Saturday, June 11, 2005

Lower taxes for non-residents in Spain

The Spanish government has announced its intention to lower the income tax charged to non-residents in Spain. The tax is called Impuesto sobre la Renta de no Residentes (impatriados).

The new law allows people with fiscal residence to declare Non-Resident Income Tax (Impuesto sobre la Renta de no Residentes) and aims to encourage activity of foreign companies in Spain.

People who have fiscal obligations in Spain but have not been residents here for the last 10 years and who have arrived as a result of a contract can opt for Non-Resident Income Tax. The work they are paid for must take place in Spain, although some activity can take place abroad (no more than 15 percent of overall earnings). If the company they work for is part of an international holding, then 30 percent of their wage can be earned abroad.

Non residents must work for a company registered in Spain. Tax payers who opt for this fiscal status will have to declare their taxes each year and will pay a fixed rate of 25 percent. They will not be liable to any tax deductions. They will have to apply for Non-resident status during the first 6 months of working in Spain, and the maximum period granted for non-resident status is set at 5 years.

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