Banking and Finances in Spain
Whether you’re moving to Spain temporarily or on a permanent basis, you will need to deal with the Spanish banking system. If you don’t speak Spanish this can be a tricky business, so take time to read up on the basics before you get started.
Since 2002, Spain has used Euro coins and notes. There is a range of euro coins from 1 cent to 2 euros, and notes from 5 to 500 euros. Euros can be spent in 19 countries across the European Union.
Setting up a bank account in Spain
Banco or caja?
There are two main types of financial institutions in Spain offering current and savings accounts, and if you move to Spain it is an important distinction to know. A “banco” is a large, publically listed company with shareholders whereas a “caja” is state controlled and may have fewer branches.
Think about location of bank branches, whether you want online banking and fees before making your choice. You may of course choose to have current account with one provider, savings account with another and a credit card or mortgage with a third. Transferring money to Spain from abroad can be done through your bank or other options.
Some of the biggest banks in Spain with the largest branch network include Banco Santander, BBVA, Banco Popular, Caixa Bank and Banco Sabadell.
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Resident or non-resident?
Whatever the type of financial institution, you have the choice of either a Spanish resident or non-resident bank account. If you just require an account to have a salary paid into and then pay bills from, a non-resident’s account should be sufficient.
If, however, you require a credit card, overdraft or other type of loan, you will need a resident’s account.
Documentation required to set up a bank account
If you are opening a basic, non-resident account, you will need to go to the bank with your passport or national identity card, a way or proving your employment status such as a student card, wage slip or letter from your employer and a utility bill or rent agreement to prove your address. If any of these documents are not in Spanish, the bank may require an official translation.
For a resident account, in addition to the documentation for a non-resident account you will need to provide your Foreigner’s Identification card (NIE). This is the card you will need for any dealings with the Spanish tax authorities and to obtain one you will need to register at a main police station with an “Oficina de Extranjeros” (Foreigners’ Office).
Fees and Bank Charges in Spain
Compared to banking in the UK, Spanish bank charges can be high. It is common to be charged when making a withdrawal from a cash machine or when paying a cheque into your account.
Often, the lowest fees are available with an online account. Make sure you compare fees and charges when deciding what sort of bank account is best for your needs.
If you’re working or resident in Spain, you’ll need to file a Spanish tax return. Spanish income tax is complex, with a proportion of tax being levied by the national government and a proportion by the regional governments.
If you have your main residence in Spain, you will have to pay tax on overseas earnings as well as what you earn in Spain.
Income tax is charged on a sliding scale from 20% on lower earnings up to as much as 47% on earnings over 60,000 euros. There is also a system of personal allowances and allowances for children, home owners and pension payments.
It’s a complicated system which is liable to change with different governments or due to the fluid financial situation, so get advice from a Spanish finance professional on your individual circumstances.
Access to pensions as an expat
Due to the financial crisis, the Spanish government have tightened up rules on claiming pensions, and now you have to have worked for 25 years in Spain and paid tax into the system to qualify for a pension from the Spanish government.
Fewer companies than in other parts of Europe offer an employee pension scheme, although these are becoming more popular. You may be able to claim a state pension from another European nation when resident in Spain, depending on your circumstances.
Many Spanish financial institutions also offer private pensions savings schemes for both Spaniards and resident foreigners.