Visas and benefits: How Spain's budget freeze affects foreigners

The Spanish government has decided to not move forward with its budget for 2024, reasoning that the calling of early elections in Catalonia will disrupt the legislative agenda. Instead, the Socialist-led government will now work on the budget for 2025.

Spain’s Minister of Finance, María Jesús Montero, told Cadena SER that postponing the budget is “the sensible thing to do'' in light of the electoral climate. This is especially true when the Catalonia campaign will likely take up a huge amount of political capital for the government as it seeks to rally support around its controversial Amnesty Law for separatists.

READ ALSO: Spain finally passes controversial amnesty law for Catalan separatists

According to Spanish law, when a government doesn’t present a budget the previous year's budget is automatically extended. But how, if at all, does this affect foreigners in Spain?

Financial aid and benefits

There are two main impacts, depending on your situation. The first is that some aspects of the budget are used as benchmarks for state aid and benefits. One potential impact for foreigners in Spain is that because an income index used as a reference for allocating aid and benefits in Spain (known as IPREM) will not be increased as it usually would on an annual basis, state benefits will also not increase. The IPREM currently stands at €600 per month.

For example, currently in Spain the amount of unemployment benefit is 80 percent of the monthly IPREM (€480). By freezing the budget and therefore not updating the IPREM, the amount given out in state aid like unemployment benefit (known as el paro in Spanish) will, when considered against inflation, essentially be cut in real terms, something that will affect more than one million people in Spain.

By not updating IPREM, the government also pushes back an adjustment to personal income tax (IRPF) to prevent minimum wage earners from having to pay it.

As a result of the government’s decision to delay the budget, trade unions have criticised the move and called for the IPREM to be updated in line with the CPI.

Visa income requirements

Another way that the IPREM can impact foreigners is in terms of visas. Much like how the index is used as a reference for benefits, in Spain there are several visa options (namely the non-lucrative visa, the study visa, and the family unification visa) that require you to demonstrate economic solvency according to the IPREM measure.

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For example, when applying for a non-lucrative visa (NLV) you must demonstrate financial solvency of 400 percent of the IPREM. For most student visas in Spain, you must have 100 percent of the IPREM.

For some visas, to bring dependent family members with you to Spain you must have 75 percent of the IPREM for the first family member, and then 50 percent of the IPREM for every other dependent.

So put simply, the government’s decision to freeze its budget for 2024 means the IPREM will not be increased, which can in turn impact foreigners in Spain in two main ways: firstly, those on government benefits will likely see a real terms fall in the value of their aid versus inflation; and secondly, those living in Spain on certain types of visas will not see their income requirements increase annually, as they usually do.