According to Pais newspaper, it is one of the emergency measures for a no-deal Brexit plan that the Spanish cabinet will endorse at Friday meeting.
Brits living in Spain will have to apply for a foreigner identity card by January 2021, according to the newspaper.
"Hard" Brexit may erupt unpredictable economic consequences not only in the United Kingdom but also in the EU itself.
Earlier, European Commission President Jean-Claude Juncker noted the need to continue to do everything possible to prepare for all Brexit scenarios, including the worst ones.
The United Kingdom is set to leave the European Union on 29 March. While London managed to negotiate a withdrawal deal with Brussels after months of intense talks, the UK parliament has been refusing to endorse the deal due to the controversial provision on the Irish border backstop, contributing to fears of a no-deal Brexit.