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Home / News / Tax Advantages for Foreigners living as Residents in Spain

If you reside in Spain, it seems wiser to take out a formal residence permit. If you are an EU citizen, you are no longer required to apply for a “permit”, as since 2007 a simple one-sheet Certificate of Registration is all that necessary to obtain. Non-EU citizens, however, need to apply for residence permits, work permits and must face other complications as well.

Foreigners often think that taking out a residence permit in Spain will cost them money and expose them to Spanish taxes which non-residents can avoid. The truth is often the reverse, as the resident property owner has a number of tax advantages over the non-resident.

Take out a formal residence permit to enjoy tax advantages

Let us take a look at several scenarios. For example, if you are a resident and over the age of 65, and you have lived in your home for three years, you will not be subject to Spanish capital gains tax when you sell it, no matter how great your profit is.

If you are a resident and you sell your property, you are not subject to having 3 percent of the total purchase price withheld and deposited with Spain´s Tax Agency as a guarantee against your tax liabilities. Also, you do not pay your capital gains tax until the following year. A non-resident must declare in 30 days.

If you are a Spanish tax resident and you bequeath your home to a spouse or child who is also a resident, you are likely to avoid Spanish inheritance tax on 95% of the valuation up to €120,000. The conditions are that you have owned and lived in your home for a minimum of three years. The inheritor must be a resident and cannot sell the property for 10 years. Top limit for the 95 per cent reduction is €120,000. Any amount over that limit and you must pay.  Non-residents pay from the first euro of valuation.

Spanish property owner´s imputed income tax does not apply to the owner´s principal residence. If a husband and wife jointly own a property worth €120,000 and they are non-resident, they will pay a non-resident property-owner´s income tax of approximately €600 each year. The resident is exempt from this tax on his principal residence.

Finally, if you do live in Spain for the majority of the year, you are violating the law if you do not obtain a residence card. The law states that your tourist stay, even as a European Union citizen, is limited to 180 days per year. You can be fined if you over-stay this limit.

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