Special regime for impatriates: Requirements, advantages and disadvantages, differences with the general regime.
For impatriate taxpayers, this question always arises: can I take advantage of the Impatriate Regime, what advantages do I have if I decide to take advantage of it, so in this article we explain the most important requirements, advantages, disadvantages and differences with the IRPF regime.
To begin with, we would have to know what an impatriate is, and when can a person be considered an impatriate?
Well, when we talk about impatriates, we can generally say that we are referring to workers who have been hired through an employment contract abroad and are assigned to provide services in Spain, or also those foreign workers who come to Spain with the purpose of signing a contract with a Spanish employer.
The fact of applying for the Impatriate Law is optional for the taxpayer, as explained in article 93 of the LIRPF.
Therefore, it is up to the taxpayer to decide whether or not to make use of this special regime, always assessing the advantages and disadvantages that may arise from making use of the regime, depending on their situation.
The special non-resident tax regime applicable to workers posted to Spain is regulated in article 93 of the IRPF Act 35/2006, as well as in articles 113 to 120 of the IRPF, and in the OM EHA/848/2008 and OM HAP/2783/2015 which regulate the forms that must be submitted to comply with this regime.
Single tax rate
One of the advantages that we can point out and which is the most notable and beneficial for the taxpayer, is that this special tax regime allows foreigners who move to Spain to benefit from a tax rate of 24% only on income obtained in Spain up to the amount of 600,000 euros, in the case of exceeding this maximum figure, a fixed rate of 45% will be charged.
|NET BASE/ EUROS||APPLICABLE RATE/ PERCENTAGE|
|Up to 600.000 euros||24%|
|From 600.000,01 euros upwards||45%|
Unlike taxation under the general IRPF regime.
This is a progressive tax that works by brackets, i.e. it increases as your income increases, so there is no single tax rate as in the Impatriates Act, in the IRPF this tax rate will vary according to the amount of your income.
Therefore, in order to calculate the amount we have to pay to the Treasury, there are IRPF brackets in which we will apply a different percentage, taking into account the income that is included in the general IRPF base.
What requirements must be fulfilled in order to be eligible for this law?
- Firstly, the expatriate must not have been resident in Spain for the last 10 years.
- There must be an employment contract that justifies your move to Spain, and this must be signed with a Spanish company. The core of the professional activity, i.e. the work, must be in Spain.
- You must not obtain income through a permanent establishment in Spain.
- Maintain the employment contract in force, which motivated the move to Spain during the entire time that this regime is being applied.
- The double taxation agreements will not be applicable, as, by taking advantage of this special regime, you acquire the status of NON-RESIDENT for tax purposes and therefore you will not be granted the tax residence certificate and as a consequence you will not be able to benefit from the double taxation agreements.
- You are not entitled to deduct expenses such as social security costs.
- You are not entitled to the exemption for severance pay or the deduction for the minimum family or descendants.
DIFFERENCES BETWEEN THE SPECIAL REGIME AND THE GENERAL REGIME
|SPECIAL IMPATRIATE REGIME||GENERAL IRPF REGIME|
|Flat tax rate of 24% or 45% (depending on amount of income)||Different brackets according to the amount of income, and according to these amounts a different tax rate is applied.|
|Tax is only levied on income obtained in Spain, not on worldwide income.||Income is taxed worldwide.|
|Double taxation treaties do not apply.||Double taxation treaties do apply.|
|There is no right to deduction, e.g. for minimum family or descendants, nor of expenses, e.g. for social security.||A number of deductions are available:|
-International double taxation relief
|The 183-day tax residency requirement need not be taken into account.||The 183-day requirement to be tax resident in Spain must be taken into account (although there are two other requirements for establishing tax residence in Spain) Art.9. LIRPF|
At Letslaw we would be delighted to help you with all the procedures involved in the special regime for impatriates and to offer you personalised advice, so please do not hesitate to contact us for whatever you need!
Letslaw es una firma de abogados internacionales especializada en el derecho de los negocios.