15 Feb Impatriate Tax Regime
It is well known that Spanish tax legislation contains a qualifying provision, fostering the establishment of temporary inbound residents or impatriates.
It did become relevant in the international tax arena, where famous sportspeople could benefit from it. In fact, the tax law regulating said tax regime took the name of “Beckham Law”, for obvious reasons. Today such a special tax regime is no longer applicable to professional sportspeople. Nevertheless, it still applies to certain qualifying impatriates, as the main purpose of said special regime consists of attracting valuable human capital from international multinationals.
In order to qualify for said beneficial tax regime, the requirements are as follows:
-The inbound resident should not have been Spanish tax resident, during a 10 year period prior to his/her relocation to Spain.
-The relocation into Spanish territory must be caused for an employment contract or by acquiring the status of company’s director, not owning more than 25% of the shares.
-No income obtained can qualify as obtained through a Spanish permanent establishment.
The temporary status of said elective impatriate regime limits its application to the year in which the impatriate becomes Spanish resident, as well as the following five years. Therefore, when accurate planning is carried out, it allows for the first year of arrival not wasted by not spending more than 183 days in the Spanish territory.
When the impatriate regime becomes applicable, the taxpayer is subject to tax. However, it is worth noting that limited to Spanish sourced income, in the context of Spanish Inheritance Tax, Wealth Tax and Income Tax. Exceptionally, all employment income is considered to be obtained in Spain and regarded as Spanish sourced. Such employment income is subject to 24% of gross income, and 45% when exceeding EUR 600,000. Thus, said regime is also applicable even if the EUR 600,000 threshold is exceeded.
Under said special regime, the taxation of dividends, interests and capital gains is established at 19% as a general rule, 21% when exceeding EUR 6,000 and up to EUR 24,000, and 23% when exceeding such amount.
In summary, the impatriate tax regime would be extremely tax advantageous for inbound residents moving into Spain. They would only be subject to tax on their Spanish sourced dividends, interests and capital gains, and otherwise would be taxed on their annual worldwide income that is left aside for tax authorities’ control, including strict reporting obligations of foreign income or wealth.