Tax advantages for foreign entrepreneurs and workers in Spain

The Beckham law

In this article we are going to talk about the option available to foreigners (individuals) who, for work or business reasons, move to Spanish territory. 
Many of them do not know how much tax they would pay here and need to plan their move and know if it would be worth it, given a certain salary or expected return on economic activity and the cost of living in Spain (rent, food, taxes, health insurance, fuel, leisure, school for the children, etc...). 
Knowing this data can give you an approximate idea of your disposable income, your savings and debt capacity, so that you can grow and take root in a country like Spain, ranked 4th in the ranking of countries with the highest economic growth according to the OECD and within the top 10 countries in the world in terms of quality of life. 
 
In Spain, income from work is taxed by the Personal Income Tax, a progressive tax that increases according to the salary received by the worker. 

In other words, if a worker earned €45,000 gross per year, and without taking into account personal circumstances (such as marital status or having dependent descendants or ascendants) or other income (dividends, capital gains...) the tax bill would be €11,610.96. 
 
Important: in this example we are not including the possible deductions existing in each autonomous community depending on the taxpayer's place of residence (but this example may help you to get a general idea). 
With this result, your effective tax rate would be 25.80%. 
 
Now, as a non-resident, the tax rate is a flat rate of 24% for all incomes (if you are not  citizen of an EU country, Norway or Iceland) or 19% if you belong to the European Union (Germany or France for example, these citizens are entitled to deduct the expenses related to obtaining the income). 
 
As you can see, taxation is very similar in general terms for those earning income whether resident or non-resident (if non-EU citizen, Norway and Iceland). 
In the case of an EU citizen, this equality would occur for salaries not exceeding €34,000 gross per annum (approximately 19%). 
 
SO, KNOWING MY SALARY, WHAT SHOULD I DO TO REDUCE MY TAX BILL? 
 
If you are eligible for the special tax regime applicable to workers, professionals, entrepreneurs and investors moving to Spanish territory, you will have the option of choosing between paying tax as a non-tax resident during the year in which you move to Spain and for the following 5 years, paying tax at a flat rate of 19% or 24% depending on your country of tax origin, or choosing the option of paying tax as tax residents do at a progressive tax rate. 
 
SO WHICH OPTION IS BEST FOR ME? 
 
To answer this question properly, the ideal is to consider not only the expected gross annual income from the salary, but also many other personal and financial circumstances in order to optimise and plan taxation. 
 
For example, if you have 2 children, are married and want to benefit from a certain deduction or reduction in your autonomous community (deduction for rent, reduction for contributions to pension plans, joint taxation, etc...) or for example, you have capital losses (sale of a property, shares, investment funds...), you will be more interested in paying tax as a tax resident. 
 
However, if your salary is higher than a certain amount (say €70,000) and you cannot benefit from any of these tax advantages applicable to tax residents, then your best option is to apply for this special regime. 
 
At DA Advisers we can advise you so that you can choose the best option that suits you and we can also assist you in all the necessary procedures to obtain this special tax regime. 
 
In Alicante on 14 September 2023 
 
Gabriel Díaz García  
Alicante Economist Bar Association 3611 
Actuary & European Financial Advisor 
MAPFRE Wealth Management Alicante Office