Tax opportunities for digital nomads in Spain: Unlocking the new “Beckham Law”
María Pérez Ravina & Inmaculada Pineda
Spain
by María Pérez Ravina & Inmaculada Pineda
Understanding the new Beckham Law: A strategic shift
The Spanish Special Tax Regime for Expatriates (“Beckham Law”) has been recently reformed to offer unprecedented tax advantages for remote workers.
Under the new rules, digital nomad employees can benefit for a maximum of six years from a flat income tax rate of 24% on employment income up to EUR 600,000 per year (and 47% on income above that threshold), and not be taxed in Spain on any other type of foreign income (capital gains, dividends, interest, rental income, etc.).
If the remote workers perform part of their work physically in their home country and any double taxation conflict arises, a tax credit in Spain (with a limit of 30% of the total tax liability) could be applied, to be analysed on a case-by-case basis.
Assets held abroad are not considered to determine if the limits subject to the Wealth Tax are exceeded and, under this regime, taxpayers are not required to file the informative declaration Form 720 on assets located outside Spanish territory (while regular tax residents are subject to this obligation).
Eligibility criteria: Who is eligible to apply?
In order to be eligible for the “Beckham Law”, digital nomads must acquire tax residency in Spain and meet the following requirements:
The applicant must not have been a tax resident in Spain during the five tax years prior to moving to Spain;
The person must move to Spain for the purpose of one of the professional engagements regulated by the legislation – among them, to provide employment services remotely as teleworkers; and
Income obtained in Spain for carrying out the activities contained in this new law should not be classified as obtained through a Permanent Establishment.
Social security considerations
While the tax advantages are attractive, digital nomads must also deal with their social security obligations. To join the Special Regime “Beckham Law” it is necessary to provide documentation in this regard.
For this purpose, digital nomads have two options:
Obtain a Certificate of Coverage (if bilateral treaties or agreements for social security are applicable) which guarantees that, despite being physically located in Spain, they will maintain social security contributions in their home country; or
The foreign company formally registers in Spain in order to pay the teleworker's contributions to Spanish social security.
Employers' obligations and withholding taxes
An important tax matter for the foreign company is the analysis of the functions to be performed by its employee in Spain, since, depending on the circumstances of each case, these could determine the existence of a Permanent Establishment of the employing company in Spain. This requires an in-depth analysis to avoid any possible additional implications for the foreign company in Spain.
In relation to the withholding obligation of the foreign company paying the digital nomad's employment income, in general, foreign employers are not obliged to withhold income tax in Spain from employees working remotely from Spanish territory, provided they do not have a Permanent Establishment or perform any economic activity in Spain. However, in that case, the individual is responsible for paying the tax through Form 151. Regardless, it is always recommended to analyse each specific situation on a case-by-case basis.
XLNC member firm B Law & TaxMadrid, SpainT: +34 917 817 194
María Pérez Ravina is a tax lawyer and Head of the International Mobility department. She provides tax advice to individuals, fiscal residents, non-residents, and residents under the Special Expat Regime, as well as advice on the planning of their assets and their tax obligations. Contact María.
Inmaculada Pineda is a Managing Partner at B Law & Tax and joined the firm in 2007, becoming partner in 2017. She advises high-net-worth individuals on tax and estate planning and has broad experience in tax structuring for real estate and cross-border investments. Contact Inmaculada.
