More Americans are moving to Spain and paying high prices for real estate

More Americans come to Spain for longer, either as the so-called digital nomads work abroad or enjoy a new life in retirement.

The number of Americans living in Spain grew 13% between 2019 and 2021, and home sales to Americans increased 88% between the first half of 2019 and the first half of 2022, according to a report by the General Council of Notaries of Spain.

Among expat groups shopping in the sun-drenched country, Americans paid second only to Danes, shelling out as much as 2,837 euros, or $3,119, per square meter. In addition, the home prices that grew the most in the same period were paid by Americans, according to the report.

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Buying or living in a home abroad requires a certain level of wealth, given the cost of not only real estate but also travel abroad, said Alex Ingrim, a private wealth manager based in Florence, Italy, and Senior Investment Analyst for Global Financial Services. signature Chase Buchanan.

According to the report from the General Council of Notaries, US buyers are focusing on urban areas such as Madrid; As with any big city, people are drawn to its job opportunities and services, Ingrim said.

While the southern coastal region of Andalusia has always been a popular spot for Americans, there is “strong word of mouth” for the city of Valencia, an urban area on the northernmost beach of the Mediterranean coast with a large community of expatriates, including many Americans, Ingrim said.

However, Americans who want a different retirement or remote work The experience and adventure of moving to Spain must take into account some factors.

Most of the taxes on property purchased in Spain are paid in advance in a Stamp dutyor “AJD” in the Spanish language, instead of annual property tax payments as in the US.

“Stamp duty can range from 1% to 2.5%, and then there’s the (value added tax) on new construction or the transfer tax on existing homes,” said certified financial planner Jude Boudreaux, partner and senior financial planner at The Planning Center in New Orleans. “Everything is substantially more than in the United States.”

It must be paid by the buyer at the Treasury office of the corresponding Autonomous Community in Spain within 30 business days following the purchase of the property.

“You pay a lot of tax up front rather than on an ongoing basis, so the buying costs and the buying process are very different,” said Ingrim, who advises interested buyers to contact local real estate agents and property attorneys as soon as possible. in the process.

If you are looking to retire in Spain, consider the financial and tax implications, and seek the help of an adviser before jumping in, he added.

Also, make sure your taxes are in order. Although you rarely pay taxes on the same income twice, look at the different streams of income and assets you may have to understand “who taxes what first, Spain or the US.”.Ingrim said.

For example, a US citizen who works in Spain will have a higher tax rate, but those taxes become a deduction when he files his federal tax return in the US, he said. boudreauxwho is a member of CNBC Financial Advisory Council.

On the other hand, the US taxes their global income, so if an American earns income from renting property in Spain or anywhere else in the world, “the US will gladly tax their income from Spain,” he added. .

For his part, Ingrim pointed out that “While you may have an obligation under both systems, you rarely pay tax on the same stream of income or the same asset base twice.”

It’s important to remember that your debts in the US don’t just disappear when you move abroad, he added. “He still must have a plan to deal with his US liabilities while living abroad.”

Some countries, such as Portugal, may ask foreign residents for a credit report from their country of origin when obtain a mortgage or try to establish credit. Consider your debts and plan to keep up with your payments.

“Keep paying your student loans, car payments, mortgages, whatever, and try to (maintain) your US credit history because it can affect your progress in your new country (of residence),” he said ingrim.

Keep a US bank account linked to a US address open before you move so you can pay your bills via automatic transfers from that account, Boudreaux said, to save on exchange fees and monthly transfers.

Also, you may need a Spanish bank account to pay your daily expenses in euros and avoid being regularly at the mercy of exchange rate fluctuations. The US government imposes bank reporting rules on all banks that do business with US citizens. Find a Spanish bank that complies with these rules, “so they can do all the proper reporting when necessary,” Boudreaux added.

Spain launched its digital nomad visa earlier this year, making it easier for foreigners to move and work there.. The visa is designed for “international teleworkersand applicants must meet a series of requirements, such as accreditation or professional experience of at least three years.

“Before having this visa, it was difficult to work in Spain because the tax rates were very high and there was no well-defined immigration regime, apart from the ‘golden visa’ that allowed you to move to Spain and work,” said Ingrim.

The golden visa, which you only get if you buy property for more than 500,000 euros, or around $550,000, allows you to live, work and obtain a greater set of rights once you reside in Spain, he said.

Meanwhile, non-profit visas are intended for people who are no longer employed, including retirees, who may rely on passive income. This type of visa allows you to live in a new country but prohibits you from working. “The first step would be to hire a Spanish immigration lawyer and understand if you meet the requirements,” Ingrim said.

However, before making an offer on a property, consider renting first to see if the area meets your preferences and needs, Ingrim added.

Some Americans already living in other countries, namely Portugal, are aware of how arrangements like the golden visa can exacerbate housing problems for locals. That should be a consideration for buyers in Spain, she said.

In Ingrim’s experience, American buyers coming in are expressing concern about the issue, saying, “We don’t want to be in on contributing to that.” As a result, many prefer to rent up front, as a precaution.