VISAS

THIS MONTH WE LOOK AT THE NOMAD OR TELEWORKERS VISA. THIS IS A NEW VISA FOR PEOPLE WORKING REMOTELY FOR COMPANIES SITUATED OUTSIDE SPAIN. FOR EXAMPLE, YOU MIGHT BE EMPLOYED BY A COMPANY IN THE UK, BUT THE COMPANY GIVES YOU PERMISSION TO WORK FROM MENORCA. THERE MAY BE TAX BENEFITS AS YOU CAN QUALIFY FOR A LOWER NON-RESIDENT INCOME TAX RATE FOR 5 YEARS. THERE CAN ALSO BE CAPITAL GAINS SAVINGS FOR THOSE ABOUT TO RETIRE.

The Digital Nomad Visa

Spain passed the Startups Law at the end of 2022, with the aim of attracting remote workers, digital nomads, and new startups. They were catching up with other countries in the EU offering this type of VISA. The visa’s full name in Spain is the “Visado para teletrabajadores de carácter internacional” but it has become known as the Digital Nomad Visa.

Before this visa was introduced, it was not possible for British residents visiting Spain as tourists to take part in any economic activity. The new visa permits UK nationals working remotely for UK companies to relocate to Spain, provided that their Spanish income, if any, is below 20% of their annual income.

The visa allows the applicant to work remotely in Spain for any foreign company at which they have been continuously employed for at least three months and with an agreed contract of at least one year, where remote working terms and conditions are agreed. In addition, the company must have been trading for at least one year before the intended relocation.

It allows non-EU citizens the opportunity to live in Spain for up to 5 years. 80% of your business income must be generated from outside of Spain. You may provide a service to Spanish customers or businesses, but this must equate to a maximum 20% of your total income.

How to Apply for the Visa

You can choose to apply for the visa while you are in Spain or from your home country. If you are in Spain as a tourist (less than 90 days) and apply for the visa while here, the visa will be valid for an initial three years. Alternatively, you can apply from a Spanish consulate in your home country. Using this method, the visa will be valid for one year.

In both cases, the visa can be extended for up to five years. If initially applying from Spain, you will have one renewal period of two years taking you to the five years. If applying from outside of Spain, you will have two renewal periods of two years taking you up to the five years required for permanent residency.

After 5 years of residency, you can apply to become a permanent resident in Spain.

How long does it take to get a Digital Nomad Visa?

The Digital Nomad Visa application process promises a turnaround time of only 20 days. Also, it uses a legal system known as “positive administrative silence” which means that if the administration fails to respond within 20 days of submitting the application, it will be considered approved!

Requirements for the VISA application

You must show evidence of either 3 years of work experience or a degree from a reputable university, vocational training, or business school. You must not have been living in Spain within the past 5 years before your application.

Like the NLV visa which we covered last month, you must submit a range of documents such as a criminal records certificate and a declaration of no criminal record for the last 5 years and private health insurance with full coverage throughout Spain.

Proof of Income

You must demonstrate adequate financial resources to support yourself while living in Spain. This equates to 200% of the Minimum Interprofessional Salary (SMI). As of January 31, 2023, the Spanish monthly minimum wage was €1,260 (€1,080 over 14 payments). Therefore, you must have a minimum income of €2,520 per month or €30,240 per year. For the first dependent (spouse or partner) the amount is 75% of the SMI which is €11,340 per year. For each child, the amount is 25% of the SMI which equates to €3,780 per annum

Features of the Visa

• The visa allows free movement throughout the EU for workers and their family members.

• Digital nomads will pay a lower non-resident income tax of 24% on incomes up to €600,000 and 47% for incomes above this threshold (the threshold may vary in different regions of Spain). After five years, you will move to the Spanish general tax regime.

• There is no requirement to complete modelo 720 for wealth tax declaration.

Tax Implications - Beckham’s Law

To be eligible for the visa you must reside in Spain for at least 6 months a year. Once you have been in the country for more than 183 days you will pay your taxes in Spain and as stated above you will benefit from a lower non-resident income tax rate for 5 years. After 5 years you will lose this benefit.

“Beckhams Rule” is the popular term for the Spanish tax law of 2005 which introduced a special lower rate of income tax for non-residents. It was aimed at attracting highly skilled professionals, entrepreneurs, and investors to Spain, also known as the Special Tax Regime for Impatriates (SIRE in Spanish). The law was named after the well-known British football player, David Beckham, who reportedly benefited from this tax regime when he played for Real Madrid in Spain.

Under the Beckham Rule foreign income is not considered a taxable event. Additionally, the term extends up to five complete tax years plus the year of application: six tax years in practice.

In broad terms, according to the Spanish non-resident tax rules, the only taxable income for the individuals will be revenue generated or taxable in Spain. Additionally, the legislation limits the wealth tax application to those assets in Spain. Therefore, the Beckham rule excludes wealth tax, capital gains tax, and income tax arising outside Spain for the applicant and their family.

Tax specialist León Fernando Del Canto of Del Canto Chambers at Middle Temple in London, states “The Beckham rule regime should be an excellent option for anyone with employment income between €20,000 and €600,000 in Spain, coupled with substantial assets and income outside of Spain. Before deciding if this regime is favourable for a UK national, their worldwide assets, including investments and real estate, as well as the income and gains generated by those assets, should be considered carefully, as the Spanish general residency regime could be more advantageous.”

Benefits for People about to Retire

According to Blevins Franks, this visa could be particularly attractive to UK people who plan to retire in the next few years. They say, “If, as part of your retirement plans you will be selling shares in your UK company, and if you dispose of them while living and working in Spain under this visa, you escape capital gains tax in both countries. This could be a considerable saving.”

If this applies to you, seek advice from a cross-border wealth management firm such as Blevin Franks, that understands the intricacies of both Spanish and UK taxation and the interaction between them.

Whatever your circumstances, you should consider seeking professional tax advice before applying for a Digital Nomad Visa to assess if it is the right choice for you, and to ensure that you comply with all the requirements and obligations. They have made it very easy to apply for the visa, but it is a new law and there are many factors which need to be taken into consideration.

References: https://www.blevinsfranks.com/spains-new-digital-nomad-visa-whoseligible-and-the-tax-benefits/ https://delcantochambers.com/a-new-digital-nomad-visa-for-spain/

You can see the official publication of the legislation in the Official State Gazette (BOE) https://www.boe.es/diario_boe/txt.php?id=BOE-A-2022-21739