Spain’s Tax Benefits for UK Nationals Explained
Halloween may be behind us, but the fright for UK taxpayers is only beginning. The recently approved Autumn Budget 2024 is set to bring significant tax hikes, especially for higher earners, with increases in Capital Gains and Inheritance Taxes. This financial squeeze has left many UK residents exploring ways to minimise their tax burden while remaining in Europe.
For those considering a move to Spain, a silver lining exists. Spain offers substantial tax relief options for UK nationals through avenues like the Digital Nomad Visa and Beckham’s Rule—regimes that can drastically lower, or even eliminate, tax obligations while allowing full access to the EU.
Stunning Javea coastline, Costa Blanca, Spain
The following blog, featured by Spanish Property Insight and written by Larrain Nesbitt Abogados (LNA) , explains how these tax-friendly options could ease your tax concerns while keeping you close to home. Read on to see how relocating to Spain could be the perfect solution.
Are you concerned about Labour’s expected tax hike? Lawyer Raymundo Larrain explains how to slash your tax bill without leaving Europe.
Introduction
Halloween is almost upon us.
This year brings truly scary stuff, such as the UK’s Autumn Budget 2024. It’s to be approved on the 30th of October, and will cause a MASSIVE spike in taxes for despondent UK taxpayers (to plug the £40bn shortfall in tax revenue post-Brexit), specifically targeting those in the higher tax brackets.
It is widely expected the Labour government will move the goal posts by tweaking taxes, as well as significantly increasing existing ones, such as Capital Gains Tax or Inheritance Tax (IHT) which is already very high at 40%. By contrast, in several regions of Spain such as in Andalusia, IHT was suppressed; it’s zero for 99% of taxpayers, including UK tax-domiciled beneficiaries. Since 2019, NONE of our UK clients have paid IHT on inheriting estates located in Andalusia (or in other regions). Just saying …
It also plans to charge 20% VAT on independent schools. If anything, the UK is widely known and revered worldwide for its excellent independent tuition, attracting pupils from all over the world (mainly from China). Sadly, the UK will become the first – and only – country on the planet charging VAT on private schools, punishing private academic institutions in what is a faux pas. It will drive thousands of struggling families (mostly middle class), who are already making a huge financial sacrifice, to pull out their children from them and apply in lieu for public schools, further exacerbating and compounding the issues that mire UK public schools i.e. chronic public underfunding. At a time when the UK economy is stagnating, this ill-conceived measure will force some private schools to merge to survive, or even close their doors with a loss of jobs.
With this in mind, I thought I would write a short blog post highlighting the ray of hope Spain offers on taxation matters to foreign beleaguered taxpayers, namely British nationals. Mark Stucklin published an interesting take on this matter: British tax-refugees head for Spain.
It should be noted that I purposely leave out other tax benefits from living in Spain, which acting in tandem with those described below, further compound the tax mitigation to a point where foreign individuals stand to pay no tax on living in Spain (some regions have de facto ultra-low taxation). You categorically don’t need to move to Dubai to bring your taxation to almost zero. This can still be achieved by living at the heart of Europe, only two hours away from London. Interested? Read on.
Spain: Tax haven or tax hell?
In John Boorman’s 1981 Excalibur movie, there is a part of the dialogue between Merlin and King Arthur where Merlin explains he is a dream to some, a nightmare to others. This apparent ambivalence can also be predicated on Spain’s taxation system: a dream for some, a nightmare for others.
The nightmare
If you happen to be already a tax resident in Spain, and you are classified as a high earner, you will be hit with a top marginal tax rate of 50%. Unlike in other countries, in Spain to be regarded as a high earner, you only need to be making €60,000 in gross annual earnings. As from this amount, you trigger the top tax rates.
The dream
However, foreigners are in for a treat as a whole different story applies to them. Both EU and non-EU nationals (i.e. UK taxpayers) can now greatly benefit from lenient tax breaks on applying for two new tax regimes to the point no tax is paid.
I will describe both regimes below, but it should be noted they offer identical tax advantages. One is devised for Non-EU nationals, and the for EU nationals.
1. Non-EU nationals – Digital Nomad Visa
Non-EU nationals (i.e. British) may apply for the new Digital Nomad Visa which was approved in 2023. Over 7,000 successful applicants now pay low taxes, or none at all. This visa has associated incredible tax advantages that are modelled after the UK’s wildly popular Non-Domiciled tax regime aimed at foreign HNWIs and UHNWIs. No other visa in Spain offers such tax breaks. LNA attains this in under 3 weeks.
The DNV offers multiple key tax advantages:
- Worldwide income is tax-exempt. Spanish Tax Authorities tax you strictly on the income derived within Spanish territory. Meaning, any other source of worldwide income is tax-exempt (just like with the popular UK’s non-domiciled tax regime). Needless to say, this unique tax advantage offers a hugely attractive prospect for those taxpayers with substantial overseas earnings. The only exception is any income derived abroad from working which is taxable in Spain.
- Worldwide assets are tax-exempt. Overseas property portfolios, art, jewellery, yachts, paintings, etc are all tax-exempt in Spain. You don’t even have to declare them!
- Spanish income tax is capped. The first €600,000/year earned from a source within Spanish territory is taxed at a flat rate of 24% (in lieu of the standard top marginal rate of 47%). As can be surmised, even for earnings derived exclusively in Spanish territory, the tax savings are huge.
- Exempt from submitting tax return 720
- Exempt from submitting Spanish Wealth Tax
- Five years plus one. It applies on the fiscal year of relocation and on the following five years (total six years).
- Defer tax bills. You can apply to defer the payment of tax on the first and second year without penalties or delay interests being rolled on top (as is standard)
- Override the 90/180-day rule. As an added bonus, because it’s a visa, you can legally circumvent the pesky 90/180-day rule which now applies post-Brexit allowing you unfettered access to Spain and the Schengen Area (29 countries). All of the EU within your grasp, just like before Brexit!
2. EU nationals – Beckham’s Rule
EU nationals may now apply for what is known as Beckham’s Rule. Over 10,000 EU taxpayers are already benefitting from it. It offers exactly the same tax advantages as those collated above for the Digital Nomad Visa. LNA attains it in under 4 weeks.
Conclusion
You don’t need to be King Arthur to pull out Excalibur from an anvil to pay less taxes in Spain.
All you need to do is call LNA today and apply for either a Digital Nomad Visa, or for Beckham’s Rule and you are all set. Seize the day, live the dream in Spain whilst you pay few tax, or none at all.
If you don’t fancy overpaying taxes, don’t speak to Merlin, speak to Larrain. We’ll work the magic.
At LNA, we offer you both services:
- Beckham’s Rule (Non-Domiciled tax regime)
- Digital Nomad Visa (tax-free visa)
Marbella-based Larraín Nesbitt Lawyers has over 21 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.
LNA has a 100% track record of attaining Spanish residency
At Larrain Nesbitt Abogados (LNA) we have over 21 years of experience. We assist clients buying, selling, or renting properties in Spain. We are specialized in visas and taxation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone at our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author will result in criminal prosecution. Ní neart go cur le chéile. VOV.
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2024 © Raymundo Larraín Nesbitt. All Rights Reserved.
Tagged Beckham Law Non-dom tax regime, Digital Nomad Visa, Residency, Tax breaks
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