What are the tax benefits of Spain’s digital nomad visa?

digital nomad visa tax benefits

The Spanish government has teased the introduction of a ‘digital nomad visa’ for over a year as part of the long-awaited Start-up Act, which was finally approved by the Spanish Parliament in November 2022 for implementation in early 2023.

Under this act, eligible foreigners working remotely will be able to live and work in Spain without requiring a full work visa. Not only will the digital nomad visa allow remote workers to stay in Spain for up to 1 year, renewable for up to 5 years, but it also comes with tax incentives.

Here’s what you should know about income requirements and tax benefits for digital nomads in Spain, as well as tax benefits for start-up businesses.

 

What are the income requirements for digital nomads?

Before you can apply for a digital nomad visa and make the most of its benefits, you must be either an employee exclusively working for a foreign company, or a consultant or self-employed freelancer with at least 80% non-Spanish clients.

This must be backed up by a degree from a reputable institution of higher education, or more than 3 years of experience – the last year of which must have been working for the same existing employer, or regularly working with the same client.

When it comes to minimum income requirements for the digital nomad visa, the Economic Affairs Ministry and Senate in Spain have yet to set a specific amount. However, like other Spanish visas that require evidence of sufficient funds for the applicant to support themselves while living in Spain, it’s likely to be around twice the SMI (Salario Mínimo Interprofesional, or minimum professional salary).

Spain’s national minimum wage was €1,000 a month in 2022, meaning a remote worker hoping to apply for this visa would have to prove earnings of at least €2,000 a month. However, the minimum wage is likely to increase in 2023, potentially as high as €1,082 a month. In any case, most predictions estimate the digital nomad income requirement to be between €2,000–€2,500 a month.

 

How much income tax do digital nomads have to pay?

To become a Spanish tax resident, you must have spent at least 183 days out of the year in the country. Until then, a remote worker will continue paying income tax in their country of origin. If they stay longer than this on their digital nomad visa, which initially permits a 1-year stay, they will become eligible for paying tax in Spain.

However, remote workers could qualify for a special kind of non-resident tax in Spain. Typically, non-tax residents would pay 24% in income tax, but according to Business Insider, holders of this visa could be eligible for a reduced rate of 15%.

This is commonly known as the Beckham rule or Beckham law, as it was originally created for footballer David Beckham, though its official name is the Special Regime for Displaced Workers (Régimen Especial para Trabajadores Desplazados).

It allows foreigners who come to live and work in Spain under certain conditions to pay tax as a non-resident at a fixed rate of 24% for up to 6 years. Under the Start-up Act, digital nomads who earn less than €600,000 a year could apply to have this flat rate reduced further to 15% for up to 4 years.

In comparison to the standard tax rates for residents, which would see someone earning €60,000–€300,000 a year paying 45% in income tax, this is an especially favourable deal.

To be able to apply for this special tax treatment, the digital nomad visa holder must not have been a tax resident in Spain in the previous 5 years, and no more than 20% of their income must come from Spanish employers or clients.

 

Are there any tax benefits for start-ups in Spain?

To encourage more companies to set up a base in Spain, especially new technology companies, the Start-up Act is designed to encourage investment in start-ups in Spain. Not only does this package of incentives include renewable 3-year residency permits for entrepreneurs and investors, but it also offers tax breaks for start-up companies.

Start-ups can request to defer Corporation Tax for 12 months and/or defer interest on this tax for 6 months, and when they do pay, they can benefit from a Corporation Tax reduction from the standard 25% to 15% for up to 4 years.

Investors can also apply for a 30%50% tax deduction on investments in start-up companies in Spain (from €60,000€100,000 a year).

Since the Start-up Act applies retroactively, start-ups which were launched up to 5–7 years before the introduction of this new law could still benefit from these tax breaks if they meet the criteria.

However, start-ups will be disqualified from these benefits if they are acquired or merged with a non-start-up company, surpass an annual turnover of €10 million, cause damage to the environment, or have a partner with a 5%+ share who receives a criminal offence conviction.

 

When do applications for digital nomad visas open?

As the details of the digital nomad visa regulations are yet to be finalised, it’s not yet possible to apply for a Spain remote worker visa – but it’s believed that this type of Spanish visa will be available very soon, by March 2023 at the latest.

When it does become available, it’s expected that applicants can either apply online with the Spanish consulate or embassy in their country of origin, or travel to Spain on a 90-day Schengen Visa and apply for the digital nomad visa while in the country.

Of course, once this new visa option opens, our Spanish immigration law experts will be happy to assist with digital nomad visa applications. If you have any questions about the best type of Spanish work visa for your needs, contact us by phone or email to find out how we can help.

 

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