accounts – can help you make the right choices.

Moving money

Most expats need to transfer money between different currencies and make international payments – so it’s important to understand how foreign exchange works and the impact of exchange rates going up and down.

When you’re juggling financial commitments in multiple currencies, remember that the currency markets can move very quickly, resulting in wide variations in the buying power of your money.

To help you reduce the risk associated with currency fluctuations, it’s worth considering foreign exchange solutions that let you fix an exchange rate for a period of time. By fixing the rate, you know exactly how much you’ll need to convert, whatever happens to the markets in the meantime.

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Make banking arrangements that you can use in both countries and in both currencies.

Expat Explorer survey respondent

View more hints and tips for Spain

Family finances

Adjusting quickly to a new way of life is particularly important for expat families. As any parent knows, bringing up children doesn’t come cheap. As well as keeping them entertained, you want to give them the best start in life. And that means giving them a good education along with plenty of opportunities to develop their talents and interests.

Education

Educating children abroad can be an expensive business because you can’t always send them to the local school. Even if your employer pays for private schooling as part of your relocation package, be prepared for significant extra costs as international schools tend to have lots of extracurricular activities.

If you want your children to be educated in your home country, you’ll have to budget for boarding fees, along with flights so they can join your family at the end of each term.

Planning ahead to cover the cost of university fees is also important. If one of your children applies to study at a UK university while you’re living overseas you can expect some rigorous questioning as to whether they qualify as a home fees student, even if they’re a British national.

Protection

With the right protection in place, life-changing events such as job loss or a serious illness don’t have to be financially crippling for you and your family.

There’s a wide range of policies on the market for everything from income protection, critical illness cover and life insurance to private medical insurance and travel insurance. As an expat, you want cover that’s portable – so it moves with you if you move to another country or return home.

If you’re relocating with your company, check the conditions of your benefits package carefully to see if you need to take out additional cover. If you’re self-employed, looking for work or retired, the responsibility to protect your family sits squarely on your shoulders.

Pensions

Being an expat can affect your pension. If you can’t pay into a pension in your home country, you’ll need to think about other options. Portability is key as you should avoid creating small pension pots in numerous countries around the world.

Needless to say, this is a very complex area, and expert advice is vital. There are many factors to consider, including the benefits offered by your existing pension, your plans for the future, the tax regime where you’re based and the country you expect to retire to.

Inheritance planning

Many expats have property, possessions, investments and bank accounts in more than one country. Inheritance laws vary from country to country and are often highly complex. But with careful planning it’s possible to minimise the inheritance tax your family has to pay.

Consider making a tax-efficient will in your home country, your country of residence and any other country where you have substantial assets. If you have more than one will, make sure they tie in with one another – and that they clearly state who is responsible for dealing with your estate (your choice of executor is crucial), who is responsible for paying what tax where, and how any liabilities, administration expenses and tax should be paid.

Holding your wealth in an offshore location can make life a lot easier. By using specialist offshore-based solutions, many potentially difficult probate issues can be avoided.

Budgeting

When you move to a new country, a change in the cost of living can have a big impact on your finances. If you’re moving with your job, your employer may help with expenses such as accommodation or school fees, but relocation experts say these perks have been cut back in recent years as a result of the economic downturn. It’s therefore vital that you take all your new living costs into account. And don’t forget that setup costs such as buying a car and new furniture can take a big chunk out of your relocation budget.

Calculate living costs

When you’re planning to move abroad, it’s important to know how much money you’ll need to enjoy the same lifestyle as the one you have currently. This will help you negotiate your salary (if you’re moving for a job), make housing market comparisons and give you a sense of what your everyday expenses will be.

Medical insurance

Healthcare is something you shouldn’t overlook. If you’ve relocated with your job, medical cover may be provided as part of your benefits package. If it isn’t, and there’s no reciprocal agreement between your home country and the country you’ve moved to, you may need to take out private medical insurance.

Extra expenses

As an expat you may have to budget for some additional living costs, such as employing a driver and domestic staff or joining business and social clubs. There could also be bills to pay back in your home country. If you let out your house, for example, you’ll probably have to pay management fees to a letting agent, along with ongoing maintenance costs.

Financial planning

Expat life can be very busy, but it’s worth setting aside some time to look at how your money could be working harder for you. You may find yourself with more disposable income after you move – all the more reason to make financial planning a priority.

When it comes to saving or investing for things like school fees or retirement, your expat status brings new opportunities that weren’t available to you back home. Many expats choose to include offshore savings accounts and investments in their plans. These can be a tax efficient way to grow your wealth while you’re abroad. And you don’t have to move your money if you relocate to a different country.

Please remember, though, that whilst banking offshore may have potential tax benefits for you, tax rules differ from country to country. If you are unsure about your personal tax obligations, you should seek professional advice. It is your responsibility to disclose your income to the tax authorities.

Making life easier for expats

  • Starting a new life abroad has its complexities.
  • Your finances shouldn’t be one of them.
  • We believe that choosing to live abroad has the power to enrich your life. It can be a journey that leads to new experiences and opportunities. But it can also be complicated. That’s why we’re here to help manage your finances and make planning for the future simple.
  • Wherever life takes you, we’ll help take care of your personal economy.

All content in the Banking, Moving Money, Family Finances, Budgeting, and Financial planning sections, all Expat Explorer survey data and all tips (in quotation marks) are provided by HSBC.

The Tax section is provided by EY in accordance with their Terms and Conditions. Neither HSBC nor EY accepts any responsibility for the accuracy of any of this information. By using this information you are accepting the terms under which EY is making the content available to you.based on the legislation and practices of the country concerned as of 1 July 2015 by EY and published in its Worldwide personal tax guide, 2015-16. Tax legislation and administrative practices may change, and this document is a summary of potential issues to consider. This document should not be used as a substitute for professional tax advice which should be sought for the country of arrival and departure in advance of moving in order to discuss your circumstances. It is your responsibility to disclose your income to the tax authorities.

All other content is provided by expatarrivals.com, Globe Media Ltd and was last updated in August 2016. HSBC accepts no responsibility for the accuracy of this information.

This information does not constitute advice and no liability is accepted to recipients acting independently on its contents. The views expressed are subject to change.