Spain Aims to Put a Stop to Tax Fraud
Spain’s tax agency have announced that they will be clamping down on tax fraud by digital nomads and fake non-residents. The agency will be investigating tax evasion by remote workers who claim that they do not reside in Spain, so that they may take advantage of better tax rates.
Spanish Residency
If you spend more than 183 days in Spain, then you are considered to be a Spanish resident. You may also be considered as a resident if your main economic interests are in Spain or if your spouse and/or children live in the country.
The “fake non-residents” that the tax agency are on the lookout for are said to usually have a high income and to be living in Spain with their families.
Agencia Tributaria’s Declaration
At the end of February, the Spanish Tax Administration Agency (Agencia Tributaria) declared that they want to intensify “control on residents who artificially reduce their fiscal bill by using the non-resident tax.” Their main focus will be on people who meet resident criteria but are using IRNR (non-resident) tax which only applies to income made in Spain. Whereas they should be paying IRPF tax which applies to worldwide income.
The non-resident tax is usually considerably lower than the IRPF tax percentages, especially as the IRPF tax is progressive based on earnings with the possibility of reaching up to an alarming 47%.
The 183-Day Rule
This clamp down on tax evasion could largely be aimed at digital nomads and remote workers from the EU who may be finding it easier to bypass the 183-day rule due to the freedom of movement within the European Union.
It was discovered through a report carried out by Spanish tax advisers in 2021 that over half of tax address changes to a different country or Spanish region were actually false. With the addresses only changing on paper without a physical move of location. This suggests that many people are forging their paperwork in order to pay the tax that suits their best interests rather than what they should legally be paying.
The Clamp Down
The plans to clamp down on tax evasion are part of the agency’s 2023 official control plan. Also known as the Hacienda, the Spanish tax agency are planning to comb through the country’s economy to track undeclared payments. They will also be “strengthening control over online payments through entities or applications located abroad” and “boosting investigations into cryptocurrencies to locate assets subject to seizure and with links to criminal networks.”
Startups Law
Only weeks ago, the Spanish government finalised approval of its eagerly anticipated Startups Law. This was great news for foreigners and digital nomads who want to move to Spain, bringing their own businesses with them, as the law included some encouraging tax conditions.
Spain’s Digital Nomad Visa
The Spanish digital nomad visa is obtainable by non-EU foreigners, and it gives them the right to reside in Spain. If they are not earning more than 20% of their income from Spanish companies and are earning less than €600,000 per annum, they may get Spain’s new digital nomad visa, stay longer than 183 days in Spain per year and can pay non-resident tax.
Summary
Tax legislation is ever evolving, and changes based on the district among other criteria, it is important to stay up to date and make sure you are in compliance with the latest regulations. This message from Spain’s tax agency about tax evasion and fraud will at the very least be serving as a deterrent and will make people think twice about their actions.
If you have any questions or concerns regarding this topic or would like to find out how you can begin creating a sustainable financial future, please contact one of our Wealth Managers today.
