Income Tax for Individuals with International Component


Income Tax

The 2023 Tax Campaign is set to begin soon, running from April to June 2024.

In today’s globalized environment, it is increasingly common to find individuals relocating to Spain (impatriates) or abroad (expatriates), usually for work-related reasons. It’s also common for individuals who are tax residents in Spain to invest overseas and receive income from other countries.

The first crucial aspect is determining tax residency. It must be verified whether the requirements to be considered a tax resident in Spain are met or if one is considered a non-resident.

Tax residency is always established through domestic regulations, meaning that the internal laws of each country determine the criteria for considering someone a tax resident. Double Taxation Agreements only contain clauses to avoid double tax residency for an individual, acting through tie-breaker rules. Specifically, a person is considered a tax resident in Spain if they have stayed more than 183 days in the natural year in Spanish territory, or if their vital or economic interests are in Spain.

Regarding tax registration obligations, remember to inform the Tax Agency (AEAT) of any changes, whether in residence or tax status.

If considered a tax resident in Spain, one must pay taxes on their worldwide income. If any income earned abroad has been subject to taxation, the taxpayer may apply for a deduction for international double taxation, provided it complies with a double taxation agreement or the internal legislation of the country or territory in question, and meets certain requirements.

If a person has relocated abroad for work reasons and continues to be considered a tax resident in Spain, they may apply for the exemption provided for in Article 7p of the Personal Income Tax Law (LIRPF) or the exempt excess regime in the IRPF, provided they meet the requirements set forth in the Law.

If, on the other hand, a person relocates their tax residency to Spain and meets certain requirements, they may consider opting to be taxed under the Special Regime for Impatriates (popularly known as the “Beckham Law”), where, as a tax resident in Spain, they will be subject to the provisions of the non-resident Personal Income Tax Law for five years, obtaining a tax advantage from a certain salary level. This option must be requested within six months from the date of registration with Social Security or from the date stated in the social security coverage certificate from the country of origin in the case of international relocation. With the entry into force of Law 28/2022, of December 21, “Start-Up Law,” some of the requirements have been reduced, and the spectrum of taxpayers who can opt for this special regime has been expanded, including so-called “digital nomads” and professionals who move to Spain to carry out activities classified as entrepreneurial.

If, according to the regulations, a person is considered a non-resident taxpayer in Spain, they must pay taxes on income obtained in Spain as provided for in the Non-Resident Personal Income Tax Law. Check if you have tax obligations in Spain.

Request advice from us to analyze your situation and study if any of these aspects may affect your taxation. Contact us!

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