Home » Spain » Financial » Investment for Expats in Spain

Investment for Expats in Spain

Submitted: July 2013

As in any country, expats should be concerned with beating inflation and taxes to preserve the value of their savings.

Tax is a matter of law, no matter the country you come from. A tax adviser may help you take the right decisions and mitigate your overall tax liability.

Regarding inflation, this is a personal matter, as you must determine for yourself which inflation you want to beat. If you are a long-term immigrant, you are likely to be concerned by Spanish inflation. If you plan to return to your home country, you might prefer beating the inflation rate of that country.


Inflation in Spain

Do not underestimate inflation in Spain. Beating inflation can be a serious challenge for Spanish residents, as Spanish savings accounts may be not enough to preserve the value of your savings.

Even though Spanish inflation has been historically high by European standards (typically above 3% before the 2008 peak), Spain is gradually converging towards its low-inflation European counterparts (Germany, France, etc.). As a result, Spanish inflation has remained firmly anchored below 3% since 2008, yet still slightly above Euro-area average.


Savings accounts

Instant-access savings accounts generally have a low yield (1 to 2%), and they are subject to tax. However, higher yields are available on fixed-term savings accounts. Typically, the gross interest rate on these accounts matches inflation but you need to lock your savings for up to two years.


Spanish securities (costs)

Do consider carefully the applicable transaction costs if you wish to trade Spanish securities. Here are the main costs you should be aware of:

There is no financial transactions tax (FTT) in Spain, although the Government is reportedly considering introducing unilaterally a French-style FTT. Spain is also favourable to proposals of an EU FTT, including under the EU enhanced cooperation procedure.


Spanish securities (overview)

Be wary of volatility when you invest in Spanish securities. This is a direct consequence of the Euro-zone crisis. Volatility is heavily dependent on the underlying risk. However, higher risk normally means higher reward, and some Spanish securities may be low-risk.

Spanish government bonds are priced as high-risk by the markets. As a consequence, they attract a higher, inflation-busting interest rate (typically above 4% for 10-year bonds). If you are genuinely risk-averse, you may consider overseas investments (see below).

You are responsible for deciding how much risk you want to take on. There is no set answer to this question, as this largely depends on your personal circumstances. A qualified wealth manager may assist you regarding this matter. See Wealth Management for Expats in Spain.

To compare Spanish brokers, you can use a specialist price comparison website.


Unit-linked portfolio bonds

Spanish residents may purchase units in a “unit-linked” product to achieve tax deferral benefits.

These products work like traditional investment funds, and the fund manager must have sole discretion over asset allocation. However, income may grow tax-free for you are not taxed until and unless you withdraw your funds. Upon withdrawal, only the proportion corresponding to your accrued income is taxable. This is because you realise a gain only on the units you have to sell to withdraw your funds.


Ben invests €60,000 in a growth-oriented unit-linked product. Four years later, the value of his units has soared by 50% and his overall investment is now worth €90,000. Ben then decides to withdraw €30,000, i.e. one third of his funds.

His taxable income will be (1/3)*30,000 = €10,000. Among the remaining €60,000, he has €20,000 worth of untaxed income and €40,000 worth of capital.

Offshore unit-linked portfolio bonds do not necessarily comply with Spanish rules. Non-compliant portfolio bonds attract current taxation every year on accrued income. To avoid disappointment, you should check if your investment product is specifically marketed as compliant with Spanish rules. A qualified financial adviser may help you find the right unit-linked investment. See Wealth Management for Expats in Spain.


Overseas investments generally

If you wish to invest in overseas assets, there are a few points you need to check:

Retaining overseas assets might be helpful if you plan to return to your home country. Ring-fencing your Spanish or Euro-zone assets can also be a useful strategy. See Money Transfer for Expats in Spain.


Overseas euro investments and the Euro-zone crisis

Overseas euro investments may also be used as a hedge against the Euro-zone crisis. On this occasion, euro investments outside Spain carry many benefits and drawbacks:



Arbitrage opportunities regarding transaction costs

More burdensome to set up

Hedge against a Spanish exit from the euro

Language or cultural differences with foreign financial intermediaries

Hedge against any Cyprus-style financial repression

Foreign asset reporting requirements

Wider range of investments available

Potential foreign withholding taxes
Lower rates of return in low-risk EU countries
Exposure to foreign macroeconomic factors

These considerations are speculative, however. As Spain is still a member of the Euro-zone which does not impose any capital controls, it doesn’t necessarily make sense to act now unless you seriously believe that Spain’s outlook may worsen further.

Critical aspects regarding Spain’s outlook include, but are not limited to:


Foreign currency investments

Expatriates may also consider buying foreign currency assets as a hedge against Spanish inflation or the Euro-zone crisis. Nonetheless, foreign currency exposure is complex financial engineering, and you might wish to seek professional advice to help you take the right decisions. See Wealth Management for Expats in Spain.



The first thing to do is to check your residence status, as Spanish investment income is likely to be tax-exempt if you have non-resident status.

For Spanish income tax purposes (IRPF), investment income is taxed separately. Investment income includes interest, most capital gains, dividends above €1,500 (subject to exceptions), income from unit trusts, and income from life insurance endowment policies.

The following temporary tax rates apply in 2012 and 2013:

                   Investment income (€)

Tax rate (%)

0 to 6,000


6,001 to 24,000


24,001 and above


From 2014, the tax rates will return to their ordinary levels as follows:

                   Investment income (€)

Tax rate (%)

0 to 6,000


6,001 and above


Capital gains on the sale of assets held for less than one year are subject to the headline progressive rates of income tax.
In 2013, the income tax rates are as follows:

Income bracket (€)

National tax rate (%)

Regional tax rate (%)

Temporary surcharge (%)

Typical total tax rate (%)

Up to 17,707.19





17,707.20 to 33,007.19





33,007.20 to 53.407.19





53.407.20 to 120,000.19





120,000.20 to 175.000.19





175,000.20 to 300,000.19





300,000.20 and above





The first €5,151 may be deducted from taxable income, and the temporary surcharge will be abolished from 1 January 2014. Your effective tax rate depends on the region you live in, as each region has separate tax rates (escalas autonomicas). Therefore, the maximum effective tax rates may vary from below 45% in Madrid to over 55% in Catalonia.

You normally don’t have to lodge a tax return if:



Moving to Spain

If you are considering moving to Spain or are soon to depart, you can find helpful information and advice in the Expat Briefing dedicated Spain section including; details of immigration and visas, Spanish forums, Spanish event listings and service providers in Spain.


Living in Spain

From your safety to shoppingliving in Spain can yield great benefits as well as occasional drawbacks.  Find your feet and stay abreast of the latest developments affecting expats in Spain with relevant news and up-to-date information.


Working in Spain

Working in Spain can be rewarding as well as stressful, if you don't plan ahead and fulfill any legal requirements. Find out about visas and passports, owning and operating a company in Spain, and general Spanish culture of the labour market.



Spanish Expat News Headlines

Spanish Expat Service Providers

HTLC Network Group Efficient Language Coaching Expatriate Healthcare Expat Financial 1st Move International

Spanish Expat Tools