How Should An Expat Invest In Spain?
Types of Investments in Spain
Any expat looking to invest in Spain will be surprised by what it has to offer. Sporting some of the most popular tourist destinations on the continent and with housing prices steeply on the rise, the country is bustling with opportunities. As with other countries within Europe, Spain has recently been hit by the COVID-19 pandemic. This has been devastating for all areas of the investment market. Since then, they have posed a post-COVID recovery plan backed by the EU, so a resurgence of the country’s wealth is bound to occur in future years.
Spain holds strengths in its developed infrastructure, international recognition and incredible quality of life. It enjoys a diversified economy with high cross-border trading and tax payment rankings. As such, there are plenty of ways you can start investing. Here are just a few:
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Buy property
As in any country, investing in the property market could be an excellent way to boost your finances. Buying a house to rent out in a heavily tourist-friendly area could make back your invested capital and provide a healthy profit.
You will likely want to market your property as a holiday home. However, there might also be locations in demand for traditional all-year-round rental houses. Please do some research beforehand to understand the property market in several towns and cities to figure out which is the best to put your money in.
When buying, consider each area’s rules and regulations. Madrid recently imposed restrictions on how many days a foreigner can rent out their holiday home. Furthermore, there have been considerations from the Balearic government on how to prevent tourists from buying an abundance of property. Could you keep track of the latest news if you plan to invest in this sector?
An easy way to invest in Spain is through the stocks and shares market. These are accessible to anyone within the country, expat or local. Online or via an agency, there are plenty of places to start your journey. However, there is a way to do this properly. Seeking advice from a professional is essential to doing this successfully. Considering a rash or uninformed decision could be detrimental to your wallet.
If you are a novice, it is best to stick to companies that are considered safe. For example, certain top companies provide a steady income for investors through dividends. Investors trade these on the Madrid Stock Exchange, with a benchmark index of the IBEX 35. They are Spain’s highest-grossing companies which see minimal risk in their overall financial health.
Stocks and shares can be risky investments as the markets are in a constant state of flux, so do bear this in mind and consider whether it’s right for you.
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Set up a business
Setting up a business can be a fun and enriching experience, especially if you know a product or service that would do well in the Spanish market.
Could you research what each area of Spain is in demand for, or what industries already make a healthy profit margin? You can base your business on these factors and create something you know will be receptive to the public. Whilst the country is recovering from the pandemic, this is the best time to set one up, as you will benefit from the initiatives to boost the economy and gross domestic product.
As an expat, you will need a Spanish visa and a valid work permit to set up a business in Spain. But once you have done so, you could see plenty of profit heading your way.
Understanding Spanish Tax Compliance Bonds
Before you begin looking for ways to invest in Spain, you must consider your financial responsibilities once you start to earn. If you make a large sum of money in Spain, you might have to start paying an influx in taxes. This is why it helps to have a Spanish tax compliance bond.
A Spanish-compliant investment bond is a single premium product with an income tax deferral. This means that any bond growth is not taxed unless the policy is eliminated. This allows your funds to grow free of tax, which benefits your overall profitability.
This product is top-rated within the expat marketplace. However, there are stringent rules that the investment must adhere to:
- You must invest in a tax-compliant life insurance bond.
- The bond must contain an element of ‘risk’.
- It must also pay out life insurance over and above the value of the plan on the death of the policyholder (generally at the 101% level).
- Investment funds available for selection have to be EU UCITS (Undertakings for Collective Investments in Transferable Securities) funds.
- The insurance bond issuer must have a fiscal representative in Spain responsible for the collection and payment of taxes due.
If these criteria are satisfied, your investment will only be taxed on the profit portion of any withdrawals alongside your Spanish income tax. It should be reported as part of your Modelo 720.
Get in Touch
For more information on these, alongside tailored international and expat financial advice, take a look at our Saving and Investing Guide. Or contact us today at Galileo Wealth to discuss your options.
