Impatriate Tax Regime for Workers relocated to Spanish territoty

We at 3.0 ABOGADOS Y ASESORES FISCALES recommend the option of applying the Special Impatriate Tax Regime to all foreign workers and managers relocated to Spain (known as the “Beckham Law”), as it often entails paying less tax in Spain.

The reason for this is because the taxpayer is taxed for Non-Resident Income Tax at a fixed rate of 24 % (up to €600,000) and not at the progressive Personal Income Tax (IRPF) rate, which may be 48%/50% in some Autonomous Regions.

It should be mentioned that all dividends, interest and capital gains received by the relocated person would be taxed at a maximum rate of 23%.

The above regime is regulated by Article 93 of the IRPF Act, and is voluntary and applicable provided the following conditions are met:

i) The relocated person must not have been a tax resident in Spain for the previous 5 years.

ii) The reason for the relocation of the person to Spanish territory must be because:

– They have an employment contract or a relocation letter not derived from a professional athlete contract.

– They have acquired the condition of a company director. For asset-holding company, they could not hold a stake of 25% or more in that company.

– They have developed in Spain a business activity qualified as an entrepreneurial activity, in accordance with the procedure described in article 70 of Law 14/2013, of September 27.

– They are considered highly qualified professionals, who provides services exclusively to companies classified as “emerging” or that carry out training, research, development and innovation activities, receiving for this remunerations that together represents more than 40% of all business, professional and personal work income.

This regime applies from the year when the person acquires their tax residence in Spain, plus the next 5 years and is extended to their family, children under 25 years old and wife (also to parents in the event of no marriage).

Other benefits to be considered if opting for this regime include not being obliged to file a Declaration of assets and rights located abroad (Form 720) and limited tax liability, as Wealth Tax. In other words, they must only declare those assets and rights located in Spanish territory and not worldwide, and the threshold from which there is an obligation to file the return is increased to 700,000 euros.

In conclusion, the possibility of applying the Special Impatriate Regime may, in many cases, bring tax savings for non-resident workers relocated to Spanish territory. Our firm offers full support to both companies and to relocated workers in completing all the necessary formalities to guarantee the application of this regime and subsequent filing of the taxes of the relocated workers.

Author: Laura Lamas