Do you live abroad, have skills and are looking for a job? Or a company looking for talented workers abroad? Keep reading; you might be interested in the new special tax regime for inpatriates.
In order to attract qualified nonresident workers, the Basque tax reform brings in a new tax regime providing relief on personal income tax and wealth tax for those workers who move their residence to Spain to carry out an especially skilled employment in research and development, scientific, technical or financial activities.
The scope of individuals eligible for this special tax regime has been expanded, as a special tax regime for inpatriates was formerly only available for those engaged in research and development activities.
Individuals who acquire Spanish tax residency, have not been resident in Spain in the five preceding years and become taxpayers in Alava, Biscay or Gipuzkoa1 may apply this new regime.
The change of residence must be for the purpose of exercising their employment in Spain, whether it is due to a transfer ordered by the existing employer or to take up a new employment.
It is also necessary that the employment is effectively carried out in Spain and for the benefit of an entity resident in Spain (or a permanent establishment in Spain of a foreign company). However, the work may be partially executed abroad if the corresponding consideration does not exceed 15% of the total compensation, or 30% if the work includes functions in foreign companies of the group.
This special tax regime is optional, and, once opted, it will apply in the year of the change of residence and the following five.
The compensation for the work shall enjoy the following benefits in the employee´s personal income tax:
- 15% of the gross income will be exempt.
- Expenses incurred as a consequence of the move, such as board and lodging expenses of the taxpayer and her family during the transfer, house move, etc., are deductible up to 20% of gross compensation. If these expenses are paid by the employer, they will not be treated as compensation in kind, up to the same 20% ceiling.
Thus, up to 35% of the total compensation may be exempt.
In addition, both the inpatriate worker and her spouse or registered partner, as well as their other family members (who have not been resident in Spain during the five years prior to the move), will enjoy the following advantages in relation to their assets outside Spain:
- Returns and capital gains derived from these assets will be exempt in their personal income tax, provided that they have been subject to a similar tax abroad (typically, a withholding tax).
- These assets will be exempt in their net wealth tax.
In view of all this, if you live abroad, it is time to update your resume and start preparing the suitcase. And if you are a company, you can offer an interesting tax package when you search for qualified candidates abroad.
1 Pending approval in the case of Gipuzkoa