Beckham’s Law: pay few taxes in Spain legally (Spain’s non-domiciled tax scheme)!

By ML
Director of Alanda Properties

In 2015, Spain introduced a special tax regime for wealthy EU expatriates that relocate to Spain. Following in the footsteps of other countries’ successful non-domiciled tax schemes, namely the United Kingdom, the self-declared goal of this programme is to attract high-achievers to relocate to Spain on the back of a job offer. The typical taxpayer profile that qualifies would be a high-profile artist, techy, high-ranking corporate employee (i.e CEO, CFO, CTO), etc.

The tax benefits

In a nutshell, this tax scheme allows EU nationals to make spectacular tax savings on paying Income Tax in Spain (IRPF). If you opt into this scheme, you stand to benefit from substantial tax breaks on both income derived in Spain as well as worldwide income.

• Spanish income. The first €600,000 earned from a source within Spanish territory will be taxed at a flat rate of 24% (in lieu of the standard top marginal rate of 47%). As can be surmised, even for earnings whose source is derived exclusively in Spanish territory, the tax savings are huge.
• Worldwide income. However, it is here where this tax scheme truly shines and comes into its own. Spanish Tax Authorities only tax you on your income derived within Spanish territory. Meaning, any other source of worldwide income is tax-exempt (just like with the popular UK’s non-dom tax scheme). Needless to say, this unique tax advantage offers a hugely attractive prospect for those taxpayers with substantial overseas earnings, assets, and interests.
• Best of both worlds. On opting into this special tax regime, a legal fiction takes place whereby EU expats are treated (for admin purposes) as if they are a resident taxpayer in Spain. Albeit in practice, for tax purposes, the taxpayer is regarded as a non-resident taxpayer. Meaning you in fact get the best of both worlds; you get all the perks from being legally resident in Spain, yet you pay a substantially lower tax bill as you are deemed in practice as a non-resident taxpayer.
• Exempt from submitting tax return 720
• Exempt from submitting wealth tax *
• Five years plus one. Because of its outstanding tax advantages, the government time gates the tax benefits. It applies on the fiscal year of relocation as well as on the following five years (total up to six years).

*contingent on the value of your Spanish estate.

Who can apply?

• European Union nationals relocating to Spain as a result of a professional contract. The contract is the essential core requirement to opt into this tax scheme. Non-EUs may not apply. Non-EUs can benefit instead from a Digital Nomad Visa, which offers almost identical tax benefits.
• Not to have resided in Spain on the previous 10 years.
• No earnings derived from a permanent establishment in Spain.

If you are a high-flyer, don’t fancy paying much taxes, and wish to relocate to Spain (legally), this is the tax scheme for you. Give us a call.

Contact me at Alanda Properties if you are buying or selling property on the Costa del Sol and Sotogrande. You will be surprised to learn the deals this new market has to offer on prime locations.

Article published with permission from LNA.

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