Mortgage in Spain for Australian buyers

The Spain-Australia Double Tax Convention (1992) prevents double taxation between both countries.

If you remain Australian tax resident (183 days a year or less in Spain and your main economic interests not here):

• IRNR (Spanish non-resident tax): 24% on an imputed income of 1.1% of the cadastral value (if it was revised in the previous 10 years) or 2% otherwise — the rate for residents outside the EU/EEA
• If rented: 24% on gross rental income (expenses are only deductible for EU/EEA residents, art. 24.6 of the Non-Residents Income Tax Act); rental income also reportable in Australia with a foreign income tax offset
• Australian salary, Age Pension, superannuation: generally taxed in Australia; credit for any Spanish tax paid
• Worldwide income reporting: Australia taxes residents on worldwide income — Spanish rental income and capital gains must be reported on your Australian tax return
• Capital gains on sale: 19% in Spain, and the buyer withholds 3% of the price on account; the ATO gives a foreign income tax offset (the 50% CGT discount may apply to assets held 12 months or more)

If you become Spanish tax resident (more than 183 days a year in Spain, or your main economic interests are here — art. 9 of the Personal Income Tax Act):

• Worldwide income subject to Spanish IRPF, at progressive rates set jointly by the State and each region
• Superannuation benefits taxed as the treaty provides, with relief for double taxation
• Modelo 720 required if your assets abroad exceed €50,000 in any of its categories
• When you stop being an Australian resident, CGT event I1 treats certain assets as disposed of (ATO) — plan before you move
• If you move to Spain for work, the special regime of art. 93 of the Personal Income Tax Act ("Beckham Law") may apply: 24% on up to €600,000 of income (47% above) in the year you move and the following five, if you meet its conditions

Action point: Australian residency tax tests are complex (the ATO applies the resides, domicile, 183-day and Commonwealth superannuation fund tests). If you plan to spend significant time in Spain, consult an Australian tax accountant who specialises in expatriation before establishing extended residency.

Because Australia is so far from Spain, you may prefer not to fly back for the notary signing. A Power of Attorney (poder notarial) lets a Spanish lawyer or trusted person sign the deeds on your behalf.

Two pathways to grant the Power of Attorney:

• Spanish consulate route: grant the power before the Spanish consul, who acts as a Spanish notary: at the Consulate-General in Sydney (NSW, QLD, NT) or Melbourne (VIC, SA, TAS, WA), or at the Embassy's consular section in Canberra (ACT). It is a Spanish public document in Spanish, so no apostille or translation is needed. Check fees and appointments with the consulate.
• Australian notary route: have an Australian notary witness the power, then get an apostille from DFAT (Department of Foreign Affairs and Trade) and a sworn translation into Spanish.

What the PoA should authorise:

• Open Spanish bank accounts on your behalf
• Obtain NIE if not already done
• Sign the purchase deed (escritura de compraventa)
• Sign the mortgage deed (escritura de hipoteca)
• File non-resident income tax (IRNR, Modelo 210) returns if needed
• Manage utility / community contracts

Practical tip: draft the PoA narrowly (specific powers) rather than a general PoA. Spanish lawyers can advise on the exact wording.

Your Spanish mortgage is in EUR. Your Australian income is in AUD. Banks may lend a lower percentage or discount income in another currency to cover the exchange-rate risk; no bank publishes a specific figure for Australian dollars, so ask each one how it treats AUD income and get it in writing. Your monthly payment in AUD will move with the exchange rate for the life of the loan.

Strategies to mitigate:

• Open a EUR account in Spain (via PoA if needed) and build up a cushion of several monthly payments before signing
• Compare the total cost of each AUD→EUR transfer (exchange-rate margin plus fees) between your bank and a currency-transfer specialist
• Show your superannuation balance and ask the bank how it weighs it: as income once you can access it, as savings before that