Spain: tax haven or tax hell?

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5 November 2024, 9:00

Spain: tax haven or tax hell? Actually, it’s both.

In John Boorman’s 1981 Excalibur movie, there is a part of the dialogue between Merlin and King Arthur where Merlin explains he is a dream to some but a nightmare to others. This apparent ambivalence can also be predicated on Spain’s taxation system.

The nightmare

If you happen to be a tax resident in Spain, and you are classified as a high earner, you will be hit with a top marginal tax rate of 50%. Unlike in other countries, in Spain to be regarded as a high earner, you only need to be making €60,000 in gross annual earnings. As from this amount, you trigger the top tax rates.

The dream

Both EU and non-EU nationals can greatly benefit from very lenient tax breaks on applying for different tax regimes. I will describe both below, but it should be noted they both offer identical tax advantages.

EU nationals – Beckham’s Rule

EU nationals may apply for what is known as Beckham’s Rule. Over 10,000 taxpayers have benefited from it. It offers incredible tax benefits:

Worldwide assets & income are tax-exempt. Spanish Tax Authorities only tax you on your income derived within Spanish territory. Meaning, any other source of worldwide income is tax-exempt (just like with the popular UKs non-domiciled tax regime). Needless to say, this unique tax advantage offers a hugely attractive prospect for those taxpayers with substantial earnings, assets, and interests overseas. The only exception is any income derived abroad from working.
Spanish income tax is capped. The first €600,000 earned from a source within Spanish territory will be taxed at a flat rate of 24% (in lieu of the standard top marginal rate of 47%). As can be surmised, even for earnings whose source is derived exclusively in Spanish territory, the tax savings are huge.
Exempt from submitting tax return 720
Exempt from submitting Wealth Tax
Five years plus one. It applies on the fiscal year of relocation and on the following five years (total six years).

Non-EU nationals – Digital Nomad Visa

Non-EU nationals may apply for the new Digital Nomad Visa which was approved in 2023. Over 7,000 applicants are now paying very few taxes thanks to the DNV. This visa has associated identical tax advantages to the ones listed above for Beckham’s Rule.

Conclusion

Fortunately, you don’t need to be King Arthur to pull out Excalibur from an anvil to pay less taxes in Spain.

All you need is to call us and apply for either Beckham’s Rule, or for a Digital Nomad Visa and you are set; paying fewer taxes, or none at all.

Why overpay tax?

At LNA we offer you both services:

LNA has a 100% track record of attaining Spanish residency

At Larrain Nesbitt Abogados (LNA) we have over 21 years of experience specializing in immigration & residency visas. We also assist clients in buying, selling, or renting properties in Spain. You can contact us by e-mail at info@larrainnesbitt.com, by telephone at our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV.