Spanish Personal Income Tax Reforms: Bienvenida to Highly Skilled Nonresidents

Recent Spanish tax reforms significantly expand tax benefits for highly skilled employees contemplating a sojourn in Spain, writes Esther Hilgado of Baker & McKenzie in the June issue of BBNA Tax Planning International Review. 
While the Personal Income Tax Act previously offered benefits to attract highly-qualified employees to Spain (the so-called “Beckham Rules”), these benefits have been expanded in signifcant regards as of January 1, 2015.
Hilgado highlights the following key benefits in her article, New Spanish Tax Regime for Expats.

• As before, the main advantage of the regime is that the expats are not taxed on their worldwide income and wealth, but instead, as Spanish nonresidents under the rules contained in the Spanish Non-Resident Income Tax (“NRIT”) Act.  This benefit applies in the year the taxpayer makes the application to apply the regime, and the five subsequent years.

• Whereas previously, the regime only applied to individuals who moved to Spain as employees, the rules now also apply to those who relocate to become company directors, provided their participation does not exceed 25 percent of the entity’s capital. 

• Previously, the regime applied only to individuals whose annual income did not exceed the EUR600,000 threshold. Now, this threshold has been eliminated.  Generally, the NRIT withholding tax rate for salary income is 24 percent, or, to the extent that income exceeds EUR600,000, the personal income tax marginal rate for ordinary tax residents in Spain (47 percent in 2015).

For more information about the new Spanish rules, New Spanish Tax Regime for Expats: The New “Beckham Rule” by Esther Hilgado, (BBNA Tax Planning International Review, June 2015) is available by subscription through the BBNA Premier International Tax Library. 

By Joanna Norland, Technical Tax Editor, VAT Navigator