How do digital nomads pay taxes in Spain?
Guide on taxes for digitals nomads
One of the topics that you are consulting us the most these days is related to the taxes to pay being a digital nomad in Spain.
The new Startup Law has introduced some very attractive tax benefits, including the option of paying income tax as a non-resident (IRNR) and paying 24% if you generate income in Spain, instead of income tax as a resident which can reach 47% (IRPF).This means that the amount of tax you may be subject to as a digital nomad is much lower compared to holding another type of visa in Spain.
To clarify the technical terms before you start reading this article, here are the two taxes we are going to talk about:
The personal income tax as a resident is the IRPF, in Spanish: Impuesto sobre la Renta de las Personas Físicas.
The non-resident personal income tax is the IRNR, in Spanish: Impuesto de la Renta como No Residente.
However, you will only be eligible for this regime if you have not been resident in Spain for the previous 5 years.
The main question among nomads is: How will living in Spain affect me for tax purposes? Well, we are going to give you the answer in this article that we have prepared to provide clarity in relation to the taxes to be paid if you are a digital nomad and you are thinking of coming to live in our beautiful country.
If I apply for the digital nomad visa, what kind of tax may I be subject to?
Although your tax residence is likely to be fixed in Spain if you reside more than 183 days a year in the country, as a digital nomad you may have the option to pay personal income tax as a Non-resident. The Startups Law has been introduced through the amendment of Article 93 of Law 35/2006, the option to pay IRNR tax, provided that the conditions that we will explain below are met.
What are these conditions?
1- Firstly, not to have been a resident in Spain during the 5 previous tax periods, that is, during the last 5 years before applying for the visa as a digital nomad.
2- Secondly, not to obtain income that can be qualified as obtained through a permanent establishment located in Spain. This means that the economic income generated as a digital nomad is not generated through a business activity that is established in Spanish territory through an office, branch, subsidiary or other type of establishment.
3- Finally, the travel of the nomad to Spain occurs because you can perform the work remotely through the use of telematic means and for that reason you can apply for and hold the visa as a digital nomad.
What assets are taxed by the Non-Resident Personal Income Tax (IRNR)?
This tax is only levied on income generated in Spain, for example if you have a property and you rent it, if you have shares in a Spanish company, bonds, etc…
Do not worry because all the income you generate worldwide is not subject to taxation by this tax.
These will be subject to taxation in the country where you pay income tax as a resident, which will most likely be your country of origin, from which you will have to obtain a certificate of residence and then submit it to the Spanish tax office to prove that in Spain you are considered a non-resident for tax purposes.
What are the advantages as a digital nomad of being taxed by the Income Tax as a Non-Resident?
As a digital nomad, it means that all your worldwide income will NOT be taxed in Spain through the Personal Income Tax (IRPF). This benefit prevents all your income from being taxed at a tax rate that can be as high as 47%, since as a progressive tax the more money you earn, the more you pay in Spain.
To summarize, the big advantage as a digital nomad is that you can choose to pay income tax as a non-resident, so if you generate income of up to €600,000 you will only be taxed at a flat rate of 24%.
How does this tax work and when do I have to pay it?
The tax period for the non-resident income tax is the calendar year, i.e. from January to December. Therefore, it must be paid before December 31 of each year.
In order to opt to be subject to this tax you must initiate the corresponding procedure during the first 6 months after your arrival in Spain through the Tax Agency. You must have the residence certificate referred to above to prove that your tax residence is not in Spain.
Here's a practical example...
You are a US national, you work for an American multinational and as a digital nomad you want to come to live and work in Barcelona, Spain. You own an apartment in Alicante that you have rented to a family.
As you have never been a resident in Spain before and the income from your work comes from economic activities outside the country, you can choose to pay income tax as a non-resident.
The income you generate in Spain through your rented apartment will be declared through this tax, paying 24% (IRNR). The rest of the income you generate worldwide will be subject to the country where you are considered a tax resident, in this case, the United States.