One of the great advantages of the digital nomad visa is the reduced tax rate remote workers enjoy in Spain. Among others, a flat rate much lower than the general rule or the exemption to file other taxes (among others) are some of the benefits this law has brought with it.
Nevertheless, there are for sure many questions regarding the exact taxes any digital nomad visa holder will face, like the need to pay twice for the same tax in the country where they generate their income.
But in this article we solve them all; so make sure to keep reading if you wish to learn about all tax benefits for remote workers and digital nomads in the Spanish territory.
Understanding tax residency for digital nomads
Before starting with the exact rates and advantages, we must understand which is the real tax status of digital nomads in the country.
That is, we must first answer if they need to pay taxes (or not), and why that is.
In order to answer that question we will use the tax-residency rule.
This rule states that, if one of the following 3 conditions is met, the foreigner will be considered a tax resident in Spain:
- If they spend more than 183 days per year in Spain
- If their center of economic activity is in the country (i.e. their business operations)
- If their spouse or children live in the country
Hence, digital nomads will inevitably become tax residents. Additionally, if they wish to renew their visa, they must comply with the first rule: spend at least 6 months in the country.
As tax residents, they will have certain obligations, like:
- Declare and pay income tax on the income generated worldwide (in Spain but also in any other country)
- Pay income tax at a progressive rate that can reach up to 50% (with slight regional differences)
- Declare their assets through model 720
- And other obligations you can find here
Nevertheless, digital nomad visa holders, even though they are residents from an immigration perspective, can still become non-residents from a tax perspective, which means the obligations seen above would not apply exactly like that, but with more advantageous conditions.
And that is because they can apply for the special tax regime called Beckham Law. How does it work and why is it so beneficial?
Beckham Law for digital nomads
The new Startup Law in Spain came with one important change in taxation, more specifically increasing the number of different cases or scenarios in which a foreigner qualifies for the Beckham Law.
The Beckham Law is a special tax regime that allows you to be considered a non-resident for tax purposes even though you spend more than 183 days in the country.
Becoming a tax non-resident has huge advantages (compared to being a tax resident), as you enjoy a much more reduced income tax rate, and you avoid filing and paying other taxes.
In this case, and in order to apply for this special tax regime, you can’t have been a legal resident in Spain for the last 5 years; and the reason you are moving to Spain must be work-related.
Furthermore, in the case of digital nomads, you are only eligible for the Beckham Law if you are an employee for a company outside of Spain, not a freelancer.
If you meet these requirements, you will have 6 months after obtaining your positive digital nomad visa resolution to submit your application at the tax office.
Once granted, you will start enjoying the great advantages of being a non-resident for a total of 5 years (plus the year in which you are applying). Then you could move to the general resident regime.
But, which are all those tax advantages for digital nomads? Let’s explore them.
What is the tax rate for digital nomads in Spain?
Remote workers who are employees of foreign companies just pay a flat fee of 24% on their work-related income up to € 600,000, and 48% on any higher amount.
This, for sure, is highly beneficial, as otherwise in the general case you would pay a progressive rate that can reach up to 50%.
Hence, your tax percentage is always blocked at the 24% rate, instead of growing with each new bracket of income growth you experience, which results in paying much fewer taxes.
| Income | Employees | Freelancers |
|---|---|---|
| Up to 600.000€ | 24% | Progressive rate from 17% to 48% |
| > 600.000€ | 48% | 48% |
But that is not all.
On the other hand, as a digital nomad who benefits from this special tax regime, you will also enjoy other tax advantages, like:
- You won’t need to file model 720 (which residents must file yearly declaring their assets)
- You won’t pay wealth tax
- Capital gains tax would also be reduced, paying a variable rate that goes from 19% to 28%
So, as you can see, it offers plenty of advantages. But there is a question we must still answer in order to get the full picture.
Do digital nomads pay taxes in Spain but also abroad?
Now you know that as a digital nomad visa holder, you can enjoy a beneficial income tax of just 24%.
But digital nomads work remotely from Spain, meaning that the main source of their income comes from outside the country.
Hence, many still wonder what happens with the taxes in the country where they have generated their income(s).
Do they need to pay their taxes there first, and then also the income tax in Spain?
That is a double taxation problem, and in order to answer this question we must refer to double treaty conventions.
Double treaty conventions are agreements between two countries (in this case Spain and the country where you have generated your income) that specify two things:
- First of all, the rules to follow to determine where the foreigner is actually a resident (and hence to see which tax rules apply to her)
- How to manage these taxes that would be paid twice, through an exemption or a credit method
Hence, it is possible you will have to pay twice, but if your country and Spain do have a double taxation agreement, then chances are you won’t.
As always, it depends.
That is why the best thing you could do beforehand is to ask and consult an expert tax lawyer so that you can fully understand how your personal situation would play out.
At Balcells Group, we can schedule an in-depth tax consultation with one of our specialists so that we can guide you step by step.
Book a consultation with one of our lawyers and we’ll answer all your questions:
