What’s going on:
Yesterday, Spain’s tax agency declared its intention to strengthen its surveillance of people who attempt to deceive the system by taking advantage of the non-resident tax loophole, according to the The Local.
The Spanish tax agency is set on monitoring undocumented payments, which is part of its 2023 official control plan as indicated in the official state bulletin of Spain.
This warning comes shortly after the Spanish government approved the much-awaited Startups Law, which provides attractive tax benefits for foreign entrepreneurs and digital nomads relocating to Spain.
Why it matters:
If a person’s principal economic interests are located in Spain and they are accompanied by their spouse or children, or if they simply stay for more than 183 days in the country, then they are regarded as tax residents by the Spanish government.
This new crackdown will focus on Spanish residents who meet the criteria and must pay IRPF on their global income, rather than opting for the IRNR non-resident tax, which only applies to Spanish income. While the IRNR non-resident tax is usually set at 24%, the progressive IRPF income tax can be as high as 47%.
Foreign workers with Spain’s new digital nomad visa can pay non-resident tax and spend more than 183 days annually in the country, but with one caveat: not more than 20% of their income can be derived from Spanish sources, and it must be below €600,000 per year, as mandated by the legislation.
How it’ll impact the future:
The tax agency’s new warning serves as an effective reminder to all visa-holders to adhere to the regulations of the program, as well as to be honest and careful about reporting and filing their taxes; digital nomads should take heed.
