– On December 6, 2023, the new Personal Income Tax Regulations (PITR) have been approved, regarding the special tax regime for impatriates with the aim of attracting foreign talent.
– They further develop the modifications introduced by the Start-ups Law (28/2022) to the regime, such as the definition of the new extended scope of taxpayers or the access to the regime for family members

MAIN AMENDMENTS

1. Definition of the extended scope of taxpayers

The Start-ups Law (passed in December 2022) extended access to the regime to those who carry out business activity in Spain; to digital nomads; to highly qualified professionals who provide services to start-ups; and to those who carry out training, research, development and innovation activities.
However, until the entry into force of the new PITR, these concepts were not technically defined and, therefore, it was unable to apply these new options of access to the special regime in practice.

2. Development of the access of family members

The Start-ups Law also allowed family members to benefit from the Beckham regime. Now, new features have been introduced:

– Travel time: The family members can relocate into Spain prior the main taxpayer.

– Duration of the regime: regarding the exercise period, this tax regime were applied to family members during the tax period in which they would acquire their tax residence in Spain and the last tax period in which the special regime would be applicable to the main taxpayer.

– Resignation: the family members would be subject to the same term as the main taxpayer to exercise the waiver.

– Exclusion: The principal taxpayer and his family members were jointly excluded from the regime if certain requirements would not be met.- The time period in which family members may apply to the regime is now delimited.

3. Exception to the requirement of not having a permanent establishment in order to qualify for the regime.

The new PITR allow the application of the tax regime to those who carry out certain economic activities specifically: (i) those classified as business or (ii) highly qualified professionals who provide services to emerging companies or who carry out training, research, development and innovation activities.

4. Documentation required to apply for the Beckham regimen

These new PITR established the documentation needed to apply for the special regimen. In this regard, practical problems to fill and submit the communication form for the new extended scope and family members are finally solved.

5. Transitional regime

Taxpayers who acquired tax residence in Spain in 2023 have a period of 6 months to exercise the option from December 15, 2023 (date of publication of the new application forms for the Beckham Regime) onwards.

La entrada Beckham Law’s Developments se publicó primero en Durá Tax&Legal.

These amendments significantly improve access to this regime.

In December 1, 2022, the Spanish Parliament approved the final text of the law. However, it is pending the publication in the Official Spanish Gazette.

MAIN AMENDMENTS

1. TEMPORARY REQUIREMENTS

The period of non-tax residence in Spain before relocation has been reduced from 10 to 5 years.

However, it should be noted that the extension to 11-year period of “Beckham law” regime has not been finally implemented. Thus, the 6-year period continues to be the governing timing rule. 

2. EXTENDED SCOPE OF TAXPAYERS 

Entrepreneurial activity. The option for this regime has been broaden to those who carrying out an entrepreneurial activity in Spain. In other words, it firstly opens the door to those qualifying for self-employment status as well as entrepreneurs.

The future regulations would determine what is considered an entrepreneurial activity and the determination of activities with innovative and/or of special economic interest. To this end a favourable approval form the Ministry of Economy would be required.

Highly qualified professionals. The requirements in this respect are still pending to be determined.

Tele-working. The regime is extended to individuals moving into Spain, in order to work from home (known as “digital nomads”) as long as they also benefit from the new visa for international tele-working, approved by said Start-ups Law.

It can be granted to employees of foreign corporations. Moreover, professionals working for foreign corporations with a threshold of 20% for Spanish companies.

This visa would be valid for 3-year period. Moreover, it must be proved, among other requirements, the existence of employment for at least three months.  Also, documentation must justify work could be carried out remotely.

Managers. The limit of shareholding in the employer´s company for the managers would be no longer applicable. Nonetheless, the current thresholds are maintained for the managers of the entities holding “passive” assets (financial or real state).

3. TAXATION

In terms of taxation, worldwide professional or work income would be taxed at 24% up to EUR 600,000. If exceeding said limit the tax rate would increase to 47%

4. AVAILABLE TO FAMILY MEMBERS

One of the main advantages is that the spouse and children under 25 (or disabled of any age) of the “Beckham Law” beneficiary would also be able to benefit from the Beckham regime.

However, its potential implementation must be analyzed into detail. In this regard, it should be noted that work/professional/passive income of other family members must be lower than income of the person enabling the application of this tax regime.

La entrada Beckham Regime Amendment 2.0 se publicó primero en Durá Tax&Legal.

The main changes to the Double Tax Treaty, which may have a large impact on the taxation of investments, are among others the following:

Taxes covered. The treaty now only covers Chinese individual and corporate income tax and Spanish income tax on individuals, corporation tax, and income tax on non-residents. As of 2021, it leaves out the scope of the Spanish Wealth tax. Hence, Spanish tax authorities are entitled to tax any kind of Spanish asset held by Chinese tax residents, as opposed to the limitation of real estate character, included under the 1990 treaty.

Dividends. The withholding tax rate is reduced to 5% in the case that the beneficial owner is a company that directly holds a stake of at least 25% in the entity distributing them throughout a 365-day period that includes the day of the payment; otherwise 10%.

Interest. The withholding tax rate amounts to 10% with exemptions for interest in connection with the sale of commercial or scientific equipment on credit as well as interest on loans insured by or interest paid to the other state, its central bank or any entity wholly owned by that state.

Royalties. These remain taxed at 10% but now excluding the use of or the right to use industrial, commercial or scientific equipment.

Capital gains. Sale of any other property besides immovable property, movable property forming part of the business property of a permanent establishment, ships or aircraft or railway or road vehicles operated in international traffic is taxable only where the seller is a resident. Gains derived by a resident of one Contracting State that may be taxed by the other State:

1) Sale of stocks or shares  that directly or indirectly derive >50% of their value from immovable property

2) Sale of shares (other than already mentioned) if the seller directly or indirectly held at least 25% of the capital of that company during the 365 days preceding the transfer.

With exemption for shares that are substantially and regularly traded on a recognized stock exchange, provided that the total shares transferred during the fiscal year do not exceed 3% of the quoted shares.

La entrada Spain-China New Tax Treaty se publicó primero en Durá Tax&Legal.

 It is especially relevant for tax residents from outside the European Union, who received a transnational gift or inheritance, having any connecting point in relation to Spain and paid related taxes.

View article  EN91-92 – L J Dura M Domingo

La entrada Spanish Inheritance and Gift Tax: residents from outside the European Union se publicó primero en Durá Tax&Legal.