It is important to consider the opportunity provided by the Personal Income Tax Law for individuals who are planning on taking up residence in Spain as a result of work relocation to optimize their payment of taxes. Under the special system for workers relocated to Spain, a taxpayer may opt to be considered a non-resident and thereby take advantage of a fixed rate of taxation of 24% (for the year in which he or she becomes a tax resident, and for the following five years), as compared to the progressive rates stipulated for ordinary residents subject to personal income tax.
This system involves other significant benefits which apply to property taxes.
In order to take advantage of this system, the law sets out the following three basic requirements:
1. That you have not been resident in Spain during the previous 10 taxation periods.
2. That relocation is the result of a contract of employment or from becoming a company administrator.
3. That you do not obtain income classed as being through a Permanent Establishment located in Spain.
In order to be able to opt into said system, you must formally notify the Tax Agency using form 149. You must provide this notification within a maximum period of six months from the start date of the activity recorded on the registration with Social Security in Spain or a document allowing contributions to be made in the country of origin. You must also attach to said form a supporting document from your employer, acknowledging the work relationship, the start date of the activity, workplace, work address and duration of the relocation.
Example: A US executive, who is married with two children, is transferred in February 2016 to work in Spain, and becomes a tax resident in Spain.
In the month of January, he receives 10,000 euros in remuneration for work carried out in the US.
From February onwards, remuneration received in Spain is as follows:
- Fixed salary: 10,000 euros.
- Variable salary: 22,000 euros.