A real estate agency window in Alicante, Spain.
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More and more Americans are flocking to Spain to live longer, whether as so-called digital nomads working abroad or enjoying a new life in retirement.
The number of Americans living in Spain increased by 13% from 2019 to 2021, and the number of American home sales increased by 88% from the first half of 2019 to the first half of 2022, the data showed. Report Developed by the Spanish General Council of Notaries.
Americans are the second-highest paying group of expatriates buying property in the sunny country, after the Danes, at 2,837 euros, or $3,119, per square meter. In addition, the report said, the largest increase in home prices over the same period was in the United States.
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Alex Ingrim, private wealth manager and senior investment analyst at Global Financial Services in Florence, Italy, said a certain level of wealth is required to buy or live abroad, not only in terms of real estate costs but also overseas cost of travel. Chase Buchanan & Co.
According to the report by the General Council of Notaries, U.S. buyers are eyeing urban areas like Madrid — and like any big city, people are drawn to it for its job opportunities and amenities, Ingrim said.
While Andalusia’s southern coastal region has long been a popular location for Americans, the city of Valencia, a suburb on the beaches further north on the Mediterranean coast, has a “good reputation” with a large expat community, including Including “a lot of Americans,” Ingrim said.
However, Americans who want a different retirement or remote work The experience and adventure of moving to Spain should take several factors into consideration.
Property taxes in Europe are different
Most taxes on property purchased in Spain are paid in advance stamp dutyor “AJD” in Spanish, rather than in the annual property tax payment as in the U.S.
“Stamp duty can range anywhere from 1% to 2.5%, and then there’s a value-added tax on new builds, or a transfer tax on second-hand homes,” says Jude Boudreaux, certified financial planner, partner and senior financial planner. planning center in New Orleans. “That’s a lot more than the US.”
The buyer must pay to the Ministry of Finance of the corresponding autonomous community in Spain within 30 working days of purchasing the property.
“You’re paying a lot of taxes upfront rather than on an ongoing basis, so the cost of buying and the buying process is very different,” Ingrim said, advising interested buyers to get in touch with local realtors and real estate attorneys early on. connect. In progress.
If you’re planning to retire in Spain, consider the financial and tax implications and seek the help of an advisor before even considering the idea, he added.
Also, make sure your taxes are in compliance.Although you are rarely taxed twice on the same income, look at the different sources of income and assets you may have to understand “who taxes what first, whether it’s Spain or the U.S..,” Ingrim said.
For example, U.S. citizens working in Spain will enjoy higher tax rates, but those taxes will be deductible when they file their federal tax returns in the U.S., said Boudreaux, a member of CNBC’s Council of Financial Advisors.
The U.S., on the other hand, taxes your worldwide income, so if an American earns income from rental properties in Spain or anywhere else in the world, “the U.S. will happily tax your Spanish income,” he adds .
Ingrim pointed out “While you may be liable for both systems, you rarely pay taxes twice on the same income stream or asset base. “
America’s debt won’t just disappear
It’s important to remember that your U.S. debt doesn’t disappear when you move abroad, he added. “When you’re living abroad, you still need to have a plan in place to handle your debt in the United States.”
Some countries, such as Portugal, may require foreign residents to provide a credit report from their home country. Apply for a mortgage or try to build credit. Keep your debts in mind and plan to keep up with your payments.
“Keep paying off your student loans, your car payments, your mortgage, whatever it is, and try to (maintain) your U.S. credit history, as that could affect your going forward in your new (residence) country,” Ingrid said. said Tom.
Before you move, keep a U.S. bank account tied to a U.S. address open so you can pay your bills through an automatic transfer from that account, saving on exchange rates and monthly wire transfer fees, says Boudreau.
In addition, you may need a Spanish bank account to pay your daily expenses in Euros and avoid frequent exchange rate fluctuations. The U.S. government imposes bank reporting rules on every bank that does business with U.S. citizens. Look for a Spanish bank that follows these rules, “so they can do all the proper reporting where necessary,” Boudreau added.
You may be eligible for different types of visas
Spain introduced a digital nomad visa earlier this year to make it easier for foreigners to move and work. This visa is for “International Remote Workers,” and applicants must adhere to a series of requirements, such as at least three years of certification or professional experience.
“Before this visa it was difficult to work in Spain because the tax rates were so high and there was no clear immigration system other than the immigration policy ‘The golden visa allows you to move to Spain to work,” Ingrim said.
Golden visas, which can only be obtained if you buy property over 500,000 euros (about $550,000), allow you to live, work and gain more rights after living in Spain, he said.
Meanwhile, the non-profit visa is for people who are no longer employed, including retirees who can rely on passive income. This type of visa allows you to live in the new country but prohibits you from working. “The first step is to work with a Spanish immigration attorney and find out if you qualify,” says Ingrim.
However, before making an offer on a property, consider renting to see if the area meets your preferences and needs, adds Ingrim.
Some Americans already living in other countries, such as Portugal, realize that arrangements such as golden visas can exacerbate housing problems for locals. That should be a consideration for Spanish buyers, he said.
In Ingrim’s experience, incoming U.S. buyers have expressed concern about the issue, saying “we don’t want to contribute to that.” So, as a precaution, many prefer to rent first.