Personal income tax for foreigners residing in Spain

If you are a foreigner living in Spain, you may want to make a Special Regime for impatriates. This is a special tax regime for foreign workers who exercise trades in Spain.

This procedure allows the IRPF-based taxation of foreigners in Spain to be reduced compared to the usual one.

Which foreigners must file income tax returns?

Since many people have decided to move to Spain in recent years.

For the same reason it is important to understand the fiscal role we have when we are foreign workers in Spain. Understanding and optimizing our fiscal impact can help to save money and avoid problems with the Spanish Tax Authorities.

As established in Article 8 of the Personal Income Tax Law. All foreigners legally residing in Spain must pay taxes in the same way as Spanish citizens, this includes direct and indirect taxes such as IRPF.

Workers who are not IRPF taxpayers can notify the State Tax Administration of the above mentioned situation. The tax agency will issue an approval document to the worker to hand over his labor income to the payer.

In this way the tax office can withhold money from that date in accordance with the IRPF regulations.

In addition to the elements previously mentioned. The following are listed here:

Staying in Spain for more than 183 days in the calendar year, equivalent to 6 months. To determine this period of stay, your sporadic absences will be calculated.Unless you can prove that you are resident in another country.
For countries or regions classified as tax havens, the tax authority may require you to prove the period of stay.This must be 183 days in the calendar year.
Your main core or activity or basis of economic interests is located directly or indirectly in Spain. Unless otherwise approved, according to the above criteria.
If the person is not legally separated from his/her spouse and has minor children habitually residing in Spain.
Those persons, natural or legal, who own or have any ownership of real estate in Spain.
Foreign workers who emigrate to Spanish territory.

File income tax returns under a special regime, the Beckham Law

Spain’s «Beckham Law» or «Ley de impatriados» is a special tax system. Its common name comes from the famous soccer player David Beckham, who was the first to benefit from this law.

It allows foreigners who emigrate to Spanish territory to pay a fixed tax base of 24%. This is only on income obtained in Spain, without imposing a progressive income tax.

Therefore, basically, this tax system for foreigners allows to pay much lower taxes in the end, thus saving money.

Where is it reflected?

This provision is in Article 93 of the Income Tax Law and was issued in 2004. The main purpose of this measure is to attract talents and qualified workers to Spain.

According to the law if you stay in the country for more than 183 days you have become a tax resident. With the Beckham law it does not matter, you will pay taxes according to tax rules very similar to those of non-residents.

Basically, this means that you only have to pay income tax on income earned in Spain. In addition, instead of paying a progressive tax base, which increases with income, you pay a flat tax base.

This stands at 24% before the maximum amount of 600,000 euros. If income exceeds the maximum amount, a flat tax rate of 45% is established.

Therefore, in terms of tax savings, the Beckham Law is undoubtedly a great tax advantage. Since this 24% is much lower than the one applicable to residents in Spain, which reaches 45%.

How long does it last?

It allows paying property tax and income tax as well during the first six years. Divided in 5 consecutive years and adding the year in which the tax residence in Spain is obtained.

Who can apply for the application of this law?

Basically any foreigner moving to Spain under the following circumstances:

• Foreign workers who have just moved to Spain.
• High income foreigners in managerial or managerial positions.
• Administrator who came to work in the company.

On the other hand, the following persons are excluded:

• Self-employed workers
• Professional sportsmen
• Director of Corporate Entity

Main requirements

The first requirement is that foreigners must not have been resident in Spain for the last 10 years.
Foreigners must have a formal employment contract. This means that you have moved to Spanish territory for work purposes.
The employment contract must be signed with a Spanish company.
For those who come to Spain as managers, they cannot own more than 24% of the shares of the company.
The main center of the workers’ professional activity must be located in Spain. However, it is possible to find work and obtain income from abroad. Provided that the income does not exceed 15% of the total income.
If this is fulfilled you can apply the law and benefit from the tax savings.

How to apply for the Beckham Law in Spain?

The application must be submitted within 6 months. This runs from the date of registration with the Social Security Agency of the company that hired you. If you do it later, your application will be denied and you will not benefit from the law.

To start benefiting from the system, you must complete and send form 149 to notify the tax office. In addition, you must also include:

Your passport and Alien Identity Number.
Social Security Number
Employment contract with a Spanish company
From that moment on, you will be able to benefit from the law for 5 consecutive years. For each item, you must use Form 151 to formalize the non-resident tax return for each year.

If in a certain situation you have more than 48 transactions, you must make an action that takes all of them. In other words, you are going to group all the sold shares and they will form a single operation.

Use of the Treasury’s securities portfolio service. The Treasury will always give you the options for you to make the Income Tax return. In this case it will also provide you with a service to include the transactions.

This added help focuses on the ISIN Code of the company in which you have made the investment. And immediately this data will be redirected to your income tax return. The advantage is that you can include the operations and transactions one by one. In addition, the interface will notify you in case the data is not correct.

The most advisable thing to avoid future problems in the tax inspection, is that you justify all the operations. This means that you should have a file for each operation, to make things easier for you it can be through Excel.

You should always give exact details of the process of buying and selling your shares. Remember that the inspection process is long and tedious, so try to avoid it.

This way you will be able to speed up the process to declare the income if you have shares in the stock market abroad. The Hacienda’s web pages do not have any limitations regarding this.

Better file your income tax return with TaxDown and relax.

In short, if you have investments in foreign shares and you have to declare them in Spain, the process can be quite complicated. This is where TaxDown can be your ally. This platform greatly simplifies the task, guiding you step by step on how to declare your investments correctly and efficiently.

With TaxDown, you can avoid common mistakes and make sure you are complying with all Spanish tax regulations. So, if you want to save yourself headaches and make sure your tax return is accurate, consider using TaxDown. It’s a tool that makes your life easier, allowing you to focus on what’s important while they take care of the tax details of your overseas investments.