Spain cracks down on expat income and taxes

by Ray Clancy on July 31, 2012

Spain seen to be adopting a stricter interpretation of 'free movement'

European nationals moving to Spain for more than three months must now prove they will not be a financial burden on the state.

A new ministerial order states that any EU citizen living in Spain for more than three months has to produce a job contract or documents confirming they have enough money to support themselves.

If they are jobless they must also show they are covered by health insurance. The decree, which potentially affects thousands of expats seeking a new life in the country, declares that Spain will now adopt a stricter interpretation of the ‘free movement’ principle.

The Spanish government has justified the measures by pointing to Article 7 of the 2004 EU directive on free movement, which gives EU member states the power to define it ‘without prejudice to national border controls’ which means that entry conditions can be imposed on other EU citizens by member governments.

Under EU law, citizens of member states are entitled to receive health care in any member country. But Spanish authorities say their finances are being drained by the arrangement and they hope to save €1 billion a year from the move.

It is unclear what effect the rules will have on those currently living in Spain. Currently, EU directives say that those living in member states for more than three months should not become an ‘unreasonable burden on social services’.

Spain is also taking an increasingly hard line again tax evaders. The Hacienda, Spain’s tax authority, is routinely investigating any form of foreign investments or overseas pension income.

‘A number of clients have reported receiving letters about their offshore bank accounts. It is the first time we have seen the Hacienda using information supplied by a tax haven to pursue tax on undeclared income. The Hacienda has also sent enquiries based on information received from other OECD tax authorities,’ said Peter Howarth, who runs a London based tax consultancy.

‘This might affect both residents who have offshore accounts and those who are claiming non-residence but have told their bank they live in Spain,’ he explained, adding that anyone with undeclared assets should take advantage of the current Spanish tax amnesty which runs until the end of November 2012 and allows people to avoid criminal penalties by paying a nominal 10% tax rate.

{ 4 comments… read them below or add one }

Mike Amapola August 9, 2012 at 10:04 am

Perhaps the UK should be reminded of the Article 7 of the 2004 EU directive on Free Travel.


colette webb August 11, 2012 at 9:25 am

if i bought a property in spain say next week. and i only used it for holidays would i need to register now with thi about the Tax law changig in spain. got up to novemebr thi year. or dose it not apply to me!


Tom March 20, 2013 at 5:13 pm

I still have not applied for residency in Spain having entered and left the country several times since retiring in uk in June 2011.I have paid all my non residence taxes on my holiday home for last 5 years but have not yet decided whether or not to apply for residency .I cannot find any information,details,penalties for failing to apply for residency in Spain within 3 months so what is preventing me from continuing to remain as a non resident for the forseeable future leaving Spain a few times a year but continuing to pay my taxes on my uk pension?


Terence Barker March 26, 2013 at 3:30 pm

we have lived in spain for 22 years as a spanish resident and have paid my income tax here, we have a small cottage in the uk
that we use as a holiday home for only our own use we do not ever let it out. We have been told that this year we have to declare this information on our tax return is this correct as there is no income from our uk home
Many thanks Mr & Mrs Barker


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