Among the special tax measures contemplated in our legislation we would like to discuss today about the Special Tax Regimen for employees assigned to Spain, also known as the “inbound expat regimen”.
An employee assigned to Spain and considered Spanish tax resident may elect to be subject to tax under the non resident Law regulations. Under this special tax regime, employment income up to 600,000 € is taxed at a flat rate of 24% instead of the scale of charges established in the Personal Income Tax (up to 48%).
This option is effective for the period in which the change of residence takes place and the following five years.
In order to apply for this special regime some requirement must be met:
(i) The individual must not have been a Spanish tax resident in the 10 years preceding the tax year of the arrival in Spain
(ii) The assignment to Spain must be derived from a labour contract or from acquiring a board of director position in an entity with no participation in its share capital or in a percentage which does not imply being a related party
(iii) The taxpayer does not obtain income that would qualify as being obtained through a permanent establishment situated in Spain.
In case the employee opts for this regime, Form 149 for expatriate workers in Spanish territory shall be submitted. The deadline for submitting this communication is within the maximum term of 6 months from the date of the start of the activity for which the worker is registered with the Social Security in Spain or on documentation enabling, where applicable, the maintenance of the legislation for the Social Security in the country of origin.
After Form 149 has been submitted, the Spanish Tax Administration will send out, within the maximum term of 10 days, a notification granting this regime if each of the requirements established by the regulations for this special regime have been complied with. All taxpayers subjected to this regime will be obliged to submit a tax return for personal income tax using a special form, namely Form 151.
In any case, from Certus we recommend having adequate advice in order to analyse if the ideal conditions for applying this Special Regime are met.