A digital nomad is a professional who uses new technologies to work, and who leads a nomadic lifestyle. Typically, digital nomads work remotely (from home, coffee shops, public libraries…) rather than from a fixed workplace.
Before starting to talk about taxes and requirements, it is important to know what the tax situation is for practical purposes of digital nomads in the country. To know if they have to pay taxes we will use the tax residence rule.
This rule establishes that, if any of the following three conditions are met, the foreigner will be considered a tax resident in Spain:
- If you stay more than 183 days a year in the country.
- It has its center of economic interest in Spain (that is, business and/or labor operations).
- Your spouse or children live in the country.
Therefore, digital nomads will inevitably become tax residents, since if they wish to renew their visa, they will have to spend at least 6 months in the country. And, as tax residents, they will have certain obligations such as:
- Declare and pay personal income tax for income generated throughout the world (in Spain but also in any other country).
- Pay personal income tax at a progressive rate that can reach up to 50% (with slight regional differences).
- Declare your assets through form 720.
However, holders of a digital nomad visa, although they are residents from an immigration point of view, can become non-residents from a tax point of view, which means that the obligations seen above would not apply exactly from that point of view. strictly, but with more advantageous conditions.
This is so since they can benefit from the special tax regime called the Beckham Law.
Beckham Law for digital nomads
The new Startup Law in Spain has brought many changes. Perhaps one of the most important has occurred in matters of taxation, specifically in the increase in the number of different cases or assumptions in which a foreigner can benefit from the Beckham Law. That is, if you obtain your digital nomad visa (once the positive resolution is obtained), you will be able to benefit from the Beckham Law.
The Beckham Law is a special tax regime that allows you to be considered a tax non-resident, even if you spend more than 183 days in the country.
Becoming a tax non-resident has many advantages compared to being a tax resident, as you enjoy a much lower income tax rate and avoid paying and reporting other taxes.
In this case, to benefit from this special tax regime, the most important requirement is that you cannot have been a legal resident in Spain for the last 5 years, and the reason why you are moving to Spain must be work-related.
How much taxes do digital nomads pay in Spain?
Digital nomads in Spain only pay a flat tax rate of 24% on their work-related income up to €600,000, and 48% on any amount above this limit.
This is undoubtedly very beneficial, since otherwise you would generally pay a progressive rate that can reach up to 50%. Therefore, their tax percentage is always locked at the 24% rate, instead of increasing with each new income bracket they experience, resulting in large amounts of savings in the end.
On the other hand, we also find the tax rate applicable to property or capital gains. This includes, for example, the sale of shares, property, interests or shares.
In those cases, the tax for digital nomads would be:
- 19% up to 6.000€.
- 21% from 6.001€ to 50.000€.
- 23% from 50.001€ to 200.000€.
- 27% from 200.001€ to 300.000€.
- 28% from 300.001€.
Additionally, as a digital nomad benefiting from the Beckham Law, you will also enjoy other tax advantages, such as:
- You will not have to present form 720 (which residents must submit annually declaring their assets).
- You will not pay wealth tax.
- The tax on capital gains is reduced, moving to a variable rate ranging from 19% to 28%.
So, being the holder of this residence authorization offers many advantages. But there is one question that we still need to answer to make everything clear.
Do digital nomads have to pay taxes in Spain and also abroad?
Digital nomads work remotely from Spain, which means that the source of their income is not Spanish territory (at least it can be only 20%), but a foreign country. Hence many people wonder what happens to taxes in the country where they have generated that income.
This is a problem of double taxation, and to answer this question we must refer to double taxation agreements.
Double taxation agreements are agreements between two countries (in this case Spain and the country where you have generated your income) that specify two points:
- The rules to follow to determine where the foreigner is actually resident and, therefore, see what tax rules apply to him.
- How to manage for practical purposes these taxes that would be paid twice, through an exemption or credit method.
Therefore, you may have to pay twice, but if your country and Spain have a double taxation agreement, you most likely will not have to do so or with nuances.
The answer depends on the particular case, so the best thing you can do is ask and consult an expert tax and accounting lawyer to fully understand how your personal situation would develop.
