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Becoming a Resident - an easy to follow guide

First of its important to remember that we all have a name, but the authorities like us all to be a number!

That is called a "N.I.E" (Número de Identidad de Extranjero) the number which the immigration service issues you and is your identification number in Spain. It is needed in order to file taxes, establish a business, open a bank account, and for almost all other forms you fill out. So it is vital to apply for your NIE as soon as possible. You can apply for your NIE and Residency at your local Oficina de Extranjeros. Below are some documents you will need to bring with you to apply for residency. This is not an official list and you may be asked for different things in different locations. The best thing is to double check with your nearest Oficina de Extranjeros. Both EU citizens and non-EU citizens get issued a NIE.

The documents needed include:

  • Current passport and one photocopy, three recent passport style photos
  • The completed application form, plus three photocopies of it

Also, note that the NIE can often be processed faster than the physical Tarjeta de Residencia, since it is issued before the actual production of the physical card.

If you wish to spend more than six months in Spain you need to apply for a "residencia" to become a resident. Residents' applications are handled with comparative ease by the Spanish authorities. Applying for Residencia is quite straight forward but can take longer than 12 months. Being a resident doesn't restrict movements in any way and it has many advantages, which are discussed below. If you don't become a resident you must appoint a fiscal representative.

Take advantage of your resident's tax status as you now have a number of tax advantages over non-residents.

These include:

1. Inheritance Tax (IHT)

Where both the deceased and the inheritors are resident there can be significant tax savings. E.g. If a property is passed from a resident who has owned and lived in that property for more than three years to another property this can generate a 95% IHT saving calculated against the value of the property. However one thing to note is that the inheritor cannot sell the property for 10 years so as not to lose your IHT reduction.

2. Capital Gains Tax (CGT)

This tax is relevant to people who are trying to sell their property. Many people wrongly think that CGT is only 5%. However this is not the case. A non-resident pays CGT at 35% on the gain made, subject to certain allowances. When compared to the resident who pays a maximum CGT of 15%, this is a huge saving.

Another relevant fact is that a resident seller will receive 100% of the purchase price as opposed to the non-resident who only receives 95%. The non-resident can apply for a refund of the 5% retention but this can take a long time to appear in you bank account. It is also important to note that a resident who is 65 or over will pay no CGT at all when they sell their home that they have lived in for at least three years.

Don't forget that by applying for residency status means that you are also declaring that you are tax resident in Spain and you are obliged to declare your worldwide income in Spain. The resident does not have to pay Wealth tax or the Non-Resident Property tax so all in all the savings are considerable.