Retiring to Spain

by Jose Marc Castro on August 6, 2009

movingtospainIMAGE200It is spring in Spain. Freed from the iron rule of an aged dictator, the country is undergoing its own renaissance in all aspects of Spanish life, culture and art.  Although still burdened with such serious challenges as the separatist movement, Spain is vibrant and alive in the 21st millennium.

This diverse country on the upper half of the Iberian peninsula is located near the western end of the Mediterranean Sea. It has become a hedonist’s haven with its relaxed lifestyle, its exotic cuisine, vibrant nightlife and rich festival history.

Climate in SpainGovernment in SpainTax System in SpainMedical Care in SpainReal Estate in SpainShopping in SpainCost of Living in Spain

A New Life in Spain

Climate in Spain

Spain has four seasons.  It is famous for its warm summers especially along the Mediterranean coastline.  Spring is mild with occasional rain and you can visit the generally warmer central regions in comfort.  Autumn with its mild and sunny days is considered the best time to travel to all regions. Winter is best spent in the warm beaches along Costa del Sol or as an equally good alternative, the mountain ranges for skiing and other winter activities. Because of the generally mild climate, you can get by without warm clothes, except for the country’s interior where weather is more variable and quite cold during winter.  All in all the country fulfills your expectations of Sunny Spain. These seasons are greatly influenced by the geographical location. The inland areas are generally Mediterranean in climate while the areas near the Bay of Biscay enjoy an oceanic clime. To the southeast are the semi-arid areas and the Canary Islands enjoy a subtropical climate all year round.

Government in Spain

A former colonial power, Spain suffered the agony of civil war in the thirties, which ended in a victory for Nationalist forces under General Franco. Picasso’s famous painting of the bombing of Guernica by Franco’s forces is considered the most striking protest against the civil war’s bloody toll on the people of Spain. (About 350,000 people died as a result of the conflict).  The Franco dictatorship lasted for 35 years during which it was ostracized by the international community for widespread violations of human rights.

1975 was a crucial year for Spain.  It was the end of the Franco dictatorship and the beginning of a democratic government. Under the 1978 Spanish Constitution, King Juan Carlos I is head of state in Spain’s system of a parliamentary monarchy. The king is a respected figure who facilitated the transition to democracy and helped to defeat a 1981 coup attempt by the Spanish military. Spain is now composed of 17 regions with varying degrees of autonomy. The Catalan region for instance is considered a Spanish “nation.”  ETA separatists continued to launch armed attacks in pursuit of independence for the Basque region although it announced a ceasefire in December 2006.

The present Prime Minister, the head of government, is Jose Luis Rodriguez Zapatero, the Socialist Workers Party leader who won in the 2004 elections over the conservative Jose Maria Aznar.  In one of his first official acts, Zapatero disengaged Spain and its troops from the war in Iraq. Spain is a member of the European Union and is also a constitutional monarchy with a hereditary monarch, a bicameral parliament known as the Cortes and an executive branch headed by a handpicked President.

Tax System in Spain

Personal income tax applies to Spanish residents  (those who spend more than 183 days a year in the country) who are taxed on their global income. Non-residents with no permanent homes in Spain are taxed only on their income and capital gains sourced in Spain. Spanish residents are also covered by inheritance and gift taxes. Spain has signed double tax treaties with almost 40 countries to prevent double taxation and unlawful reduction of income and wealth taxes. In 2007, the capital gains tax was reduced to 18 percent on net gain (formerly 35%), which encourages foreign investment on real estate properties.

The overall tax scheme in Spain was reflected in a post at the Spain Expat Forum last October 16, 2009:

Its not a straight forward answer as it will be dependent on your income, type of contract and type of employment … but I have copied some information below on the tax system that may be of help to you. If you are contracted then the social security payments will also be based on your salary amount, (%), I am trying to find some info for you now and will post later if I can find it in my files!

Individuals will be regarded as tax residents:

* if they spend more than 183 days in a calendar year in Spain,
* if their centre of vital interests (economic interests, business or professional activities) is in Spain.


* is assumed if an individual’s family lives in Spain in the absence of proof to the contrary.

Married persons may elect to file a single or a joint tax return. The joint tax return does not allow splitting of income.

Taxable income includes:

* employment income,
* all compensation received for personal services,
* salaries and wages,
* payments for certain business-related expenses,
* pensions,
* housing allowances,
* other allowances paid in cash or in kind.

Certain deductions applicable to residents only are permissible for 2009 including:

* social security contributions,
* personal allowance of EUR 5’151 per year,
* employment allowance between EUR 2’652 and 4’080 per year depending on the net salary,
* allowances for children
* contributions to Spanish pension plans made by employer and employee up to certain limits,
* certain travel allowances paid by the employer to the employee may be exempt in specific circumstances.

Income tax rates for residents are progressive, for 2009:

* 24% on income up to EUR 17’707.20 for a single person without dependent children,
* 28% on income between EUR 17’707.20 and EUR 33’007.20,
* 37% on income between EUR 33’007.20 and EUR 53’407.20,
* 43% on income over EUR 53’407.20.

A tax rule for expatriates in Spain who are employed by a Spanish company or by a foreign company with a permanent establishment in Spain has been in force since 1 January 2004. These expatriates may choose to be subject to tax either at progressive rates with deduction of certain expenses and allowances, or as non-resident taxpayers at a flat tax rate of 24% with no deduction of expenses or allowances.

Filing date:

Tax returns are usually filed from the 1st of May to 30th June following the end of the calendar year.

SS payments are split between you and your employer … the table below gives a basic overview of the payments that are made by both …. but there may be some slight deviations from this depending on your job and contract type. It also shows what % SS contributes towards unemployment benefit etc.

Percentage of gross paycheck
Reason for contribution Employer Employee Total
Standard 23,6% 4,7% 28,3%
Unemployment* 6,0% 1,6% 7,6%
Other** 2,0% 0,1% 2,1%
Total 31,6% 6,4 38,0%

*These percentages may be slightly different depending on your work contract.
**Salary guarantee in case of bankruptcy; professional studies; additional amount based on the employee’s professional classification.

Note that these percentages only apply up to a maximum gross salary of roughly 36,000€.

Medical Care in Spain

Spain’s public health care system is quite good but it is wiser to get health insurance to gain access to the excellent private health sector. First you may not be considered a beneficiary of the public health sector.  Second, you may prefer the private sector where English is spoken and the quality of health care is better. Third, there are usually no long waiting lines in private hospitals and facilities.  Private health facilities are also of better quality and patients enjoy the option of choosing which facilities and doctors they want.    Private health insurance will cost two people age 50 and above about US$1,600 each year.

The ins and outs of the Spanish Medical System was discussed in detail in a post at the Spain Expat Forum last October 21, 2009:

the Spanish Seguridad Social run an excellent health service and we’ve been very satisfied thus far. However, whilst the service from the health proffesionals is second to none, the service from the admin arm can be a little frustrating at times when dealing with non essential treatment. Basically, most Spaniards who have private medical have it because they can’t afford to be messing around waiting for their appointment. They want to see a doctor NOW and if the doctor sends them to a specialist, they want it NOW and not in X months time. Obviously they work, so want to go when they want to go and not when the appointment schedulers say so…etc.

So, if you can take time whenever to go to see a doctor or a specialist, save yourself some money and stay with the SS… they really are good. But if you have the need to see a doctore when you want and the specialist the same, have a look at the offerings from Sanitas, Axa and many others. Winterthur were doing some great deals last year and might still be very competitive.

As to how long you have to wait to start using them post take out of policy – all of them have certain conditions that you have to wait X months before using (or maternity for example), and won’t cover any pre-existing, but general practitioner cover is day one from all that I’ve seen.

Real Estate in Spain

Tremors were felt recently in the Spanish real estate market. However real estate prices were not expected to decrease substantially and real estate experts advised people not to panic. The 3.5% growth in the Spanish economy has been attributed to the boom in construction, fueled by strong demand for housing and availability of low interest loans. Due to some developments there were fears that the real estate market is overpriced and may collapse.  This is the norm now, as Spain has been affected by the worldwide financial crisis leading to a downward spiral in residential property prices.  However government and industry leaders were quick to reassure people that the market is still basically sound.  Although France is considered to be the best area for real estate investment, Spain is still considered as a strong “buy” market, especially in the cities of Madrid and Barcelona.

Shopping in Spain

Shopping in Spain can be an education in Spanish history and culture. Most stores are still small and family-owned.  Many designer brands popular worldwide are also Spanish in origin, such as Zara, Mango, Bershka and Camper. There are indoor and open markets that sell ordinary household utensils, food, flowers, and a wide assortment of other goods. Spanish handmade products are still the best bargains, representing the best in arts and crafts that the country has to offer. Outstanding examples are Catalonian textiles, suede clothing, handmade wood furnishings, leather shoes and toys from Alicante, and wine from places such as Granada.

The cheapest groceries (half the price of other stores) can be found in Dia. There are specialty shops where you can find vegetables, fruit, meats, bread and pastries that are reasonably priced. Imported food can be found in abundance in the El Corte Ingles supermarkets.

Cost of Living in Spain

The cost of living for expats in Spain is still lower than in many EU countries, although inflation has raised the cost of living by 10% each year. In 2006, Barcelona ranked as the 56th most expensive city in the world while Madrid ranked as the 53rd most expensive city.  If you live in major population centers, you can live simply on a budget of US$1.040 a month and more comfortably on US$1,170 a month.  Electricity costs about US$13 a month; water about US$20 a month. Chicken costs an average of US$4 a kilo while pork chops cost U$6.50 per kilo. Cars fetch higher prices although maintenance and gas cost less.   A person can eat out for about US$20-25 as long as he or she is not in a tourist area.

To get a better idea of the true cost of living in Spain, do pay a visit first to the country before making and decision on making it your new home when you retire.

{ 7 comments… read them below or add one }

suedepump September 25, 2010 at 7:04 pm

I'll back again for sure, thanks for great article 😀


Mag February 8, 2011 at 11:07 am

We are considering retiring to Spain – we are financially secure and would pose no burden on the Spanish economy with the obvious exception that we will need health care for the usual age related conditions. Otherwise we are very healthy fit people who love to walk in the Spanish countryside. What would anyone say are the points for and against our proposed move?


mickey dsouli August 18, 2015 at 11:27 am

hi Mag,

if you like, i would love to discuss your options in spain i live on the costa del sol, i’m licensed and have helped many expats to get the most out of their move to spain, (especially financially). don’t worry the service is completely free and without obligation.


Malcolm August 22, 2011 at 3:31 pm

A helpful article. We are deciding where to buy, countrywise so every detail is important


Hermi August 5, 2012 at 11:35 am

Starting to consider retirement in Spain. We, and I'm sure all your audience, would be very much appreciate if ExpatForum and Jose Marc Castro would update this article to 2012 data. Thank you.


Maria May 7, 2014 at 1:52 pm

If it’s possible to retire in Spain with just the SS income?


Richard Martin August 10, 2015 at 4:51 am

We have a seminar coming up here in Penang starting on August 23. Is there anyone here who could help us with a short talk to the participants about health insurance in Malaysia, please?

Richard Martin


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