How they do it

7 drawbacks of a Spain residence permit by investment

The Due Diligence checks on investors in Spain are becoming stricter: in the first half of 2021 only half as many Spanish residence permit applications by investment were approved compared to the same period in 2020.

The terms of the Spanish investment program are in many ways less favorable than those offered by similar residence permit programs in Portugal, Greece and Malta.

We have found 7 reasons not to get a residence permit in Spain.

Drawbacks of a Spanish residence permit by investment
Reason 1

You need to invest €500,000, which is more than in other comparable EU programs

In order to obtain a temporary Spain residence permit by investment, the investor has to buy real estate or securities, launch a business, or open a deposit account in a Spanish bank. 

Spain golden vsa has the highest entry threshold for investors. The minimum investment amount is €500,000, compared to just  €250,000 in Portugal and Greece. A permanent residence permit in Malta can be obtained for an investment of €150,000.

The minimum investment in different residence permit programs 

Spain residence permit Portugal residence permit Greece residence permit Malta permanent residence
Entry threshold€500,000 €250,000€250,000€150,000
Real estate€500 000€280 000€250 000€370,000
Bonds€1,000,000€500,000€400,000
Individual cost calculation of the residence permit in Spain
Reason 2

You cannot get permanent residence or recover your initial investment without moving to Spain

All investments under the Spain residence permit program are non-refundable until the investor is granted a Spain permanent residence permit. If you sell your property, securities, or business, or close your deposit account any earlier, your residence permit will be canceled.

Only those investors who live in Spain for more than five years are able to recover most of their initial investment and remain permanent residents. If the investor does not move to Spain, they will not be able to recover their initial investment and maintain the validity of their Spain residence permit. 

In order to get permanent residence by investment in Spain, you need to continuously live in Spain for at least 5 years as a residence permit holder. You cannot leave Spain for more than 10 months in total during the entire period, it is not recommended to leave the country for more than 3 consecutive months and, in general, it is not advisable to travel abroad often.

5 years
You need to live in Spain continuously in order to get permanent residence and recover your initial investment

When applying, the investor needs to confirm that they are solvent, have a valid medical insurance policy, and rent or own residential property in Spain. When making a decision, the employees at the migration service check that the applicant is law-abiding, the degree of their integration into Spanish society, and the timely payment of their tax obligations for each year that they have lived in the country.

In Portugal and Malta, the requirements are more favourable for investors: in order to obtain permanent residence in these countries, investors are not required to move there. They need to spend just 7 days a year in Portugal in order to obtain permanent residence or citizenship after 5 years. 

In Malta, applicants do not have to obtain a residence permit and wait several years for permission to apply for permanent residence. Here you can get permanent residence by investment directly, and it is not necessary to live in the country either before or after receiving it. 

Conditions for obtaining permanent residence 

Residence permit holderTime required to be spent in the country
Spain permanent residence5 years5 years consecutively
Cannot leave Spain for more than 10 months for the entire period
It is not advisable to leave the country for more than 3 months in a row
Greece permanent residence5 years5 years in a row
Cannot leave Greece for more than 6 months in a row or 10 months for the entire period
Portugal permanent residence5 years7 days per annum
Malta permanent residenceNot necessaryMust visit Malta once

The more favourable terms for the investor for getting permanent residence include the easier ways for the initial investment to be returned to the investor. The Maltese government requires investors to maintain ownership of their property for the first five years after obtaining permanent residence, after which the investment property can be sold. In Portugal, just as in Spain, in order to recover the initial investment, the investor needs to obtain permanent residence or citizenship; however, in Portugal this can be done without moving to the country.

Terms under which the initial investment may be recovered by the investor

CountryPeriodRequired to move there
Spain5 yearsYes
Greece5 yearsYes
Portugal5 yearsNo
Malta5 yearsNo
The complete guide on obtaining residence permit in Portugal
Reason 3

To obtain Spain citizenship, you need to live there for 10 years and give up citizenship in your country of origin

In order to apply for Spain citizenship, you need to be a permanent residence permit holder; pass exams on your (i) knowledge of Spanish at level A2 or higher and (ii) Spain’s cultural life and the laws in force there; and continuously live in the country for at least 10 years as a resident of Spain.

You can apply for citizenship 7 years after obtaining a residence permit in Greece; and after 5 years, in Portugal and Malta. Note that the relevant exams must be taken in each country. However, Malta and Portugal have set more lenient requirements in their residence permit by investment programs.

Conditions of citizenship

Time spent as a residentTime spent in the country
Spain citizenship10 years10 years in a row
Greece citizenship7 years7 years in a row
Malta citizenship5 years4 years
In the year before submitting your application, you cannot leave the country
Portugal citizenship5 years35 days in total
7 days per annum

If an investor becomes a Spanish citizen, in most cases they have to renounce citizenship of their country of origin, as Spain does not recognize a second citizenship with most countries.

If the Spanish authorities discover that the investor has not renounced citizenship of their country of origin within the prescribed period, their Spanish passport can be withdrawn and annulled. Moreover, an investor can be blacklisted and banned for life from entering the country or even the Schengen zone.

We have listed below the countries with which Spain has agreements allowing citizens of these countries to keep their original citizenship even after becoming Spanish citizens. They include countries in which Spanish is recognized as the official language or which were formerly Spanish colonies, as well as three European countries with which Spain shares common borders. 


Countries with which Spain recognizes a second citizenship

AndorraColombiaPortugal
ArgentinaCosta RicaPuerto Rico
BoliviaCubaEl Salvador
BrazilMexicoUruguay
VenezuelaNicaraguaFrance
GuatemalaPanamaChile
HondurasParaguayEcuador
Dominican RepublicPeru

Portugal, Malta and Greece allow investors who have been granted citizenship to remain citizens of their country of origin. However, they will have to give up their original citizenship if that country does not not recognize a second citizenship. For example, citizens of Kazakhstan automatically lose their citizenship upon obtaining a passport from another country.

Do I have to give up citizenship of my country of origin when receiving a second passport?

SpainYes
GreeceNo
PortugalNo
MaltaNo
Reason 4

In Spain the concept of tax residence is interpreted ambiguously

Usually an individual becomes a tax resident automatically when they spend more than 183 days a year in a country. In Spain, you may also become a tax resident under the following conditions: 

  • if the entire family of a foreigner lives in Spain;
  • if a foreigner owns property in Spain.

If an investor obtains a Spain residence permit by investment in real estate and at the same time continues to live in their country of origin, they can be taxed on their global income twice: both in Spain and in their country of origin. Some of our clients have experienced this: they were obliged to pay taxes in Spain after the renewal of their residence permit. The decision of the Spanish tax service had to then be challenged in court.

Evgeniya Morozova, Head of the Legal Department in Immigrant Invest
Evgeniya Morozova
Head of the Legal Department, lawyer, Candidate of Juridical Sciences, Judicial Counsellor of the 3rd Class
Drawbacks of tax residency and a residence permit in Spain
State tax agency in Barcelona
Reason 5

In Spain taxes are high and it is difficult to get concessions

Taxes when buying property. If an investor obtains a Spain residence permit by buying real estate, in addition to the minimum investment of €500,000, they also need to pay taxes. 

For buying residential real estate in the primary market, the tax rate ranges from 7 to 12% of the transaction amount; and in the secondary market, from 6 to 10% of the cadastral value of the property. When buying commercial real estate, the tax can be as high as 25%.

Tax rates when buying investment property

6—12%
in Spain
10%
in Greece
6—8%
in Portugal
5%
in Malta

Income tax for individuals. Tax residents of Spain pay income tax on a progressive scale varying from 19 to 47%. For non-residents, a flat rate of 24% applies.

New tax residents may be eligible for preferential tax treatment under the Beckham Law. The application of this law allows you not to pay tax on your global income. On income earned in Spain, tax is charged at the rate for non-residents, i.e., 24%. This concession is valid for 6 years.

24%
flat income tax rate for non-residents and those granted preferential treatment

Only residents who work in Spain based on an employment contract or are directors of Spanish companies in which their share does not exceed 25% can apply for the Beckham Law regime. Most investors do not meet these conditions.

In Portugal, investors can be offered a more favorable tax regime: the Non-Habitual Resident. The tax incentives are valid for 10 years, and the tax rate of 20% is lower. This regime can be applied not only to specialists who work in Portuguese companies but also to the self-employed, as well as managers and company executives.

Comparison of preferential tax regimes in Spain and Portugal

Spain Portugal
Duration6 years10 years
Tax rate24%20%
EligibilityHighly qualified professionals who work in Spanish companies under an employment contract

Directors of companies, if their share in the company is less than 25%
Highly qualified specialists who work in Portuguese companies under an employment contract

Managers and company executives

Self-employed individuals

Inheritance tax. Official inheritance and gift tax rates in Spain range from 7.65 to 34%. However, these tax rates have to be multiplied by kinship coefficients. A coefficient ranging from 1 to 1.2 is applied to an inheritance made to children, a spouse or parents, which can increase the tax rate to 40.8%. 

If the inheritance is maded to distant relatives, for example, a partner who was not officially married, the coefficient ranges from 2 to 2.4. In this case, for properties worth more than 4 million euros, such as villas on the ocean, the tax can reach 81.6%.

81.6%
maximum inheritance and gift tax in Spain

In neighboring Portugal, inheritance and gift tax is levied at a flat rate of 10%, and if the inheritance is received by close relatives, such as a spouse, children, parents or grandchildren, the tax is not charged at all.

Taxes: drawbacks of a Spanish residence permit by investment
When inheriting real estate in Spain valued at more than 4 million euros, the tax ranges from 40 to 81% of the cadastral value of the property
Reason 6

Investors are not protected from the illegal seizure of their property 

Due to the crisis caused by the coronavirus pandemic, the number of people in Europe who find themselves without work and housing is increasing. As a result, there has been a dramatic increase in the number of squatters moving into vacant premises. 

The villas owned by investors in Spain who do not rent them out because they prefer to spend their holidays there and do not want tenants to live in them for the rest of the time are left vacant for most of the time and are in danger of being taken over by squatters.

Squatters can also be a threat to landlords. Tenants can simply stop paying rent, and they are just as difficult to evict as the squatters who move in without the landlord's knowledge.

Squatting: drawbacks of of a Spanish residence permit
Residential building in Spain occupied by squatters. They use banners to declare their intention not to vacate someone else's property

In Spain, squatting is common partly due to the peculiarities of the local legislation. It is not possible to evict illegal tenants even with the help of the police: the police do not have the right to enter a property without the permission of the tenants, even if the real owner of the property presents them with all the necessary documents. 

If the homeowner tries to break into their own property by force, they may even be prosecuted.

The tenants residing illegally in a property, or squatters, can only be evicted through a court order. Moreover, the Spanish court often supports the squatter rather than the owner by referring to the law that every human being has the right to housing.

Furthermore, Spanish real estate is not a profitable investment, not only because of squatting. The Spanish real estate market is saturated, with limited potential for profit. According to Eurostat, real estate prices in Spain rose by less than 1% in 2020. In comparison, the prices in Portugal increased by 5%, and in Greece, by 3%. 

Real estate price growth in 2020

На 1%
in Spain
На 3%
in Greece
На 5%
in Portugal
Reason 7

High cost of living in Spain

The cost of living in Spain is higher than in neighboring Portugal, but the level of safety and comfort for ordinary citizens is lower.

Prices for consumer goods in Spain are on average 12% higher than in Portugal; food prices are 17% higher; and rental prices are 3% higher. 

The average bill in Spanish cafes is estimated to be 33% higher than in Portuguese cafes. At the same time, there is a tradition of eating fresh food in Portugal: locals almost never cook at home, and when buying an apartment they look for a cafe on the ground floor where the whole family can have breakfast and dinner.

Spain is ranked below Portugal in all rankings assessing the level of peacefulness and safety in countries. In addition to squatting, Spain also has high rates of theft and robbery.

Spain is a popular travel and relocation destination. The country is famous for its beaches, Mediterranean cuisine, comfortable climate and Gaudí architecture. However, if you are thinking of applying to Spain only in order to obtain an EU residence permit and visa-free entry to the Schengen countries, we advise you to also consider all the shortcomings of a Spanish residence permit that are usually not mentioned.

Svetlana Gorchakova
Senior manager for key clients of the Austrian office
The complete guide on obtaining a residence permit in Europe

Frequently asked questions

How do I get a Spain residence permit by investment?

Investors can obtain a Spain residence permit by buying real estate or securities, or starting a business in the country. The minimum investment required is €500,000, making it more expensive than than the investment programs of some other European countries, such as Portugal, Greece and Malta.

Who is eligible for the Spain residence permit program?

It makes sense to obtain a Spain residence permit only for investors who are determined to move to Spain and are subsequently prepared to give up citizenship of their country of origin.
Citizenship of an EU country without moving can be obtained in neighboring Portugal. It takes 5 years.

How can I get Spain citizenship?

Requirements for  getting Spain citizenship:

    • live in the country for at least 10 years as a resident;
    • have permanent residence, which can be obtained after 5 years of living in the country;
    • pass two exams on your knowledge of the Spanish language at level A2 or higher and on the cultural life and local laws of Spain;
    • have no criminal record or tax debts.

7 drawbacks of a Spain residence permit by investment

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