The tax regime for foreigners has changed in Spain.
Spain has recently broadened its special tax regime to include investors, entrepreneurs, digital nomads, and highly qualified professionals. This enhancement allows individuals, meeting specific criteria, to benefit from a highly tax-efficient situation. While the regime has been in existence for many years, this recent improvement has garnered widespread acceptance, not only in the global mobility services community but also among midsize corporate entities and private clients (U/HNWI).
Previously applicable to directors of Spanish subsidiaries, employees seconded to Spain, and similar categories, the extended regime now encompasses investors, entrepreneurs, digital nomads, and highly qualified professionals. The government recently released the application form, along with documentation and conditions necessary to avail of these advantageous tax measures.
In essence, individuals who would otherwise face worldwide income tax liability and wealth tax in Spain may opt for this limited liability tax regime. This regime features a flat 24% income tax rate (instead of progressive rates up to 47%) and zero wealth tax for assets held outside Spain. Spanish assets may enjoy wealth tax exemptions, such as up to 6 million for a married couple.
Under this regime, various types of income, including non-Spanish dividends, interest, capital gains, rental income, and business income outside Spain, are not subject to taxation in Spain, regardless of their tax treatment abroad or the applicability of tax treaties. Unlike similar regimes in other countries, the Spanish inpatriate regime does not emphasize foreign tax treatment, and annual reporting of foreign assets and income is not required for Inpatriate Taxpayers. Additional benefits include no Controlled Foreign Corporation, Exit tax, among others.
Applicable for a period of 6 years, this regime is also linked, in certain cases, with the startup law enacted a year ago, which provides additional corporate tax incentives. Once the special regime concludes, other tax incentives and exemptions for business activity and private wealth taxation come into play. Based on our experience, exiting the regime may not be necessary in many cases with proper asset review and structuring.
This enhanced regime took partial effect in 2023 and has already been utilized by numerous Northern European businessmen and entrepreneurs for structuring venture investments, realizing gains from group disposals in their home countries, and mitigating the risk of non-tax residency. The election period is within 6 months of arriving to work or invest in Spain. However, for arrivals in 2022 and 2023, the period extends until June 2024, providing ample time to:
It's worth noting that in PFV, we have lawyers and solicitors in our team, eliminating the need to outsource to third parties. Our firm adopts a comprehensive 360-degree approach, addressing all aspects of these projects (migration, regulatory, tax, legal, administrative, banking, etc.) to optimize costs and ensure consistency.
Contact: Partick Fay