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.