Dateline: Barcelona, Spain
Golden beaches. Happening nightlife. Excellent food from around the world and a Spanish tapas stand everywhere you turn.
Barcelona is a happening place; Europeans have known that and been coming here on holiday for years. Hundreds of thousands of Europeans have likewise bought up cheap real estate on Spain’s coastline to the south, and in charming inland cities like Granada.
Ever since the global recession started in 2008, Spain’s poor economic decisions have come home to roost in the form of high unemployment and dirt cheap real estate in some parts of the country.
At the peak, more than half of Spain’s youth were unable to find a job. Things aren’t much better now, which would suggest why Spain wouldn’t be in a rush to hand out residence permits to anyone who wanted to live here.
In reality, obtaining second residency in Spain is relatively easy if you’re the type of person who can create jobs. That means you are willing to start a business in Spain or simply bring a substantial enough level of income or savings here to live on and spend money to support the local economy.
As a high-tax country, Spain isn’t exactly the best place to plant your flag in Europe. For most people, your entire worldwide income will be subject to tax in Spain.
There are some legal ways to MINIMIZE the amount of tax you pay here if you have business or investments around the world, but you can’t expect to live here and pay no tax at all.
That’s because obtaining second residency in Spain comes with the presumption that you will spend six months a year in the country. How convenient for the government that the minimum time to keep your visa active is the amount of time for them to tax your global income.
If you’re a perpetual traveler practicing flag theory, a Spanish visa will allow you to theoretically spend as much time as you want in the rest of Europe’s Schengen Area, meaning you don’t really have to live in Spain. But seeing as taxes here are so outrageous, there are much better options available.
Spain entrepreneur visa
This visa is pretty straightforward: you agree to start a company in Spain and conduct some business there. I’m currently working on a guide that will explain just what type of company you have to set up if you want to minimize taxes, but your options, in general, are quite open.
While opening a restaurant is never the most interesting idea to the government, anything service-related and that results in employment for Spanish workers (or other EU citizen workers) is plausible.
Spain isn’t exactly known as a tax haven, but there are a few incentives to encourage people to start companies here. While I doubt this tax reduction is the reason for Barcelona’s vibrant start-up scene, new Spanish companies enjoy a tax rate of only 15% for their first two years in business.
After that, rates will be 25% with various other caveats. In general, even taxes in Spain are dropping, even if companies are also subject to audit and other tax requirements that you wouldn’t find with doing business in a zero-tax jurisdiction.
The real hit is the salary tax you take as a director of your company (and you are required to take one).
That said, the cost to set up a Spanish company and obtain residency isn’t outrageous; expect to pay $5,000 to 10,000 or so for full service depending on a variety of factors.
Spain residency visa
Do you earn 2,300 euros per month? Can you show a bank statement with 27,600 euros? If so, you are eligible to live in Spain under a temporary residency program that is renewed annually for the first three years, then bi-annually after that.
I view this as a way for Spain to attract people who want to live in the country and are used to paying high taxes somewhere else. If you’re a US person used to paying 45% income tax, Spain’s 48% income tax won’t feel much different as you enjoy another plate of tapas and Spanish wine overlooking a beach.
That said, if you’re aspiring to pay little or no tax as a global citizen, living in Spain under this residency visa is flat out stupid. Again, you’d be subject to paying tax on your worldwide income by default… or your visa wouldn’t be renewed.
However, if you have already accumulated a fortune and can live off of savings, getting second residency here would be less of a burden, although there are still a laundry list of filing requirements (including Spain’s version of the FBAR) and a potential wealth tax.
Again, if you just want to live in Spain year-round, there are likely better European visas you can obtain. That said, Spain does offer equal footing for non-westerners to come here, so long as they can meet the rather minimal funds requirements.
Of course, if you hold a western passport, you already enjoy the right to spend up to 180 days in Spain each year as a tourist, with no income tax obligation and even the ability to reclaim any VAT you pay on retail purchases.
How to obtain Spanish citizenship
Spanish citizenship requires ten years in the country unless you are a natural-born citizen of the Philippines or any Latin American country, in which case the requirement is two years of residence.
Keep in mind that a friend of mine is only halfway through the process of claiming her citizenship after meeting the residency requirement, and it has taken her two years so far. Bureaucracy is a big thing here.
There are no shortcuts to Spanish citizenship, and my contacts in the luxury real estate market – where Spain’s Golden Visa program operates – suggest that will never change, no matter how much money you invest here. Everyone has to do their ten years.