The Spanish tax authorities have announced their intention to increase their investigation of digital nomads and other remote workers who falsely claim to be non-residents in order to avoid taxes.
This warning follows the recent approval of Spain's startup law, which offers favourable tax conditions for international workers.
The Agencia Tributaria announced on Monday, February 27th, that it will “intensify its control on residents who artificially reduce their fiscal bill by using the non-resident tax”.
Spain’s digital nomad visa is for non-EU foreigners, giving them the right to residency in Spain.
In Spain, a person is considered a tax resident if they spend more than 183 days in the country, have their primary place of business there, and live in Spain with their spouse and/or children.
The focus will be on Spanish citizens who fit this requirement and should pay the IRPF tax on their worldwide income, but instead choose to file under the more advantageous IRNR non-resident tax, which is only paid on income earned in Spain as these so-called "fake non-residents" typically earn high incomes and live in Spain with their families.
Non-resident tax (IRNR) is generally 24 percent whereas IRPF income tax is progressive based on earnings and can go up to 47 percent.
The Spanish tax agency (Hacienda), plans to strengthen control over online payments made through foreign entities or applications and increase investigations into cryptocurrencies to locate assets subject to seizure and with links to criminal networks. These initiatives are part of the agency's official control plan for 2023 and have been published in Spain's BOE state bulletin.
The new Startup Law allows international workers who obtain Spain's digital nomad visa to pay non-resident tax and stay in the country for longer than 183 days per year, provided they earn less than 600,000 euros annually and less than 20 percent of their revenue comes from Spanish enterprises.
However, the warning from the tax authority may prevent anyone from breaking the visa's criteria. It is possible that the tax fraud campaign will target EU digital nomads and remote employees more easily, as they have rights to free movement within the EU and can avoid the 183-day limit.
A report by Spanish tax advisors in 2021 found that more than half of tax address changes from Spain to other countries or regions within Spain with better fiscal conditions were fraudulent, as the taxpayers had only relocated on paper and continued to reside in the same location in Spain.