Spanish Golden Visa, Beckham Regime and Digital Nomad Visa

With the up-to-date news from our neighbouring country, inquiries from clients looking for a safe destination to establish their tax residence or even to work remotely have skyrocketed.

In October 2023, Portugal announced the suspension of its special regime called "Non-Habitual Resident Regime" (NHR), which until then had made the country one of the most attractive destinations at a tax level. Although it is true that the extension of the special regime for another year has been announced, investors feel some uncertainty about what may happen after this period.

This measure, together with the modification of the Golden Visa regime in Portugal, has made countries such as Spain, Italy, Cyprus and Greece the perfect alternative for international investors and workers to continue enjoying important tax and immigration advantages.

As a result, Spain has become the focus of foreign residency and investment thanks to the Special Regime for Workers Posted to Spanish Territory (commonly known as the Beckham Law), the Golden Visa for foreign investors, the Digital Nomad Visa and other tax reductions that some Autonomous Communities such as Madrid have recently announced in order to attract more foreigners and capital to their territories.

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Below we set out the main advantages and requirements for access to the Special Regime for Workers Posted to Spanish Territory and/or the Digital Nomad Visa.

Taxation in Spain

To better understand the advantages offered by this special tax regime, we must briefly mention of the ORDINARY REGIME FOR TAX RESIDENTS in Spanish territory.

It will be understood that the taxpayer has his/her habitual residence in Spanish territory when any of the following circumstances occur:

·   That he/she spends more than 183 days during the natural year in Spanish territory, including sporadic absences, unless the taxpayer proves his/her tax residence in another country.

·   That the main nucleus or base of his/her activities or economic interests is located in Spain, directly or indirectly.

·   That, unless proven otherwise, the spouse who is not legally separated and the minor children who are dependent on him or her habitually reside in Spain, the latter being a presumption that admits proof to the contrary.

At this point it is important to mention that in Spain there is no concept of split fiscal year, so we can be either residents or tax residents during a given fiscal year, but never both at the same time.

Tax residents in Spain under the ordinary regime are subject to taxation in Spain on their worldwide source income, that is, regardless of the place of its origin, under the following progressive tax rates:

General Base

From 19% to 47%

Savings Base

From 19% to 28%

Income from work and economic activities

Dividends from shares and shares in companies.

Income from real estate

Interests

Capital gains not derived from transfers

Capital gains from transfers

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In addition, taxpayers who are considered tax residents in Spain may have the following additional tax obligations:

INFORMATIVE DECLARATION OF ASSETS AND RIGHTS LOCATED ABROAD (FORM 720)

Tax residents in Spain are obliged to declare their assets and rights (mainly accounts, shares and real estate) located outside Spain, when the valuation of each group of assets/rights exceeds €50,000.

·       WEALTH TAX

1.  The Wealth Tax is levied on the net value of the taxpayer's property and rights.

2. This tax is entirely regulated by the Autonomous Communities in such a way that it varies according to the territory in which most of the assets and rights of the individual are located or the Autonomous Community in which he/she is resident for tax purposes.

3. In certain Autonomous Communities, such as the Autonomous Community of Madrid and the Autonomous Community of Andalusia, the tax is subsidized with respect to the first 3 million euros of the net value of the taxpayer's assets and/or rights.

4. Depending on the applicable regional legislation, tax rates vary between 0% and 3.75% on the net value of assets and rights.

5. Taxation of tax residents on worldwide assets and rights and taxation of non-tax residents and residents under the special regime (Beckham Law) only in relation to the value of assets and rights located in Spanish territory.

·       TAX ON LARGE FORTUNES

1.  Temporary tax (in force in principle during the years 2023 and 2024), applicable to individuals with a high net worth, consisting of assets and rights with a net value of more than 3,000,000 euros.

2. Tax residents in Spain will benefit from a general tax exemption on the first €700,000 of net worth, in addition to an exemption of €300,000 in relation to their main residence located in Spain.

3. Non-tax residents and residents under the special regime (Beckham Law) are subject to a general exemption on the first 700,000 euros of net wealth only in relation to their assets and rights located/exercised in Spanish territory.

4. In order to avoid any double taxation, the Tax on Large Fortunes will be deductible for Wealth Tax purposes.

5. Tax rates range from 1.70% to 3.5%.

After a brief introduction to the taxation of ORDINARY RESIDENTS in Spain, below we will explain how the BECKHAM LAW works and what are the main advantages of this special tax regime.

SPECIAL REGIME FOR WORKERS POSTED TO SPANISH TERRITORY “BECKHAM LAW”

The Special Tax Regime (Beckham Law) allows individuals who acquire their tax residence in Spain as a result of moving to Spanish territory, to choose to be taxed in accordance with the Non-Resident Income Tax (IRNR) regulations, even if they are considered tax residents in Spain.

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This Special Regime has recently undergone certain positive changes with effect from January 2023, making it accessible to groups not contemplated in the previous regulations. Among the cases included in the new Article 93 of Law 35/2006, of 28 November, on Personal Income Tax:

·       The transfer to Spain has taken place as a result of an employment contract (either with a local contract or by means of a posting letter).

·       Digital nomads who perform their work remotely from Spanish territory through the exclusive use of computer, telematic and telecommunication means and systems, as long as they have the digital nomad visa and are considered employees.

·       The acquisition of the status of administrator of a company. However, if the entity is considered a holding company, the individual may not hold more than 25% of the shares in it.

·       The performance in Spain of an economic activity classified as an entrepreneurial activity.

·       The development of an economic activity by a highly qualified professional who provides services to start-ups or carries out training, research, development and innovation activities.

·       The spouse, children under the age of 25 or disabled children of any age who meet the legally established requirements for this purpose may benefit from the Special Tax Regime.

As for the requirements that will have to be met for this, we can highlight the following:

·       The individual must not have been a tax resident in Spain during the 5 years prior to their move to Spanish territory.

·       The application must be submitted within 6 months from the date of registration of the worker with the Social Security in Spain (or of obtaining the certificate of Social Security coverage in the country of origin).

·       That the taxpayer does not obtain qualifying income from a permanent establishment located in Spanish territory, except in taxed cases.

TAXATION RULES ARISING FROM BECKHAM LAW

The beneficiaries of the Beckham Law will be subject to taxation in accordance with the rules established in the Non-Resident Income Tax regulations, this is only in relation to income obtained in Spanish territory.

The applicable tax rates will be as detailed in the following tables:

GENERAL BASE

From 19% to 47%

Income from Employement and Economic Activities

Income from Real Estate

Capital Gains non derived from transactions

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SAVINGS BASE

 From 19% to 28%

Dividends arising from shares and participations

Interests

Capital gains from transmissions

Additionally, taxpayers under the Special Regime will be subject to taxation in the Wealth Tax and the Tax on Large Fortunes, only in relation to assets and rights located in Spanish territory, which is an important advantage to be considered.

EXERCISING THE OPTION

The period in which this taxation option can be exercised is 6 months from the date of registration of the worker with the Spanish Social Security (or from the date of obtaining the certificate of Social Security coverage in the country of origin), subject to the submission of certain documents proving compliance with the necessary requirements.

DURATION

The concession of the special tax regime will entail the possibility of taxation according to the rules explained above for 6 years (the year in which the residence is acquired and the following 5 years) unless the taxpayer is excluded or renounces the right to be included in the system.

DIGITAL NOMAD VISA

With the entry of the Startups Law in 2023, we find many new developments and measures of different types, whose main purpose and ultimate goal is to attract investment, talent and promote the Spanish economy.

The Digital Nomad Visa is probably one of the most popular measures, to the point that certain cities in Spain have become the nerve center of digital nomads worldwide.

The Digital Nomad Visa is aimed at third-country nationals, who may apply for the permit whether they are self-employed or employed, and must meet the following requirements:

Self-Employed Digital Nomads

• A criminal record certificate from the countries in which the applicant has resided in the last 2 years.
• Have a degree from a university or business school of recognized prestige or a minimum of 3 years' work experience in functions similar to those of the position to be performed in the remote work modality.
• Have been registered as self-employed in the country of origin for the last 3 months (demonstrable).
• Existence of a real and continuous activity for at least one year of the company with which they maintain the professional relationship (demonstrable).
• Existence of a business relationship with a company/client for at least the last three months prior to the submission of the application.
• The professional's income must come mainly from foreign clients, and their income from clients established in Spain must not exceed 20% of the applicant's total annual turnover.
• Have sufficient financial resources (Minimum EUR 2,160.00/month)
• Be registered with the Social Security as a self-employed worker (Self-Employed Workers Scheme - RETA).
• Have health insurance.

Employed workers Digital Nomads

• A criminal record certificate from the countries in which the applicant has resided in the last 2 years.
• Have a degree from a university or business school of recognized prestige or a minimum of 3 years' work experience in functions similar to those of the position to be performed in the remote work modality.
• Have been registered as an employee in the country of origin for at least the last 3 months (demonstrable).
• Existence of a real and continuous activity for at least one year of the company with which the employment relationship is maintained (demonstrable).
• Existence of a pre-existing employment relationship with the employing company in the country of origin for at least the last 3 months prior to the submission of the application.
• Have sufficient financial resources (Minimum EUR 2,160.00/month)
• Have a certificate of Social Security coverage from the country of origin, otherwise the worker must register with the Spanish Social Security.

In relation to this last point, it is important to note that in the case of teleworkers, the greatest complexity lies in the impossibility of obtaining the corresponding certificate of coverage in terms of Social Security at source.

This is because most countries consider that the teleworker's change of domicile does not meet the needs of the company itself, but to their own will, so they do not foresee the possibility of obtaining such a certificate of coverage as is the case in the case of international travel.

In these cases, there are certain alternatives that allow the company to establish a local payroll for the teleworker in Spain, without this implying for it the holding of tax and accounting obligations in our country, as long as there is no risk of Permanent Establishment.

What does it mean to be a digital nomad?

Being a Digital Nomad means being able to work remotely from anywhere in the world in the place that suits you best. The Digital Nomad Visa is intended at third-country nationals outside the EU/EEA who wish to work remotely from Spain for foreign companies using exclusively electronic means.

Do I have to pay taxes in the country as a digital nomad?

According to Spanish legislation, tax status is completely independent of immigration status, which means that holding a certain visa does not necessarily imply the acquisition of tax resident status in Spain.

Digital nomads with an employment relationship with a foreign company may apply for the application of the Special Regime for Workers Posted to Spanish Territory or commonly known as the Beckham Law.

In order to obtain and maintain this permit, a minimum stay in Spanish territory of 6 months is required.

Who is the Digital Nomad Visa for?

The Digital Nomad Visa is intended for third-country nationals (outside the EU/EEA) who wish to work remotely, using exclusively electronic means, for foreign companies, i.e. companies located outside Spanish territory.

What are the benefits of the Digital Nomad Visa?

The Digital Nomad Visa allows its holders to enjoy the following advantages:

·   Reside and work remotely from Spain for foreign companies.

·   The possibility of applying the Special Regime for workers posted to Spanish territory (Beckham Law) as long as they have an employment relationship with the foreign company.

·   Possibility of taking advantage of this work and residence permit for the holder's family nucleus.

·   Possibility of applying for the Digital Nomad Visa both in the case of employees and in the case of self-employed workers under the fulfillment of certain requirements.

What is the estimated processing time for the Digital Nomad Visa?

The estimated processing time for the Digital Nomad Visa is 20 working days

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