Digital Wanderers Facing Taxation in Spain?
In Spain, digital nomads are considered tax residents if they meet the criteria of spending 183 days in a year in the country or having a main residence in Spain. As a tax resident, digital nomads will owe tax on their worldwide income.
For those who choose to establish themselves as self-employed freelancers, there are two options: professional freelancer (actividad profesional) requiring specific qualifications or sole trader (actividad mercantil) typically in trade or production. This status allows for independent work using one's own resources and organizing activities under personal responsibility, with obligations to pay social security contributions.
Quarterly taxes, including a 20% tax on the quarterly profit, must also be paid. Digital nomads who opt to pay social security on their own will need to keep VAT bookkeeping records and invoices.
The personal income tax rate for income over €300,000 per year can go up to 52%. Some digital nomads may qualify for the Beckham Law Regime, which offers lower tax rates and benefits. The Beckham Law provides a 24% flat tax on the first €600k earned in employment or freelance income, plus 48% tax on anything over.
The first year, freelancers will pay €85 per month towards social security, and in the second year, they will pay a percentage of their profit to social security. There are two options to pay Spain's social security tax: either the employer pays it or provides a certificate of coverage in their country, or the individual pays the social security tax themselves.
Digital nomads will also owe taxes on rental income, salary from a Spanish company, freelance work from a Spanish office, interest from a Spanish bank account, dividends from a Spanish company, and capital gains from a Spanish asset. Spain may tax any goods and assets owned abroad, including real estate over €300k, crypto, bank accounts, and investments.
It's important to note that if an individual's main residence is located outside of Spain and they can establish tax residency elsewhere, they may not be claimed as a tax resident by the Spanish authorities. Additionally, non-tax residents can still owe taxes in Spain on Spanish income and assets.
Spain has double taxation treaties with multiple countries, including the United States, Canada, Australia, and the United Kingdom, which means that you will not pay taxes in both countries.
Lastly, certain assets like primary residences and life insurance are not included in the wealth tax. The wealth tax on worldwide net wealth for digital nomads who are Spanish tax residents varies depending on where they reside in Spain. Many applicants decide to declare themselves as freelancers to pay the social security tax on their own.
In order to be eligible for the Beckham Law, one must have not been a Spanish tax resident in the last five years and arrive in Spain as a consequence of employment, digital nomad visa, entrepreneurial visa, intercompany transfer, highly qualified visa, or a freelance providing research or development services to a Spanish company.
In conclusion, understanding the taxation system in Spain is crucial for digital nomads planning to reside in the country. It's advisable to seek professional advice to ensure compliance with the regulations and maximize potential benefits.
