In Spain road tax is applicable to all vehicle owners. The annual car tax (impuesto sobre vehiculos de traccion mecanica) and this is paid to the local authorities. There is a both a minimum and maximum rate set for this tax but the charge will vary from region to region and will depend on how many people are living in the region. The charge also uses the horsepower of the vehicle to calculate the total cost. The more powerful the engine on the car the higher the tax that is to be paid. The tax will also take into consideration the CO2 emissions of the vehicle, with lower rates for more eco-friendly models.

The car tax year is the same as the calendar year and payments are usually made between March and May at the local town hall (ayuntamiento). The town hall will announce when the payment is due and post details on a community notice board and in local newspapers, although all drivers are advised to contact the town hall to be sure of the details. Payment can be done in person either at the town hall or the local tax office (oficina municipal de impuestos), as well as by direct debit and post. If payments are made late then the authority has the right to add charges on at a rate of 5% for the first month then 20% for each additional month. In order to tax the vehicle you will need to produce certain documentation including the registration document, the technical certificate and proof of ID such as a passport or NIE number.

There are different types of car insurance but third party insurance is compulsory for all drivers. It is also a legal requirement that proof of insurance should be carried when you are driving. Those without it can face on the spot fines if stopped by the police. The third party, fire and theft insurance (seguro de terceros o de responsabilidad civil obligatoria) can be topped up with other types of insurance.

A fully comprehensive (seguro a todo riesgo) policy can be obtained from all insurers and if you are buying a car on a finance agreement this may be part of the terms and conditions. It is also possible to have driver and passenger insurance (seguro de ocupantes) which covers those in the car for loss of earnings in the event of injury caused by an accident, or compensate their families in the event of a fatal accident.

The way car insurance works in Spain is very different to the way it works in other countries. When a car is considered to be a write-off it is normal for the insurance companies to pay out only a percentage of the value of the car. It is a good idea to check the terms and conditions of each insurer before taking out the policy to determine how much you would be entitled to in the event of such a claim.

The way in which the premiums are calculated are similar to those in the UK. There is a no-claims bonus (bonification) system which lowers premiums for drivers who have a good history of no-claims. Policies also have an excess (franquicia) attached and the higher the excess the lower the premium. Insurers will offer a range of excess options to suit your budget.

If you are involved in an accident in Spain and the other driver does not have insurance then you are entitled to make a claim from the Insurance Compensation Pool established by the authorities (consorcio de compensacion de seguros). Your insurance company will be able to provide information on making a claim to this fund.

If your car is not yet registered in Spain then you need to have an insurance policy with your provider in your home country. The regulations within the EU state that a car can only be insured in the same country as it is registered in. However, there are several British insurers that have branches in Spain and it is possible to arrange the insurance while you are in Spain. A foreign registered car can only be used for 6 months in Spain before it will need to be re-registered. It will then be necessary to change the insurance to a Spanish insurer.