Basic Tax Guide for Digital Nomads in Spain: what every digital nomad needs to know to avoid tax problems in Spain?
The demand for digital nomads in Spain has grown exponentially, not only because of the Spanish culture and the Mediterranean climate, but also because of the greater ease with the language and the tax benefits.
But before we get into the issue of a digital nomad visa for Spain, here's the question: what does a digital nomad, or an individual seeking such a visa, need to know in order to avoid tax problems such as double taxation and tax evasion?
There are 4:
1. Tax residency;
2. IRPF - Impuesto sobre la Renta de Las Personas Fisicas;
3. Beckham's Law;
4. Double taxation treaty.
We will cover each of these topics in this article.
1. Tax residence
Tax residence is nothing more than the place where an individual carries out their vital economic activities. This place can be their fixed residence or their habitual residence.
Digital nomads do not have a fixed residence, but they do have a habitual residence. Therefore, the belief that you don't need to file your taxes anywhere because you don't have a fixed abode is debunked.
It doesn't matter if you travel every 3 months, every month or every week, anyone in the world will have a tax residence somewhere.
If you declare taxes for two countries at the same time, you have double tax residence.
2. IRPF – Impuesto sobre la Renta de Las Personas Fisicas
Spain levies income tax on individuals through the "Impuesto sobre la Renta de Las Personas Físicas - IRPF".
All citizens who are considered taxpayers under Spanish law are obliged to declare and pay the IRPF every year.
The tax is levied on an annual basis and is progressive according to the total amount of income (table updated until 2024):
Annual Income | Rate |
From 0€ to 12.450€ | 19% |
From 12.450€ to 20.2000€ | 24% |
From 20.200€ to 35.200€ | 30% |
From 35.200€ to 60.000€ | 37% |
From 60.000€ to 300.000€ | 45% |
More than 300.000€ | 47% |
Those considered by Spanish law to be tax residents in Spain have the duty to declare the "Impuesto Sobre La Renta De Las Personas Físicas" every year, in a universal and progressive manner.
In other words, they must declare all their income, and those who earn more will contribute more.
It is important to remember that anyone who stays in Spain for more than 183 days will automatically be considered a tax resident in Spain. That's why it's extremely important to plan your move to Spain in advance.
If you are interested in hiring professional legal services related to tax planning for Portugal, we are a law firm specializing in the subject. To do so, please contact us by e-mail: contato@trpuppioadvocacia.com.br
However, there is a more beneficial tax regime, which is the Beckham Law. We'll talk about this tax benefit in the next topic.
3. Beckham's Law
The Beckham Law was introduced in 2005 by Royal Decree 687/2005 with the aim of attracting skilled foreign labor to Spain.
Those who fall under this regime can stay in Spain for a further 183 days without being considered ordinary tax residents.
Beneficiaries of this scheme will only pay IRPF earned within Spain at a flat rate of 24% or 47%.
However, there are a number of requirements to fall under the Beckham Law, such as:
a) you must not have resided in Spain for the last 5 years;
b) employees who come to Spain to work for a Spanish company or who have an employment contract with a foreign company; or
c) self-employed persons who can prove that they intend to open a business in Spain; or
c) who is a high-income expatriate holding managerial positions in a Spanish company or;
d) who is an administrator immigrating to Spain to work for a Spanish company or who is an administrator of a start-up.
An important note: the granting of the digital nomad visa has nothing to do with falling under the tax regime of the Beckham Law. It is possible to have a digital nomad visa and file the IRPF tax return like other Spanish taxpayers and apply the progressive rate of the IRPF table.
If you want to understand more about the changes to the Beckham Law through the Startups Law, I've written about it in this article.
If you are interested in hiring professional legal services related to tax consultancy and verification of compliance with the Beckham Law tax regime, we are a law firm specializing in the subject. All you have to do is contact us by email: contato@trpuppioadvocacia.com.br
4. Double Taxation Convention between Brazil and Spain
Double Taxation Treaties, as their name implies, are designed to ensure that tax residents' income is not taxed twice.
The Double Taxation Conventions specify which taxes will be covered by it, the qualification of each income and which method will be applied to avoid double taxation on each income.
Although the Double Taxation Conventions are similar, each country stipulates specific issues in order to sign the Convention. In other words, what is included in the Double Taxation Convention in Spain will not necessarily be included in the Double Taxation Convention in Portugal, for example.
The Double Taxation Convention between Brazil and Spain has supreme application over the domestic law of each country. In other words, the Convention is above any and all tax laws issued by Brazil or Spain.
Any tax resident in Brazil or Spain, or in both countries, who receives income from these countries will be entitled to the application of the Convention, under penalty of nullity of the charge.
If you are interested in hiring professional legal services related to tax consultancy, assistance in administrative or judicial tax actions, we are a specialized law firm. To do so, please contact us by e-mail: contato@trpuppioadvocacia.com.br
Alert for Double Tax Residency
Those who have dual tax residency need to declare their taxes for two countries at the same time.
However, what few people know is that when you are a tax resident in a particular country, the principle of universal income declaration prevails. In other words, taxpayers must declare all their income, regardless of its origin.
What most people do is declare income from their country of origin only in their country of origin, and income from Spain only in Spain. However, by failing to comply with the duty to declare assets universally, the taxpayer commits a crime called tax evasion.
In addition to the risk of facing criminal charges for tax evasion and thus having your passport invalidated, the amounts evaded can be charged to the taxpayer, which will include interest and monetary correction.
Portugal exchanges information on tax matters with various countries around the world. This exchange of information is carried out through artificial intelligence, which searches and cross-checks the data of its taxpayers in order to detect fraud.
It is therefore extremely important to carry out tax planning, as in addition to optimizing tax payments, it avoids various problems, such as tax evasion and double taxation.
If you are interested in hiring professional legal services related to tax planning, we are a firm specializing in the subject and we can help you, just get in touch via email: contato@trpuppioadvocacia.com.br
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