Spanish tax authorities have said they will step up their investigation into claims by digital nomads and other remote workers pretending to be non-residents.
Hacienda’s warning came just weeks after the Spanish government fully approved its highly anticipated startup law, which offers favorable tax conditions for international workers.
Spain’s Agencia Tributaria on Monday February 27th declared that it aims to “intensify its control on residents who artificially reduce their fiscal bill by using the non-resident tax”.
If a person spends more than 183 days in Spain, has their primary place of business there, and lives in Spain with their spouse and/or children, they are considered tax residents by Spain.
The focus will be on Spanish citizens who fit this requirement and should pay IRPF, which is imposed on all of their worldwide income, but who instead elect to file their taxes under the more advantageous IRNR non-resident tax, which is paid only on income earned in Spain.
The average non-resident tax rate (IRNR) is 24 percent, whereas the maximum income tax rate (IRPF) is 47 percent and is progressively dependent on earnings.
These “fake non-residents” typically earn substantial incomes and live in Spain with their families, according to José María Mollinedo, general secretary of the Spanish Tax Technicians Union (Gestha).
Among the measures announced by Hacienda, “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”, stand out for catching residents who pretend to be non-residents.
The Spanish tax authority also refers to performing peinados, or “combing” the nation’s shadow economy, in the sense of locating unreported payments.
These initiatives to combat tax evasion are a component of the agency’s official control plan for 2023 and have been made public in Spain’s BOE state bulletin.
The warning comes only a few weeks after the Spanish government completely adopted its eagerly awaited Startups Law, which provides favorable tax circumstances for international businesspeople and digital nomads who relocate to Spain and bring their skills with them.
The law allows international workers who obtain Spain’s new digital nomad visa to pay non-resident tax AND remain in the country for longer than 183 days annually, but only if they make less than €600,000 per year and less than 20% of their revenue from Spanish enterprises.
Foreign nationals from outside the EU may reside in Spain with the help of the country’s digital nomad visa. The warning from Hacienda will prevent anybody from breaking the new visa’s criteria.
Yet, it’s possible that the EU’s digital nomads and remote employees could be the target of the tax fraud campaign because for them is more easily avoid the 183-day limit thanks to their EU rights to free movement within the European Union.
More than half of the tax address changes from Spain to abroad (or even to another Spanish region with better fiscal conditions), according to a 2021 report by Spanish tax advisors, were fraudulent in the sense that the taxpayers had only relocated on paper and continued to reside in the same location in Spain.
