As Spain becomes an increasingly popular destination for digital nomads, understanding the tax implications of living and working remotely in the country is crucial.
Spain offers a Digital Nomad Visa that provides the opportunity to reside legally while maintaining work relations with companies abroad. However, tax obligations can be complex, depending on various factors, including the duration of your stay, your income sources, and the countries where you maintain financial ties.
If you’re considering applying for the Digital Nomad Visa (DNV), we have other articles that dive deeper into the eligibility criteria and the process for obtaining the visa. Feel free to check them out: “How to apply for the Spanish Digital Nomad Visa“ and “Eligibility criteria for the Digital Nomad Visa in Spain“.
This post will walk you through the main tax considerations for digital nomads residing in Spain.
1. Determining tax residency status in Spain
The first step in understanding your tax obligations is determining whether you are considered a tax resident in Spain. According to Article 9 of the Spanish Personal Income Tax Law (Ley del Impuesto sobre la Renta de las Personas Físicas, or IRPF), a person is considered a tax resident if they meet any of the following criteria:
- They spend more than 183 days in Spain during a calendar year.
- Their main economic interests are based in Spain (i.e., most of their income is generated there).
- Their spouse or dependent children reside in Spain.
If you meet these criteria, Spain will consider you a tax resident, and you will be subject to taxation on your worldwide income. On the other hand, if you do not qualify as a tax resident, you will only be taxed on the income you generate within Spain.
2. Taxation of worldwide income
As a Spanish tax resident, you are required to declare and pay taxes on your worldwide income. This includes income from your remote work, investments, property, and other sources, regardless of whether that income is earned in Spain or another country.
Spain has a progressive income tax system. The rates for 2024 range from 19% to 47% depending on your income bracket. The general tax brackets are as follows:
- Income up to €12,450: 19%
- €12,451 to €20,200: 24%
- €20,201 to €35,200: 30%
- €35,201 to €60,000: 37%
- Income above €60,000: 45%
- For very high-income earners (above €300,000): 47%
3. Double Taxation Agreements (DTAs)
Digital nomads often face the risk of being taxed twice on the same income – once in Spain and once in their home country. However, Spain has signed Double Taxation Agreements (DTAs) with many countries, including the United States, the United Kingdom, and Australia. These agreements are designed to prevent double taxation and outline which country has the right to tax specific types of income.
For example, if you are a US citizen working remotely for a US company while residing in Spain, the DTA between Spain and the United States may allow you to avoid paying taxes on your US-sourced income twice. Typically, income will be taxed primarily in the country where it is earned, and a tax credit can be applied in the other country to prevent double taxation.
It’s essential to consult the specific DTA between Spain and your home country to understand how your income will be treated.
4. Special tax regime for foreign workers (The Beckham Law)
Spain offers a special tax regime, commonly referred to as the Beckham Law, which can be advantageous for digital nomads. Under Law 35/2006, this regime allows foreign workers who move to Spain to benefit from a reduced tax rate of 24% on income earned up to €600,000 per year, with the option to apply for this special tax treatment for up to six years.
However, there are specific eligibility criteria for the Beckham Law:
- You must have moved to Spain for work purposes and be employed by a Spanish company or entity.
- You must not have been a tax resident in Spain for the 10 years preceding your move.
- You cannot be self-employed or working for a foreign employer.
While the Beckham Law was originally intended for high-earning foreign workers, digital nomads employed by Spanish companies may qualify and benefit from the reduced tax rate.
5. Social security contributions
If you are employed by a foreign company but living in Spain, understanding your social security obligations is essential. Spain has social security agreements with many countries, allowing digital nomads to avoid contributing to two social security systems simultaneously.
- For EU/EEA citizens, Regulation (EC) No. 883/2004 stipulates that individuals can remain under their home country’s social security system while working in Spain for up to two years.
- Non-EU/EEA citizens should check whether their home country has a social security agreement with Spain, as this will affect whether they must contribute to Spain’s system or remain under their home country’s coverage.
If no agreement is in place, you may be required to register and pay into the Spanish social security system. Contributions are mandatory, covering benefits like healthcare, unemployment, and pensions.
6. Non-resident taxation
If you do not meet the criteria for tax residency, you will be subject to non-resident taxation, which applies only to income sourced within Spain. The Non-Resident Income Tax (NRIT) is a flat tax rate of 24% on income earned in Spain, such as rental income from property or work performed in Spain. For EU residents, the tax rate is lower, at 19%.
It’s important to note that, as a non-resident, you do not benefit from Spain’s progressive tax system or any deductions available to tax residents. Non-resident taxpayers are taxed solely on the income they generate within Spain.
7. Wealth tax
Spain imposes a Wealth tax (Impuesto sobre el Patrimonio) on individuals who have significant assets. The wealth tax applies to residents and non-residents, but the tax base differs:
- Residents: Taxed on their worldwide assets if the net value exceeds €700,000.
- Non-residents: Taxed only on assets located within Spain, such as property.
Wealth tax rates vary by region, with most starting at 0.2% and increasing to 2.5% or more for higher asset values.
8. Filing your tax return in Spain
Tax returns in Spain are generally filed between April and June of the following year, using the Renta Web platform provided by the Spanish tax authorities (Agencia Tributaria). As a digital nomad, you may need to file as a resident or non-resident, depending on your circumstances.
If you are unsure about your tax obligations or how to complete your tax return, it’s advisable to consult with a tax advisor or legal professional who specializes in international tax law.
In conclusion, the tax implications for digital nomads residing in Spain can be intricate, but with careful planning and an understanding of Spanish tax laws, you can navigate your obligations more easily. Factors such as your tax residency status, double taxation agreements, and available tax regimes like the Beckham Law play a crucial role in determining your overall tax burden. Seeking expert advice will help you make informed decisions and ensure compliance with Spanish tax regulations while taking advantage of any applicable benefits.