The journey towards becoming a digital nomad in Spain is about to become a lot quicker and simpler! Being location independent and embracing a new “Estilo de Vida” has never been easier.
The Spanish government approved a draft law in 2021 that aims to give the country’s startup ecosystem a boost. The law is expected to come into force by mid-2022. The reform will fix the red tape and costs for Startups. This will help stimulate investment in tech start-ups.
All non-EU citizens who want to work remotely in Spain must apply for the International Teleworking Visa.
Digital nomads will only be able to work for non-Spanish companies. Some can do self-employed work for companies located in Spain. This is capped at 20% of all their work.
Highly qualified professionals with university or business school degrees can also apply for this visa. So too can those with vocational training or three years of professional experience.
Here are the four things you need to know about this new work permit:
- There must be a real and ongoing activity with the company. It must be for at least one year.
- You must meet the criteria below to conduct the work or professional relationship remotely.
With direct employment:
The relationship with the non-Spanish company must be at least three months old before moving. They must also show that the employee is allowed to work remotely from Spain.
The relationship must be at least three months old with the non-Spanish companies. They must also show that the employee is allowed to work remotely from Spain.
This type of visa will benefit many remote workers and ex-pats who want to live in Spain and continue working.
The International Telework Visa will allow you to enter and reside in Spain for up to one year. However, you must work for yourself or for employers anywhere globally.
You will be able to work online and reside in Spain as a digital nomad for three years if:
- you are already in Spain as a tourist
- you are already authorized to stay in Spain
- or your International Telework Visa expires.
Creating a company in Spain as a Digital Nomad
The new law eliminates bureaucratic processes and paperwork, which makes it simpler and faster to open a new business in Spain. Here are the most important changes you need to know about:
- Digital Nomads will be able to open a business online within a day instead of as long as 13 days before.
- The minimum capital required will become as low as €1 compared with €3,000 in the past.
- Notary public and Mercantile Registry fees will be stopped. So these procedures are now free.
- The process of being assigned a Tax ID, which is essential for being a Director or shareholder, will be much faster. A Tax ID makes it simple to move money from foreign bank accounts.
- If your startup fails, you can wind up the business in a simple online process.
Digital Nomad Taxes in Spain
It’s vital that you understand what taxes you are potentially eligible to pay if you plan to live. Below are some scenarios where there are taxes for digital nomads in Spain.
- You will still pay taxes in Spain if you are a deemed Spanish Tax Resident. You become a Spanish tax resident if you are in Spain for more than 183 days a year (Jan. 1st through Dec. 31st).
- You will pay Spanish tax if you have spent more time in Spain than in any other country. If the work is with a foreign company, a foreign partnership, an LLC or a SCorp, the income is taxed. This also includes freelance work.
- If you are a remote employee for a non-Spanish company, employment income is subject to Spanish taxes. This includes salary and even benefits in kind, like stock options, gym memberships, pension plans or insurance or similar.
- Freelancers that issue clients’ invoices must register as an “Autonomo” with the Spanish Social Security and tax authorities. Autonomos must charge VAT and file quarterly tax returns. They must also pay social security but this may affect your current Visa.
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Taxes for companies: explained
- Moving company income from a business you own outside of Spain could be employment income or a dividend. It depends on the company structure.
The government taxes all income from an LLP, a SCorp or Partnership progressively. It can be as high as 48% in some regions.
- All income from an LTD company, a C-Corp or an SL is a dividend. The government taxes them progressively between 19% to 26%.
- Spain has tax treaties to stop double taxation. The Spanish government deducts the tax you paid on your foreign income from the amount you already paid abroad.
- Failure to file a tax return can lead to a penalty between 50% to 150% of the unpaid amount. Spanish tax Authorities have signed double tax treaties with several OCDE countries and they have agreed to exchange information. This means that there is fluent and ongoing communication between Spanish and foreign tax authorities.
- Last, but not least, there is Form 720, which is an informative form on goods and assets abroad. Spanish Tax Residents must file this form if the following assets are worth more than €50,000:
– Bank accounts located outside of Spain.
– Real Estate located outside of Spain.
– Shares, investments, insurances, and pension plans (non-disposed IRAs are excluded) located outside of Spain.
Lexidy’s team of dynamic, English-speaking lawyers will update you as soon as the law passes. Just leave your contact details here.
What about Residence Tests?
Some remote workers, especially US citizens, need to meet some criteria to qualify for Foreign Earned Income Exclusion.
- They must live and work outside the country for most of the year. For US citizens, that’s at least 330 days during the tax year. The Physical Presence Test calls for the person to spend no more than 35 days a year in the US.
- They can also live and work in one foreign country for an entire year. The US calls this the Bona Fide Residence Test.
We can also help you understand taxes and how to ensure you pay the right amount at the right time! A lawyer will help you understand the tax system, local taxes, ID numbers and wealth taxes.
They can also assist with questions about foreign earned income exclusions, cost of living and worldwide income for your remote job. Our lawyers regularly work with clients in different time zones.
If you have chosen to live and work in Spain and want more information on taxes, contact us today. We will explain your options and deliver fast solutions.