Digital Nomads' tax payments in Spain

Digital Nomads' tax payments in Spain: how do digital nomads pay taxes in Spain?

Spain, like many European countries, created the digital nomad visa after the COVID-19 pandemic, due to a growing number of nomads looking for a residence permit in the country.

In addition to the concern of nomads about obtaining a visa to live - even temporarily - legally in Spain, there is also the concern about paying - and how to pay - the taxes required by the Spanish tax authorities.

When planning their trip to Spain, some of the more cautious ones research how Spain taxes its taxpayers and whether there is any possibility of obtaining tax benefits. In this research, they end up coming across the Beckham Law, which is an apparently advantageous tax regime.

Before discussing the Beckham Law, it is important to illustrate how income taxation works in Spain.

"Impuesto sobre la Renta de Las Personas Físicas" - The Spanish Income Tax

As in almost all countries, Spain also requires income tax for individuals. Spaniards declare their income abroad using the so-called "Modelo 720", which is nothing more than a document submitted to the Spanish tax authority containing information on income earned abroad.

The Spanish tax authorities analyze how that income will be taxed and what percentage (rate) it will be taxed at.

To do this, they follow the table below (updated until 2023):

Annual Income	Tax 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 of their income, and those who earn more will contribute more.

It is important to remember that anyone who stays in Spanish territory for more than 183 days will automatically be considered a tax resident in Spain.

However, there is a tax regime that Spain grants, through the Beckham Law, which disqualifies the individual as a normal tax resident.

We'll go into the Beckham Law in more detail.

Beckham Law

The Beckham Law was introduced in 2005 by Royal Decree 687/2005 with the aim of attracting skilled workers to Spain.

The reason for the avid demand to fall under this regime is the possibility of staying in Spain for a further 183 days without being considered a normal tax resident. In other words, you won't have to declare your income universally.

In addition to not having to declare all income to the Spanish tax authorities, the individual will only pay tax on income earned within Spain at a flat rate of 24%.

However, there are a number of requirements to fall under Beckham's Law, such as:

a) you must not have resided in Spain for the last 5 years;

b) you are an employee coming to Spain to work for a Spanish company or for a foreign company, or even a self-employed in some cases or;

c) you are a high-income expatriate who holds managerial positions in a Spanish company, or;

d) who is an administrator immigrating to Spain to work for a Spanish company.

Those who fall under this regime can benefit from it for up to 5 years.

However, it is important to remember that, despite falling under this regime, the individual will remain tax resident in their country of origin.

If you are interested in hiring professional legal services related to tax planning for a change of tax residence to Spain, we are a law firm specializing in the subject, so just get in touch by email: contato@trpuppioadvocacia.com.br

Permanence of Tax Residence in their country of origin and its consequences

Even with the benefit granted by the Beckham Law, the individual will remain under the obligation to declare the income earned in Spain to his home country.

The mistake that many people make, mainly because they are unfamiliar with tax legislation, is to declare in their countries only income earned in their home country, and to declare in Spain only income earned in Spain.

However, what many people don't know is that this is not a simple mistake, it is a crime of tax evasion.

The big headache of having a criminal conviction is the criminal record. Anyone with a criminal record will have their passport automatically invalidated. In other words, they won't be able to leave the country, either to travel or for any other reason.

In addition, most countries require you to present a valid passport in order to obtain a digital nomad visa. In other words, no valid passport, no visa.

What's more, in addition to a possible criminal conviction, the Treasury will be able to demand the amounts withheld retroactively, plus interest and monetary correction.

Therefore, it is extremely important to carry out tax planning. In addition to optimizing tax payments, it prevents taxpayers from being convicted of tax evasion.

If you are interested in hiring professional legal services to carry out tax planning, we are a law firm specializing in the subject, so please contact us by email: contato@trpuppioadvocacia.com.br