How digital nomads in Spain are still waiting for promised low tax rate

When the idea of Spain’s digital nomad visa (DNV) was first introduced by the Spanish government as part of the new Startups Law approved in late 2022, one of the incentives mentioned to attract startups and remote workers to the country was tax benefits.

Many publications and even law firms wrote about the lower tax rates for people benefitting from the new law, including access to the non-resident income tax rate of 24 percent.

This is much more favourable than the progressive residents’ rates which can go up to 50 percent.

But as time went on and the nomad visa finally became available and people started to apply for it, another story was emerging.

The favourable 24 percent tax rate that the government was referring to for those applying for the DNV in fact what is known as Beckham’s Law.

READ ALSO - Beckham Law: What foreigners need to know about Spain's special tax regime

The Beckham Law was first introduced in 2004 to attract talent and highly qualified workers to Spain with fiscal incentives. It was nicknamed after the footballer David Beckham as he was the first one to take advantage of it when he moved here to play for Real Madrid.

Essentially, those eligible will pay a flat fee of 24 percent up to €600,000.

This year, the law was modified and linked to Spain's new Startups Law with several changes introduced. These included the fact that you must not have been resident in Spain during the five previous years, instead of the previous 10, and the fact that dependents can now also be included on it.

One important point is that the Beckham Law (officially named the 'special tax regime for displaced workers or inpatriates') must be applied for within the first six months of living in Spain.

READ ALSO - LISTED: All the documents you need for Spain’s digital nomad visa

Many digital nomads and remote workers who have been approved for the DNV arrived in Spain and began enquiring about the application for the Beckham Law in order to benefit from the lower tax rates, only to find out that the Spanish government still hasn’t made it possible for those with the visa to apply for it. 

The boxes provided on the form or modelo 149 (in order to apply for the Beckham Law) currently do not offer the option for those on the visa to get it.

One reader wrote to The Local saying: “Unfortunately, the Agencia Tributaria (Spanish tax agency) appears not to have kept pace with these changes in the law. Their Modelo 149  is delayed (see 'NOTA AVISO' here https://sede.agenciatributaria.gob.es/Sede/procedimientoini/G606.shtml). Thus newly eligible applicants for the scheme (like myself) cannot in practice register for the Beckham law”.

Digital nomads coming to Spain are finding lots of challenges. Photo: Andrew Teoh / Unsplash

 

This was confirmed by a member of the DNV Facebook group who wrote: “I’m working for an LLC in the USA and my Spanish lawyer told me I can’t apply for the nomad visa under Beckham’s law”.

Another poster wrote: "After I got the DNV, I was looking for how to apply for the Beckham Law and guess what, my lawyer just told me that I cannot do it!!! … Here is her reply: “You have to know that according to the website of the tax agency, it is not possible for those who are digital nomads to apply yet.

"There is still no regulatory development to submit the application and they are forcing us to wait for the corresponding ministerial order to be issued to be able to submit the application. This will mean that if you are working from Spain but you are not able to apply for the Beckham Law yet for reasons that are not attributable to you, you will still be subject to the normal IRPF (income tax rate), until you can apply for the special regime."

READ ALSO: How to apply for Spain's Beckham Law tax regime

Visa consultant Richelle De Wit, who is helping many nomads to get their DNVs, confirmed that: “The tax office still hasn't published their new instructions that are supposed to include Digital Nomads”.

The Local Spain spoke with tax expert Mark McMillan from Sun Lawyers in order to find out what’s going on. He reiterated that the special tax regime for those on the visa is "pending" and that the government is still developing the new regulations.

This means that anyone who moved to Spain on the DNV in 2023 may miss out as the six-month window may have already passed when it becomes available. It’s unclear yet if this will be retroactive or not.

However, like everything official in Spain, it’s not a simple black-and-white matter and what should happen in theory often doesn't materialise in practice. For many remote workers, it may not actually be that beneficial for them to apply for Beckham’s Law.

McMillan explained that: “The special tax regime will be beneficial for those with an annual income from around €50,000 up to €600,000, so it will depend on your income bracket. Note that there are no allowances for your personal circumstances and as a result, people with spouses and children may find that they will pay less tax if they do not opt for the special regime”.

To complicate matters further, it’s likely that only remote workers and not self-employed professionals who have signed up to Spain’s autónomo plan will be eligible to apply for Beckham’s Law.

In order to qualify for the Beckham tax regime:

- You must have moved to Spain to take up work and have an employment contract with an employer in Spain or work remotely for a company outside Spain. 

- You cannot be self-employed, unless it's an entrepreneurial activity that is of an innovative nature and is of particular financial interest for Spain. For this, you must have a favourable report issued by the General State Administration.

Tax specialist Louise Carr confirmed on the DNV Facebook page. “Employees with digital nomad visa - eligible for Beckham flat tax rate of 24 percent. Self-employed with digital nomad visa - only eligible if you are carrying out an innovative activity that will benefit Spain (you'll need a report from a 'competent authority').

READ ALSO: 'It seems impossible': The problems Spain's digital nomad visa applicants face

This came as a further shock to many applying for the DNV, even more so because so far it’s mainly been self-employed people and not contract workers sent overseas who have been able to apply for it.

In order to be eligible for the DNV in the first place, remote workers must get a certificate of social security coverage from their home country or their company will need to register for and pay social security in Spain.

Several countries such as the US are indeed not issuing these certificates because they believe it should only be for workers who are transferred to Spain by their company for a temporary period.

Most employers are also unwilling to pay social security in Spain just because their employee wants to move there.

This is yet another in the long list of headaches those applying for Spain’s new DNV are having to deal with.

READ ALSO: 'No lawyer can guarantee you get Spain's digital nomad visa'