Digital nomads who choose Spain as their destination can enjoy significant fiscal benefits. However, it’s essential to understand fiscal residence and how they can take advantage of the Beckham Law to optimize their tax situation.
What is fiscal residence?
Fiscal residence is defined by three conditions:
- Staying in Spain for more than 183 days a year.
- Having your economic interests in Spain, which involves business and/or employment operations in the country.
- Having a spouse or children living in Spain.
Therefore, most digital nomads will become fiscal residents if they wish to renew their visa, as they must spend at least 6 months in the country.
As fiscal residents, they are subject to tax obligations, including declaring and paying the Personal Income Tax (IRPF) for income generated worldwide, including earnings obtained in Spain and other countries. The IRPF is progressive and can reach up to 50%, with slight regional variations.
Beckham Law for Digital Nomads
Digital nomads with a special visa can become non-fiscal residents from a tax perspective, allowing them to enjoy more favourable tax conditions.
To access this special tax regime, they must meet an essential requirement: they must not have been legal residents in Spain for the last 5 years. Also, their move to Spain must have job-related reasons, which is common for remote workers.
Once these requirements are met, digital nomads can apply for this special tax regime through the Tax Agency. Upon approval, they can enjoy several tax benefits.
Fiscal Benefits for Digital Nomads in Spain
Fixed Tax Rate
Digital nomads benefiting from the Beckham Law enjoy a fixed tax rate of 24% on their work-related income up to €600,000, and 48% on any amount exceeding this limit. This is considerably advantageous compared to the progressive rate that could go up to 50%.
Exemption from Fiscal Reports
Modelo 720: While residents must annually submit Modelo 720 to declare their assets outside of Spain, Beckham Law beneficiaries are exempt from this obligation.
Wealth Tax: They are not subject to this wealth tax on assets outside of Spain.
Capital Gains: This tax is reduced, with tax rates ranging from 19% to 28%.
Taxes in Spain and Abroad
One challenge that digital nomads face is the possibility of double taxation: paying taxes both in Spain and in the country where they generate their income. However, most countries, including Spain, have double taxation agreements that prevent this issue.
These agreements define the rules for determining an individual’s fiscal residence and provide methods to avoid paying taxes twice through exemption or tax credits.
While they may need to pay taxes in two places, these agreements usually prevent it or significantly reduce it. The specific situation depends on each case, so it is advisable to consult a tax and accounting expert for personalized advice.
In summary, Spain offers a favourable tax environment for digital nomads and remote workers. With a special tax regime like the Beckham Law, they can take advantage of lower tax rates and reduce their tax obligations. It is important to understand their personal situation and applicable tax agreements to ensure proper tax compliance.
If you want more information about the fiscal advantages and regulations applicable to digital nomads in Spain, or if you have specific questions about your situation, do not hesitate to contact EBF Consulting. Our experts are ready to provide personalized advice and help you make the most of the opportunities that Spain has to offer in terms of taxes and employment. At EBF Consulting, we take pride in offering high-quality service with maximum efficiency, so feel free to contact us through our email firstname.lastname@example.org. We are here to assist you in taking the steps toward a successful future as a digital nomad in Spain!