If you are considering for move to the city of Barcelona for a while, this post is for you. Here we are going to talk about the main aspects of how to do it, and if this choice is good for you or not.
- Where is Barcelona Exactly?
- What you can find in Barcelona?
- Why Spain in general, and Barcelona in particular is a good place for foreigners?
- Spain is the number one choice for English and German immigration (and it’s not for the weather)
- Double tax treaties
- How to avoid pay VAT in Spain as a foreigner
- As a tax resident, how to avoid to pay taxes in Spain
- Let’s talk about Spanish Social Security
- Spain is the number one choice for English and German immigration (and it’s not for the weather)
- How to live in Barcelona for long term? (the best way)
Where is Barcelona Exactly?
Barcelona is a Spanish city in the region of Catalonia. Don’t mistake this one with the city of the same name that you can find in Argentina. In this post we are going to talk about the city in Spain.
As you can see in the map above, Barcelona is the eastern coast of Spain, facing the Mediterranean. This privileged position gives this city some advantages that we will discuss in a moment.
What you can find in Barcelona?
The city of Barcelona has one of the most important harbours in Spain. From here, Spain and the rest of Europe have been receiving a lot of different kinds of products for centuries.
This historical docks have created a huge business ecosystem in the city of Barcelona. If you are interested in live in Spain for business, be sure that here you can find all the clients and providers that you can need.
A big pretty city, full of oportunities
The development of the city of Barcelona have been consequence of this huge economical interest in the harbour.
The city is very prosper and full of luxuries. That’s the reason why you can find here some of the best architectonic pieces in the country. The city itself, with a perfect grid shape, is motive of study and admiration worldwide.
For example, is common to find great beautiful avenues for walking, and big shops. One of these, called “Las Ramblas” is very famous. However, you can find a lot of lovely places at every corner. It also has important theatres, and all kind of alternatives to expend your free time, by day and night. This is a city that you can enjoy every minute you pass here.
The proximity of the coast makes this city a good example of Mediterranean weather and culture, with nothing to envy to Italy or Greece. Barcelona is also well connected, with different kinds of transportation, like trains and subways inside the city, and outside. You have France very close, so Barcelona can be the gate to Europe for you. This is important for taxes, as I will explain later.
Finally, and just for move to the next important point. If you like sports, and specially soccer, you may know that Barcelona is the home of the Barça, one of the most famous teams in Europe. As you can see, almost any person can have good reasons to want to live en Barcelona. But… as a foreigner, is this good for you? Let’s analyse it.
Why Spain in general, and Barcelona in particular is a good place for foreigners?
If you are a frequent reader of this blog, you maybe have seen me complain about Spanish taxes in more than one time. That’s true, but just for the locals. In fact, Spain is a very good living choice for foreigners, because the country has many reasons to live here, apart from the weather and the party fame.
Spain is the number one choice for English and German immigration (and it’s not for the weather)
In Spain, you don’t became a tax resident if you don’t live in the country for 6 months in the year (In Cyprus, for example, you only need two months to be considered a tax resident). This is one of the main reasons why this people can expend in Spain at least half a year, but don’t pay taxes here.
Barcelona has a strategic position that you can use for enter and go out the country several times in the year, in order to justify that you haven’t be there for more than 6 month, even having a permanent residency in the city.
Double tax treaties
However, Spain have laws and treaties for avoid “double tax”, so if you are a foreign person who lives in Spain, but you declare your taxes outside the country, you can benefit of this advantage too. You can do it, even if you live for longer periods of time. In this article, I will explain you more about this later.
Well, that was about income taxes but, what about indirect ones? With a VAT of 21%, you can be concerned about this… fear nothing, you even don’t need to pay it in some cases.
How to avoid pay VAT in Spain as a foreigner
Well, you can’t avoid all the VAT in Spain, but as a traveller you can have a refund of a good part of it. You just need to present the DIVA form at the airport. You are entitled to a refund if you:
- Have your habitual residence outside the European Union (or in the Canary Islands, Ceuta or Melilla).
- The goods acquired do not constitute commercial shipments and leave the EU within the three months following their purchase.
- And, in addition, the total value of the goods purchased is higher than € 90.15 (including taxes) on each invoice.
If you make certain purchases in an intelligent way, you can avoid paying VAT in those purchases with this, depending of where are you from.
As a tax resident, how to avoid to pay taxes in Spain
Ok, imagine that you have become a tax payer in Spain. What can you do? Well, you can have certain tax strategies that the outsider people uses in Spain for pay less taxes. I will explain to you two different scenarios (but, of course, the best is to study your particular case, take this just as a reference).
The 50.000 euros exception
The easiest way is this one. The Spanish Tax Agency says that if you have 50.000 euros or less outside Spain, you don’t have any obligation to inform the agency in your tax form.
This, in a practical interpretation, says that: if certain of your sources of income comes from a foreign entity, and you receive it in a non Spanish bank account, you have no obligation of declare this in your income taxes.
As Spain have a escalated tax system, this can mean for you to pay a lower percentage of income taxes, or even nothing!
Some examples of this can be:
- A remote worker who lives in Spain but works for a foreign company that pays him/she in a foreign bank account. Total year salary and savings is under 50.000€
- A retired person who receive a retirement pension from his/she country of origin, but lives in Spain. Again, total year pension and savings is under 50.000€. This is one of the most common scenario regarding those English and German travellers that I mentioned before. Generally they are old, and they are retired.
The Beckham law
Another scenario that you can use in your favor is the commonly named “Beckham law”. This is because the famous soccer player David Beckham used this for years for avoid paying lots of taxes in Spain, legally.
Another football players, like Cristiano Ronaldo, uses this laws to his advantage too. However, you don’t need to be a football player for use this law in your favor.
The “Beckham Law” (Royal Decree 687/2005) is a Spanish Tax Decree passed in June 2005. The law is aimed at all foreign workers (particularly the wealthier ones) living in Spain.
How it worked for elite athletes from 2005 to 2015
Upon application and acceptance by authorities, such individuals become liable for Spanish taxes based on their Spanish income and assets but avoid such taxes on their non-Spanish income and assets.
For football players, that means to pay less for the salary they receive in Spain (as some part of it is exempt of taxes with this law) and don’t pay a penny about the international image right payments, for example.
Thus, in addition to paying few taxes for his income, soccer players like Cristiano Ronaldo could dispose of his money in Spain completely legally. He could also invest his money outside of Spain without paying taxes, since he did not pay interest taxes, dividends, rental income or profits on the stock market. You can also deduce that the sale of companies and properties outside of Spain is also tax free in this scenario.
And this is where the story of the Beckham Law for elite athletes ends, because it was modified in 2015 in response of several press scandals. However, it was modified, not eliminated, and the new version of the law is giving way to a different group that, contrary to what happens with football players, can continue to benefit from this special regime.
The 2015 modification of this law , and how it works now for you
Since January 1, 2015, the Royal Decree on which the Beckham Law is based has expelled athletes, so that they can no longer take advantage of this special regime for impatriated workers. After the 2015 reform, this regime is much more interesting for managers of international companies, and other kind of foreigners.
The most important modifications are the following:
- Now, in addition to employees, company administrators can also benefit from the special regime. For this, they can’t be in possession of more than 25% of the shares of their company and, at the same time, your salary can’t come from the foreign subsidiary in Spain of the company.
- The employer may be established abroad (the existence of a permanent establishment in Spain is not mandatory)
- It’s not necessary that the physical work be carried out in Spanish territory
- Foreign salaries must also be declared (and pay taxes) in Spain. Of course, even if the total amount exceeds € 600,000, it will be taxed at 24%
So, what would be the practical effects of all this for a foreign company administrator who was going to set up a subsidiary in Spain?
Under the old legislation, you should have been employed by a Spanish establishment and would have paid 24% of taxes on your salary of up to 600.000€, then 45%.
According to the new special regime for impatriated workers, it’s no longer necessary to be employed in Spain, but you can be sent to Spain and receive all your salary from abroad. Income from abroad is no longer tax-free, but instead, now you will never have to pay more than that 24%, even if you enter more than 600.000€ annually. The special regime is limited to six years.
Of course, foreign dividends, interest, profits on the stock exchange and other foreign income are still exempt from taxes. National dividends continue to be taxed at 19%, 21% and 23% (from 50.000€), as usual (since 2016) in Spain.
Another important thing here is the tax exemption for sales benefits. That is, if you have a company or a property valued at several million and sell it while you reside in Spain (and you are under this special regime), you will not pay taxes on your income from the sale.
Let’s talk about Spanish Social Security
The last government advantage that I want to introduce to you, before start talking about the best way to find a nice place to live in Barcelona, is the Spanish Social Security System. There is people who move to Spain just for this, because in Spain Social Security covers, between other things:
- Free Spanish healthcare
- Work-related sickness or injury
- Maternity and paternity care, and child allowance
- Invalidity benefit
- Retirement and pension
Foreigners who are living and working in Spain must typically register and pay into Spanish social security in exchange for certain government benefits, including the free healthcare.
This isn’t estrange to see, in September 2015 there were 1.6 million foreigners registered with the Spanish Social Security system. Almost a million were from outside the EU and just over a quarter of a million were self-employed in Spain.
How to obtain free healthcare without pay for it
There are several scenarios where Spanish government gives you free healthcare, even if you are not paying to the Social Security. Let’s talk about those English and German retired persons who moved to Spain, for example.
For EU citizens
If you (or a close family member) have been paying social security contributions in another EU country for two full years before coming to Spain, you may be covered for healthcare. That makes Spain so good for old foreigner people.
- If you are registered as a worker in Spain, you are paying Social Security contributions, then you will be covered for state healthcare. As simple as that.
- If you aren’t, but have been in Spain since before April 2012 and earn less than 100.000€, you can register for healthcare as a Spanish resident through your local INSS.
- You can also access Spanish healthcare by paying a special monthly public health insurance scheme (called “Convenio Especial”). These are run individually by each of the autonomous regions. Monthly fees are 60€ for under 65s and 157€ for 65+.
How to live in Barcelona for long term? (the best way)
With all this information in your hand, you probably are wishing by now to move intermediately to Barcelona for a long period of time right? I will explain you the best way to do it.
Where should you live in Barcelona for a long period of time being a foreigner?
Well, remember that is better if you rent a place than to you buy it. This way you can claim that you don’t have a “permanent residency” in Spain, and avoid some taxes. In Spain, there are two kind of rental homes for foreigners:
- The “tourist” ones, that are very expensive, as they are designed for expend very short periods of time. Not recommended.
- The “long term ones”. If you sing a rent contract for a month or more, you can find better deals.
Of course, unless you are going to Barcelona just for a weekend (in that case, I don’t know what are you reading this article), you are interested in the long term ones.
You can find some specialised websites for apartments to rent in Barcelona for long term. Like the one in that link, called “beBarceloner”. I like this website a lot because is very clear and the properties are amazing.
The prices are also very interesting, because you rent this apartments for months, and not for days. This reflects in the amount of money that you pay, much less that in a tourist focus place, with a few days period in mind.
This trick is not well know by many people, so you should bookmark that website if you are considering to move to Barcelona for a while, now or in the future.
I hope that you enjoyed this article. If that’s the case, let me know in the comments. You can also ask any question or give a different point of view about this topic. You can also share this content in your social media for help other people. See you soon!