Spain tax residency is something you need to pay attention to if you spend a lot of time in Spain or hold assets there.
The Spanish tax authorities are notorious for trying to claim you as a tax resident.
Overview Tax Residency in Spain
- Progressive income taxes for professional income and investment income
- Even if you qualify for the Beckham Law your overall tax burden will still be high
- High social contributions both for employees and self-employed individuals
- Wealth tax with relatively low threshold
- Standard corporate tax of 25% but new companies pay 15% for the first two years
- Tax residency triggered by amount of days or connections to the country
- Spain doesn’t have any specific tax rules for digital nomads so if you’re on the digital nomad visa you’re subject to the same rules as anyone else
Taxes in Spain
Let’s have a closer look at the different taxes that apply in case of Spain tax residency.
Personal Income Tax in Spain
Income tax rates in Spain are progressive.
They start at 9,5% on the first €12.450 and go up to 24,50% if you earn more than €300.000.
However, these are only the federal tax rates. Regional rates should be added on top of this. Most of the time around doubling the aforementioned rates.
This makes that your exact tax burden will differ depending on the region you are living in.
For the Canary Islands, for example, the regional tax rates start at 9% on the first €12.450 and go up to 26% as from an income of €120.000. Basically, this means that your total income tax bill – federal plus regional – can go up as high as 50,50%.
Investment income (dividends, interest & capital gains) is also subject to progressive tax rates.
Yet, these differ from the aforementioned rates:
- <€6.000: 19%
- €6.000-50.000: 21%
- €50.000-200.000: 23%
- €200.000-300.000: 27%
- >€300.000: 30%
Beckham Law
As an exemption to the general tax rules there is a regime called the Beckham Law.
The rules were amended for the last time in 2023 via the Startup Law.
Under this regime, you can be recognized as a non-resident taxpayer.
This would mean your tax rate would ‘only’ be 24%.
Yet, you’ll also have to pay social contributions on top of the income tax.
Spanish Social Contributions
Social contributions in Spain differ for employees and self-employed individuals.
For employees, the following rates apply:
- Employer: 30,65%
- Employee: 6,5%
- Minimum calculation basis: €1.381
- Maximum calculation basis: €5.101
Until 2023, self-employed individuals could to a certain extend decide themselves how much they wanted to contribute.
However, as from 2023 your social contributions are linked to your actual income. The new system includes 15 income brackets linked to your net income.
The minimum contribution is €205 per month while the maximum contribution is €607. The maximum contribution applies to income of €6.000 or more per month.
You can also find more information in this regard in my article about the new self-employed regime RETA.
Spanish Wealth Tax
Apart from taxes on income you should also take into account that Spain levies a wealth tax on the assets you own.
The wealth tax is imposed by the local authorities. Some local authorities decided to provide a full relief so no actual tax is applicable.
If we go back to the example of the Canary Islands, the default rates are applicable. These start at 0,2% for a net (taxable) wealth of around €167.000. Tax rates go up to 3,50% for people with a wealth over an amount around €10.696.000.
Corporate Income Tax in Spain
The general corporate tax rate in Spain amounts to 25%.
Newly incorporated companies can benefit from a lower tax rate of 15% for the first two years.
After corporate tax, you should also account for withholding tax if you want to take dividends out of the company. The withholding tax rate equals 19%. The actual tax rate will depend on your total income from investments (as mentioned above).
Thus, unfortunately, setting up a company in Spain is no magic solution to lower your tax burden.
Requirements to Obtain Spain Tax Residency
Spain considers you as a Spanish tax resident based upon two criteria:
- Days-test: you spend more than 183 days in Spain during the calendar year
- Center of vital interests: based upon your factual circumstances like having real estate, a business or a bank account and social connections in the country. There is a presumption this is the case when your spouse or underaged children live in Spain.
So, if you meet one of the aforementioned criteria, the Spanish tax authorities will consider you a resident taxpayer. Consequently, you will have to pay Spanish personal income tax (IRPF) on your worldwide income.
If you don’t meet these requirement, you will be a non-resident. In that case, Spain can only claim taxes from you on Spanish income (e.g. rental income from Spanish property).
How to Establish Tax Residency in Spain
Let’s have a look how you can establish your tax residency in Spain.
Meet Tax Residency Requirements
The first step in establishing Spain tax residency in to meet the tax residency criteria:
- Spend 183 days or more in the country
- Have your center of vital interests in Spain
Obtain Tax Number
Part of the process is to obtain a Spanish tax number or Número de Identificación de Extranjero (NIE).
You’ll also need this number for various things like long-term rentals, phone number, etc.
File Tax Return
The tax year follows the calendar year. You need to file a tax return covering the tax year by 30 June of the following year.
Note that you also need to report any foreign assets (e.g. bank account or real estate) you own in your tax return as part of the wealth tax calculation.
You need to include this information in Modelo 720.
How to End Spain Tax Residency
Many people got stuck in the Spanish tax system. However, after realizing how much it costs them, they want to get out.
If you want to end your tax residency in Spain you should first make sure you spend less than 183 days there.
Ideally, you even minimize your time in the country as much as possible. Especially, if you don’t plan to spend the majority of the year in your new home base.
Furthermore, you also need to cut any other ties with Spain as much as possible:
- Deregister from the municipality (padron)
- Move your close family out of the country with you.
- End any rental contract you have or rent out your place if you own it
- Move your business and bank accounts abroad
- End social memberships
Finally, you’ll also have to file your final tax return and Modelo 030 to formalize your departure as a tax resident with the Spanish tax authority.
Note that Spain doesn’t have a split tax year. This means that once you spend more than 183 days in the country, you have to declare your income for the whole year even if you already left.
Spain Digital Nomad Visa and Taxes
One of the reasons that Spain is popular with digital nomads is that is also offers a digital nomad visa (1).
I dedicated a full article on the Spanish digital nomad visa. There you can find all the details. Nevertheless, we’ll give you the highlights here.
- The digital nomad visa is valid up to one year but convertible to a residency permit with a total length of up to five years.
- You need a minimum income of around €2.763 per month. If you plan to bring family members this amount increases.
- You need to provide some other information like a criminal record, proof of health insurance, proof of working remote, etc.
If you plan to apply for the Spanish digital nomad visa, you also want to understand the tax consequences.
There are no specific tax rules that apply to people who enter the country on a digital nomad visa.
Therefore, the rules we explained before apply. This means that if you spend more than 183 days in the country, you will obtain Spain tax residency.
Furthermore, your home country might still want to levy taxes. This could lead to double taxation which you want to avoid at any cost.
Why I Believe Tax Residency in Spain is Not a Wise Choice for Digital Nomads
Considering all the above, you’ll share my opinion that Spain is a high tax country.
Therefore, it doesn’t make any sense to establish tax residence in Spain for digital nomads voluntarily as part of optimizing your taxes.
Nonetheless, if you like Spain and want to spend a good amount of time in the country, there might be no escaping the Spanish tax net. So, before taking such a decision, you should be aware to the tax consequences.
How is Spain for Digital Nomads?
Spain is always mentioned as one of the top destinations for digital nomads. There are various reasons for this:
- Digital nomad visa: the first attractive point is the aforementioned digital nomad visa.
- Cost of living: Spain has a cost of living that is below the average for Europe. However, this will heavily depend on your location as rent in big cities like Barcelona can get out of hand.
- Climate: many nomads flock to Spain for the warmer climate, especially in winter it’s one of the few places in Europe with warm weather.
- Lifestyle: apart from the climate Spain offers a relaxed lifestyle with a good social life.
- Community: many digital nomads and expats call Spain home which means there is a large international community.
However, if you do like Spain, I would always suggest to see if you can just fit it in your itinerary without necessary making it your home base. In that way, you might have room to optimize your tax setup.
Let Me Figure Out the Best Tax Setup for Your Situation
You want to make sure that you get your tax setup right. The best way is to speak someone who has experience with international taxes and understands the digital nomad lifestyle. I am a digital nomad myself and have years of experience under my belt working in international tax structuring.
I helped more than one hundred nomads with optimizing their tax setup. Some people only reach out after doing countless hours of research themselves. Oftentimes, they still don’t find the answers they need. Or, worst case, make decisions based on incorrect or incomplete information.
Reach out if you want to me to help you save taxes!