The financial reality of (my) life in Spain

Nov 15, 2015 by

Glancing through an article on The Guardian about the  woes of the UK housing market, I came across this stirring advice from a commentator:

“Move to Spain: 1000 square feet of prime residence right in the centre of the capital (think Regent Street) for half a mil (Euros). And the cost of living half as much. Marigold Hotel stuff. Schengen. Great Health Service. Public Transport a third the price and twice as good. Sunshine. Food you can taste. Wine you can afford. Seaside. Mountains. Skiing you don’t need a mortgage for.”

Sounds splendid. Except that in my four and a half years of living in Barcelona, puttering about in a self-imposed state of financial witlessness, I’ve been hell bent on tamping a particularly disconcerting doubt to the bottom of my mental to-deal-with list, and the qualm is this – am I paying long-term to live in Spain?

My CPI basket – booze and beastie-spray

As someone who eschewed a good, professional job in Scotland’s financial sector in favour of going solo in crisis-bitten Barcelona, I can’t claim to be motivated by money. And on the face of it, the cost of living in Spain does seem reassuringly low: a decent cup of coffee here costs less than half the price of its Edinburgh counterpart, as does a 1-litre bottle of branded vodka, while public transport in Barcelona totes up to around two thirds of the cost back home. (Not counting the emotional cost of daily commuter hell courtesy of Scotrail.)

There’s no doubt as well that the natural attributes of the place – sunshine and the bounty of nearby sea and mountains – mean that your lifestyle obligingly ratchets your expenses down a notch.

lifesize chess board in Raval, Barcelona

Weighing up the odds in the Raval

I no longer go shopping for leisure, for example, spending more time in nature and less money than I used to in the shops, bars and restaurants of a sopping Scottish city. Here, a 3-course lunch at a neighbourhood eatery will set you back a mere 10 or 11 euros, and often means you don’t need an evening meal. Tenants don’t pay council tax, representing a significant saving over the course of a year, there’s no TV licence fee, and the mild climate means you’re not forking out a fortune on heating bills (though what I save on central heating I may well compensate for on mosquito repellents).

But, away from the comfortingly lower costs of run-of-the-mill essential items, I can’t get rid of the nagging worry that the longer I stay in Spain, the worse my economic outlook becomes. Living in a foreign country for almost five years gives you plenty of time to get acquainted with the lesser-known foibles of domestic fiscal policy, financial conventions and economic eccentricities – and several of Spain’s are bank balance ball-breakers.

Hidden costs of life in Spain?

Did you know, for instance, about the Spanish Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones)? (If not, go and inhale some calming chamomile and come back.)

Fair enough, it’s not every day you come in for a windfall, but this tax can stymie even the most innocuous of family finances. Imagine your aunt wants to give you 300 quid for Christmas, or your granny wants to give you a portion of her life savings while she’s still alive to see you make use of it. In the UK, you as the beneficiary would pay no tax, and if the donor lived for seven years after transferring the money, it would ultimately be exempt from their estate’s inheritance tax liabilities.

Not so in Spain, however, where the Impuesto sobre Sucesiones y Donaciones says that any money you receive, from family or otherwise, is considered a gift – and you must pay tax on it. It’s commonplace nowadays in the UK for parents to gift money to their offspring while still alive, in what Brits would call an ‘inheritance’ but Spain classes a gift. We’re not talking céntimos here, either, with the basic tax rate at 7% for transfers of up to €200,000 in Catalonia.

Another kicker is Spanish property tax. As a collective, this comes in at around 10% of the total purchase price, as compared to Scottish stamp duty that’s free for the first £145,000 then charged at 2%. Not to mention the horror stories I hear from buyers in Barcelona, locals and foreigners alike, who relate tales of cash in hand being demanded ‘en negro’ (under the table) to reduce vendors’ capital gains tax liabilities.

Depending on your circumstances, quotidian costs can mount up too. Trivial things, like going to withdraw cash from an ATM. This is typically free in the UK, and can be in Spain, but only if you find a network compatible with your own particular bank. Factor in the fees you’ll suddenly need to set aside each year for a ‘gestor’ (financial advisor), essential for navigating the myriad complexity of the Spanish legal labyrinth. Apart from the bonus of not paying to heat the house all year, utility bills I find are much of a muchness, with home internet substantially more expensive than in the UK. Considering the quality, clothes and shoes I think are extortionate here, and I tend to wait till I’m back in the UK to stock up.

Then, as a Coeliac sufferer, there’s the eye-watering cost of gluten-free food. Prescriptions in Scotland are free, and people with Coeliac Disease are entitled to gluten-free basics like bread and pasta on prescription from their GP. In Spain, prescriptions are neither free nor include gluten-free options, with a kilo of gluten-free flour costing more than eight times the price of wheat flour.

Swings, roundabouts and scary staircases

tibidabo-balcony

Precarious – but look at the view!

Of course, where I should be paying particular attention is in the long-term effects of the gulf between Spanish and Scottish salaries. It’s no exaggeration to say that I work longer hours in Spain than I ever did in Scotland, for a lot less financial reward. Over five, 10, 20 years, this is not going to be negligible.

To make matters worse, most companies in Spain don’t offer their employees a corporate pension scheme (at all). Spaniards are inured to this, as far as I can tell, citing historically generous Spanish state pension provision, while simultaneously caveating their confidence with a resigned “claro, by the time we come to retire, the state pension won’t exist”.

If I’m honest, I suspect that if I had the heart to sit down and do the sums properly, financially over the long haul I would have been better off living in the UK. At the same time, I’m well aware that there’s a lot more to life than cash. Being able to speak Spanish every day, being surrounded by colleagues from the four corners of the planet and being thrown into situations that challenge me as a person are all experiences I would not have had if I’d stayed tucked up safely at home.

Have you moved abroad and ended up suffering or benefitting financially? I’d be interested to hear how you’ve adapted either way.

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6 Comments

  1. Hi, nice post. I think that this is something that all expats living in Barcelona have to deal with at some point. Normally when your at the point that you realise you’re here for the long term. At the end of the day, sure you’ll earn more money in the UK but you don’t need so much money to live when you’ve got a better climate and all of Barcelona’s other benefits.

    A couple of other hidden costs you didn’t mention: the monthly €264 “autonomos” fee (which explains whu so many people work in “negro”) and the new “modelo 720” which has probably put a lot of people off the idea of moving to Spain in the last couple of years, certainly homeowners anyway.
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    • Julie Sheridan

      That sounds about right, Richard – I guess I’m at that stage where I’ve been here long enough that I have to make a decision about whether I stay for the duration. For all that day-to-day expenses are definitely cheaper, I’m not convinced that ultimately you don’t need as much money to live here. It’s not like house prices are a bargain, or there’s a forgiving tax regime. And the much lower salaries and lack of pension is something that has me genuinely concerned about my long-term future.

      The self-employed (autónomo) fee is prohibitive, and one of the worst in Europe. Given that so many people get round it illegally, I don’t see the logic of the Spanish government not overhauling this for good. Modelo 720 is a bit of a sore point right now:) In theory, it’s filling out a form, and shouldn’t cost anything other than the gestor’s fee. But that’s another story…

  2. Hi Julie I really enjoyed this post. Very thoughtful and it raises lots of questions that I am sure many people will relate to. Everyone makes different decisions of course and I know a lot of people who find that on balance the quality of life in Catalunya is so good that is makes the disadvantages seem less important. The only right answer has to be one for the individual to decide on. Life itself is insecure and who knows what is around the corner? I decided last year to return to the UK and to Cornwall and this seems to have been right for me. I came with my Catalan partner so he is now experiencing the situation in reverse as his work life has disppeared until he finds new avenues here.

    I have still my acupuncture profession to follow but of course I left 6 years ago so now must rebuild my practice from – not scratch but from a very much reduced base.

    I didn’t want to work unofficially in Catalunya so didn’t start a practice there. If I had paid the autonomo I would have been forced to work many more hours than I wanted to. I also didn’t like the possibility of paying tax on my UK home and savings. I didn’t want to lose my tax free ISAs which had taken many years to build up. I am not someone who finds it easy to do things on the quiet so my decision was affected by my need to live somewhere I don’t need to hide things from the authorities.

    I still would like to have the best of both worlds and to spend a good amount of time in Catalunya every year but I also have realised, since coming back to the UK, that there is a lot to be said for a more straighforward living situation even if it means letting go of so many things I loved about my life in Granollers. I miss my friends and the climate and the balnearis and the wonderful feeling of getting to grips with both Spanish and Catalan. But being back in the UK also feels comfortable and nourishing and somehow more relaxed. We will see what happens next!

    Best of luck in making your decisions. You will know what is right for you – listen to your body as well as your mind. and of course your heart XXX

  3. Julie Sheridan

    Hi Kate, nice to hear from you. Wow, that’s a big decision, to move back to the UK. I know you loved it here. I don’t know many people who have moved back ‘home’, only a few for family reasons, though I think it’s a consideration that never really goes away when you live abroad. The financial and tax regime in the UK is definitely more straightforward. There’s no justification for the autónomos set-up here, as evinced by the fact that so many people – Spaniards and foreigners alike – refuse to comply with it, robbing the state coffers in the process. Logically, you would think some canny politicians would have clocked this by now. I’ve noticed as well there’s no equivalent of ISAs here, which is a shame – I bet there’s a big market for them. Thanks for commenting, and all the best in your new life (say hi to Tori Amos in Cornwall for me!)

  4. Hola Julie,

    I really enjoyed your post. It gave me chills to hear you echo so many of my thoughts.

    I have been back in Barcelona for a little over a year now – I originally moved here in 2009 and left after two years because I couldn’t see how I would be able to make a ‘proper’ living.

    For the last year I have been working on my freelance business during the day and teaching at a school at night – 12-hour days. I did so because I was trying to maintain the financial security I had enjoyed in London. And it worked. To my astonishment, I was earning pretty much the same amount I was earning in London. But alas, I was suffering personally, unable to find time to do anything fun or meet up with people – yourself included (sorry about that!) – and ultimately realised that it wasn’t viable long-term. I didn’t move to Barcelona to work more! So I quit the teaching job and now work almost exclusively with companies outside of Spain.

    Like any freelancer, I enjoy the sense of freedom I have and the job satisfaction, but sometimes it’s terrifying to think that my entire income depends on where Google decides to rank a select few pages of my blog. I would of course face the same dilemma if I were to freelance back home in the UK, the difference being that I would know I had some sort of job market to fall back on should I decide to go back to “normal” employment. Here it feels like it’s a case of do or die.

    Ultimately, like many expats, I want it all. I want the stability of home and the excitement of living abroad. I remind myself daily that there is always a compromise, that nowhere has it all, the grass ain’t bla bla bla… The problem is that sometimes I can’t convince myself.

    Best of luck with everything. Hopefully catch you around sometime.

    Saludos!

    Ben 🙂
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    • Julie Sheridan

      Hey Ben, and sorry for the delay in replying. 12-hour days don’t sound like fun. Kind of defeats the point of being in Barcelona. When I moved here at first I naively assumed I would end up freelancing too, and the thought still appeals, but the financial impediments the Spanish government puts in your way make me run a mile. I agree, living anywhere other than on home soil is going to involve a lot of compromises and stoic resolve, as well as the boon of experiences you gain. But looking at it logically, the autónomos set up here is madness. It’s as if it’s designed to put people off ever setting up as sole traders in the first place. Absolutely, tax people on what they earn – but don’t tax them on thin air, during months on end when they might well be earning nothing at all. Kudos for doing it, and legally as well – you’re definitely not in the majority.

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