Foreign Resident Living In Spain? Here’s How The Spanish Budget Freeze Will Impact You

In an unprecedented move the Spanish government have decided to delay their budget this year. Like most European governments Spain updates their budget at the same time every year but not in 2024.

This year the Spanish government have decided to postpone the 2024 budget, and start working on the budget for 2025 instead. The reason? This has officially been cited as the calling of early elections in Catalonia.

The country’s Minister for Finance, María Jesús Montero, said that postponing the budget was the “sensible thing to do” because of the impending elections. For a political perspective, the election campaign in Catalonia will take significant political focus and manpower. This is especially true as the government is seeking to gain support for its proposed Amnesty Law for separatists that has proven pretty controversial in the country.

But a year without a Budget update could have huge implications, including for foreigners living in Spain. Here’s what you need to know: 

What Happens If The Spanish Government Doesn’t Present A Budget?

If the Spanish government chooses not to present a budget unfortunately that doesn’t mean you can enjoy a year without having to pay any taxes! But the Spanish authorities do have a system in place for this situation.According to Spanish law, when a government doesn’t present a budget the previous year's budget is automatically extended.

So we can expect to see the 2023 budget extended into 2024. But in real terms what does that mean? And how will it impact you as a foreign resident in Spain?

Do You Receive Financial Aid From The State?

If you are in receipt of financial aid from the State or any benefits then this budget extension is likely to impact you. This is because the amount of benefits people living in Spain recieve is set by the budget, indirectly at least.

Spanish benefits are set according to a standardised income index which is known as the IPREM. It is this index that determines how much state aid should be allocated to each applicant. But because the budget won’t increase the IPREM in line with inflation, benefits recipients are likely to be worse off in real terms this year. Figures remaining the same amounts to a cut and will make making ends meet trickier than ever.

The IPREM currently stands at €600 per month.

Those living in Spain who receive unemployment benefits currently recieve 80% of this IPREM. This means in 2023 they received €480 and they will continue to receive this amount going into 2024. This is something that will affect more than 1 million people in Spain.

This will also impact minimum wage earners in the country. This is because by not updating the IPREM figure outlined above the adjustment to personal income tax will also be adjusted, effectively meaning minimum wage earners will pay more tax.

Trade unions have criticised the move and called for the IPREM to be updated in line with the CPI to protect their members as a result of this delay.

Income Requirements For Visa Applicants

If you have already applied for a visa in Spain then you will know that the IPREM impacts the amount you will need to demonstrate you earn, or have available, when you make your visa application. This particularly impacts the non-lucrative visa, the family reunification visa, and the student visa. The IPREM measure is used to calculate whether you are economically solvent enough to live in Spain.

This is actually good news for foreign citizens making their visa applications this year. Whilst IPREM and therefore visa application fees increase each year, this year they will be frozen.

One great example of this is the non lucrative visa. To secure a non lucrative visa in Spain applicants most demonstrate that they have access (via investments, savings, pension payments, etc) 400% of the current IPREM. For a student visa this figure is reduced to 100% of IPREM. As the IPREM has not increased this is largely good news for visa applicants. You won’t see your income requirements increase this year, and therefore there is less pressure for your earnings to increase year-on-year too.

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