Is Moving to Spain for Tax Purposes worth it?
Kierunek - Hiszpania
Spain attracts people worldwide. Its main appeals are stunning weather, rich culture, and a happy population. Colloquially, it is called the Land of the Never-Setting Sun, but is this true? To avoid disappointment, it is worth noting that this title does not refer to the entirety of Spain.
There is a wide variety of climates and temperatures, from cold winters to hot summers. Whether you prefer a beachside paradise or an urban oasis, Spain has something for you! Each region offers its own unique climate; the Mediterranean coast enjoys mild winters and hot summers, while inland areas encounter more extreme temperatures. Rainfall also varies drastically, with some areas such as Galicia – famous for its lush green landscapes – experiencing heavy downpours.
Spaniards are content with life, proudly expressing this with their loud and free-spirited behaviour. They are friendly, and their positive energy radiates throughout the country.
But is it worth the move purely for tax purposes?
The pandemic has opened up the possibility of remote working. Working from anywhere in the world is a very realistic and achievable dream.
Imagine a property by the sea with a terrace facing the coast. This is how you greet and say goodbye to the day. Unforgettable sunrises and sunsets. The sound of the waves and cicadas accompany you while drinking your morning coffee, and evening street dances uniquely celebrate each day's end. All of this is at your fingertips.
The only decision to make is whether to move here permanently or combine work with pleasure, spending only half the year in this beautiful place.
Albert Einstein said:
"For taxes, the mind of a mathematician is not enough; here you need a philosopher...".
So, what are the tax conditions in Spain for foreigners?
It all depends...
The State Tax Authority (Agencia Tributaria) sets the main tax rules, but the local offices are responsible for the finer details. What does this mean in practice? Tax rates in Spain can vary depending on where you choose to live.
IRNR - income tax for non-residents in Spain
Individuals residing in Spain for less than 183 days are subject to it. Only income earned in the country is accountable. Flat rates apply and are:
For EU citizens - 19% rate.
For non-EU and EEA citizens - 24% for a base not exceeding €60,000 or 45% if the base equals or exceeds €60,000.
NOTE! If you have a property in Spain but do not intend to move here, you must file a tax return and pay property tax, regardless of whether the property is rented out.
IRPF - personal income tax in Spain
IRPF is paid by all residents and foreign nationals (when staying for more than 183 days). This tax is progressive, meaning the salary amount is considered during calculations. A tax-free amount depends on age:
Up to 65 years of age - €5,550.
Between 65 and 74 years of age - €6,700.
Over 75 years old - €8,100.
The tax scale is as follows:
Income up to €12,450 - 19%.
From €12,450 to €20,200 - 24%.
From €20,000 to €35,200 - 30%.
From €35,200 to €60,000 - 37%.
From €60,000 to €300,000 - 45%.
Above €300,000 - 47%.
Before deciding on the region for your new property, you should research how local taxes are structured – these can vary from those set by the Agencia Tributaria. Generalised tax thresholds for the entirety of Spain are announced each year.
NRIT - Royal Decree of 2005 (known as the Beckham Decree)
Foreigners who move to Spain and work there will be exempt from taxation on income earned in another country. This relief is valid for six years. You can only apply for this within six months of moving to Spain. The applicable tax rate is 24% on the first €600,000 earned. Above that, the rate is 47%. Income earned on Spanish territory is also taxable.
To qualify for the Beckham Decree, you must meet the following conditions:
You have not lived in Spain within the last ten years.
You are coming to Spain for work purposes, and all tasks resulting from the job will be performed in Spain (you received a job offer prior to your arrival).
You have been transferred from a foreign company to Spain.
You will be hired as a director of a Spanish company (and do not own more than 25% of the shares).
Those NOT eligible to apply for this scheme are:
Freelancers or self-employed.
Professional athletes.
Directors of companies based in Spain who own more than 25% of the capital.
Wealth TAX
For those with IRPF status, this tax covers assets located exclusively in Spanish territory.
How to become a resident of Spain?
When applying for resident status, you must meet the basic conditions:
Demonstrate economic stability.
Demonstrate funds in a Spanish bank account (also applies to professional activities registered outside Spain).
To obtain the document, you must appear at a Spanish police station in person. You will receive a green card; this does not establish tax residency in Spain. If you stay in the country for more than 183 days, you are classified as a tax resident (whether you have residency or not).
Considering this, is it worth moving to Spain for tax purposes only?
The answer is simple – NO!
However, if you also want to enjoy the gorgeous weather, vibrant culture, and joyful spirits of the locals, then it is well worth considering! If you decide to permanently live in this luscious country, apply for residency as soon as possible.
This document will help you deal with many formal and everyday matters, such as:
Enrolling your children in school.
Maintaining a bank account with preferential terms.
Obtaining a public health card (Tarjeta Sanitaria Individual).
The decision is yours to make!
