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How long can I stay in Spain with the DNV?

DNV holders can stay in Spain for up to 5 years.

 

Does the DNV include family members?

Yes, foreign nationals who benefit from the DNV, can bring to Spain their spouse and children under 18 and over 18 provided that the applicant is able to show that they are still financially dependent on the applicant (for example, the children are in their university studies or suffer from any mental or physical incapacity that prevent them from making a living for themselves).

 

Where should Digital Nomads pay their taxes?

Digital nomads can pay their taxes either as Spanish tax residents or as a non-Spanish tax residents (under the so called Beckham Law). The “Beckham Law” consists of an optional special tax regime that enables foreigners who move to Spain to pay their income tax as non-Spanish residents, despite becoming de facto tax residents.

 

Spanish tax residents pay taxes at a progressive tax rate from 19% to 47% depending on the amount of their worldwide income. In addition, depending or their place of residence, they are liable for the Wealth Tax (Impuesto sobre el Patrimonio) or the new tax of the Great Fortunes (Impuesto de las grandes fortunas) whereby by a flat 1,7% is applied to their worldwide assets worth betwen 3 and 5.3 millions of euros; 2,1% to assets valued between 5,3 and 10,6 millions of euro, and of 3,5% to assets valued in excess of 10,6 millions of euro.

 

In contrast, Spanish non-tax residents - and therefore those within the scope of the Beckham Law - will pay taxes at a flat rate of 24% of their employment or professional gains made up 600,000 Euros and of 45% for any amount above. Any other income not raised within Spain will be outside the taxable scope. In addition, they will not be liable for the Wealth or Great Fortune Tax on their assets located outside Spain.

 

It should be noted that if the taxpayer is under this special tax regime, double taxation agreements will not apply. Therefore, to consider which system (resident or non-resident) benefits the most, it is necessary to assess the circumstances of each case.

 

If you want to be updated about this topic, send an email to london@scornik.com and you will receive the latest news.

 

Written by Laura Gallego Herráez.

 

Read more about Immigration.

 

Spanish Digital Nomad Visa:

1. Who qualifies for the Spanish nomad visa?
2. Where must a digital nomad working from Spain pay its taxes?

Tax Incentives:

1. What tax reliefs are available when investing in Spanish start-ups?
2. During how many tax periods could I benefit from those tax incentives?
3. Which companies qualify for the tax incentives provided by SUL?

Enhancement of Beckham Law:

1. Who qualifies for the so-called Beckham tax regime?
2. Can a Spanish Nomad Visa holder apply for the so-called Beckham tax regime?
3. When this special tax regime must be applied for?

Benefits for Investors:

The requirements for investors investing in start-ups that will not reside in Spain are simplified, as they will no longer require obtaining a foreigner identity number (NIE); and the company incorporation process is eased, and for specific cases, lower notary and registry fees would apply.

1. How to set up my company through the new online system that Start-up Law provides?
2. How to apply to NIF through this new system?

This new legal hub not only redefines the way legal services are delivered, it also provides value to its users by providing free access to publications explaining the changes brought by SUL. If you are interested in receiving the said publications, send us an email to london@scornik.com

 

Spanish Wealth Tax

Spanish Wealth Tax is payable by individuals; (companies are not subject to wealth tax). This tax applies to both Spanish and non-Spanish tax residents. However, while Spanish tax residents pay wealth tax on their worldwide net assets (i.e. total assets minus total liabilities), non-Spanish tax residents only pay wealth tax on their net assets located within Spanish territory.

 

Pursuant to Spanish national legislation, the tax rate that applies ranges from 0.2% to 3.5% depending on the total value of the net assets of the taxpayer above €700,000.

 

However, the government of each Spanish Autonomous Community can either apply, the national law or pass its own laws on the following:

• Deductions and tax rebates.
• Tax-free allowances.
• Levied tax rate.

Using that legislative capacity, the regional Government Council of Andalusía has approved the abolition of the wealth tax within its regional territory.

 

Solidarity Wealth Tax

This is a temporary tax, which will apply during 2023 and 2024 and it will be reviewed before ending 2024.

 

Individuals whose net assets worth more than EUR 3 million will be subject to the solidarity wealth tax as follows:

 

APPLICABLE RATE	NET OF WORTH ASSETS
1,7%	Between EUR 3 and 5 million
2,1%	Between EUR 5 and 10 million
3,5%	More than EUR 10 million

 

Non Spanish tax residents and those residing on a region where wealth tax has not been scrapped, the amount paid on account of the wealth tax will be deductible from the amount due on account of the solidarity tax.

 

Written by Laura Gallego Herráez.

 

Read more about Taxation.

 

What is the (so called) “Beckham Law”?

The “Beckham Law” consists of an optional special tax regime for those inpatriates who move to Spain allowing them to pay their income tax as non-Spanish residents (despite becoming de facto tax residents) and, depending on their income and circumstances, pay lower tax in comparison to Spanish tax residents (STR).

 

STR pay taxes at a progressive tax rate from 19% to 47% depending on the amount of their worldwide income.

 

In contrast, Spanish non-tax residents (SNR) – and therefore those within the scope of the Beckham Law - will pay taxes at a flat rate of 24% up to the amount of 600,000 Euros. If this is exceeded, a fixed rate of 45% will be triggered. However, this will only apply to Spanish income, leaving any income generated outside Spain to be levied at the corresponding foreign jurisdiction, with the exception of employment income, where income obtained abroad is also taxed in Spain.

 

Dividends, interest, and capital gains generated in Spain are taxed at a rate ranging from 19% to 23%.

 

However, if the taxpayer is under this special tax regime, double taxation agreements and some deductions will not apply. Therefore, to evaluate which system benefits most to each taxpayer it is necessary to assess the circumstances of each case.

 

Requirements to be elegible under the Beckam Law: amendments proposed by the Spanish Start-Up Bill.

In order to be eligible to apply to this special regime, the taxpayer must have relocated to Spain as a result of an employment contract in Spain or being appointed as a director of a Spanish company where the taxpayer does not hold any shares or otherwise - and again depending on each case - there is certain connexion between the companies. However, and this is a relevant modification introduced by the SUB, if the taxpayer is appointed as a director of a Spanish start-up company, he can apply to this special regime, regardless of his stake in the share capital of the said entity.

 

In addition, the SUB extends the scope of this special tax regime to those who work remotely, also known as “digital nomads”.

 

Also, the taxpayer must not derive income through a permanent establishment of a foreign company in Spain as it is established by the current legislation.

 

The qualifying period to apply for this regime will drop from the - currently - 10 years in which the taxpayer has not been deem to be STR previously to applying to the special regime, to 5 years.

 

According to the current legislation, family members of the taxpayer who is registered with the Spanish tax authorities within this special regime are outside of its scope. However, the SUB, establishes that the spouse and the children of the taxpayer, who are under 25 years old, as well as any handicapped dependents regardless of age can pay taxes under the Beckham Law rules, as long as they meet the following requirements:

1. Family members must relocate together with the taxpayer or a later date within the first year in which the special regime applies.
2. They must not have been tax residents in Spain for the five years prior to relocation.
3. They must not derive income through a permanent establishment in Spain.

The total taxable income of all the family members for each tax year in which the inpatriate’s tax regime applies cannot exceed the taxable income of the tax payer (600,000 Euros) that has relocated to Spain. The purpose of this rule is that when the relocated tax payer is the main source of income for the family, only then may the other family members benefit from this regime.

 

If you want to be updated about this topic, send an email to laura.gallego@scornik.com and you will receive the latest news.

 

Written by Laura Gallego Herráez.

 

Read more about Taxation.

 

Setting Up A Limited Liability Company Electronically With The Minimum Amount Of Capital Of Just 1 Euro

Pursuant to the C&Glaw, a limited liability company can be set up in Spain with a minimum capital amount of just 1 Euro, as opposed to the 3.000 Euros formerly required.

 

However, for the purpose of safeguarding the interests of creditors, the limited liability company must at least allocate 20% of its profits to its legal reserves until the said reserves, together with the company’s capital, reaches the amount of 3,000 Euros.

 

Additionally, if the company goes into liquidation, and if its assets are insufficient to meet its obligations, the shareholders shall be jointly and severally liable for the balance between the amount of 3,000 Euros and the company’s capital.

 

With the aim of simplifying the administrative processes and reducing the cost of setting up a Spanish Limited Liability company, the Create and Grow Law establishes measures to improve the services of the Centre and Business Creation Network (Centro de Información y Red de Creación de Empresas) allowing setting up a limited liability company by submitting the called Single Electronic Document (Documento Único Electrónico).

 

Some of those measures are, but is not limited to, the following:

1. The founders of a limited liability company will be able to adopt, if they wish to, a standard table of articles of association provided by the online system as in the United Kingdom.
2. The publication of the registration of the limited liability company in the Official Gazette of the Mercantile Registry will be exempt from payment of any fee.
3. The online system will provide a standard model of authorisation which can be used by the limited liability company to authorise to individuals or other companies to act on its behalf.

Combating Late Payment

The Create and Grow Law establishes the creation of the State Private Late Payment Observatory (Observatorio Estatal de la Morosidad Privada) with the aim of monitoring and analyse data on payment deadlines and promoting good payment practices.

 

Its actions include the publication of an annual list of defaulting companies that do not pay on time a percentage higher than 5% of their invoices or the total amount of unpaid invoices is higher than 600,000 euros.

 

According to article 4 of the Spanish Law 3/2004 of 29 December regarding payments in commercial transactions, the maximum period within which the debtor must pay any outstanding debt to a creditor is 30 days, unless the two counterparts set up another date of payment, which cannot exceed 60 days.

 

However, it is not uncommon for those deadlines not to be met and due to that, small and medium-size business can suffer lack of liquidity.

 

In order to combat late payment, the Create and Grow Law establishes that a company which does not makes a payment within the period mentioned above, will not be entitled to apply to any public subsidies nor be eligible for take part in public contracts.

 

Mandatory B2B E-invoicing

Pursuant to the Create and Grow Law, electronic invoices must be used in all commercial relations between companies and self-employed people. This measure not only contributes to reinforce the digitalization of the business operations, but also guarantees greater traceability and control of payments for the public administration in order to combat the late payment mentioned above.

 

Companies and self-employed individuals with an annual turnover over eight million Euros, must use the e-invoicing system within a year after regulatory development is approved, while companies and self-employed individuals with turnover under eight million Euros, must use the e-invoicing system within two years after the Create and Grow Law comes into force.

 

According to the Create and Grow Law, businesses and self-employed must give free of charge access to their e-invoices, which should be readable, printable and downloadable.

 

In addition, said access to must be maintained for up to four years since the invoices were produced.

 

If businesses or self-employed individuals do not comply with the e-invoicing regulation, they could face a fine of up to €10,000.

 

Written by Laura Gallego Herráez.

 

Read more about Corporate & Commercial.

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₁ Ley 18/2022, de 28 de septiembre, de creación y crecimiento de empresas.

₂ Chapter V with regards to crowdfunding platforms will come into force from 10 November 2022.

 

Self-employed & Companies can also defer quarterly VAT returns tax for up to 12 & 6 months respectively without security for amounts below € 3,000 and up to 36 months for amounts over € 3,000 providing security.

 

When security is required, this may adopt the form of:

1. Bank guarantee.
2. Chattel mortgage.
3. Mortgage.
4. Rights of assignment of the lease of urban property.

 

The guarantee must be provided within two months from the date the Spanish tax authorities confirms that the deferral is granted.

 

Interest on tax deferral

When the Spanish Tax Authorities admit the deferral sought, interest on the deferred amounts is applied and for 2022, it is set at 3,75%.

 

Written by Laura Gallego Herráez.

 

Read more about Taxation.

 

Some of the clauses that we can find in an IPRA are the following:

1. Non-discrimination between the regulatory regime applicable to domestic investments and the rules applying to investments originating from the other signatory State, with the exception of privileges granted as a result of regional economic integration processes.
2. Expropriation without fair compensation is prohibited.
3. Free transfer of profits and capital.
4. Provisions on the settlement of disputes between the investor and the State so that, in case of dispute between both parties, these are resolved through international arbitration. For example, in accordance with:
• Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL);
• Paris International Chamber of Commerce (ICC);
• Washington-based International Centre for Settlement of Investment Disputes (ICSID).

IPRA signed between the United Kingdom and Latin American countries.

The UK has an IPRA with several Latin American countries, and continues to open negotiations to expand the list.

1. COLOMBIA
2. CHILE
3. PARAGUAY
4. MÉXICO

Written by Laura Gallego Herráez.

 

Read more about Corporate & Commercial.

 

International commercial agreements

Ecuador has a wide network of international trade agreements, which contribute to promote the strengthening of the economy, with different countries, such as México, Chile, the European Union and the United Kingdom.

 

Indeed, the Government of Ecuador has announced its intention to achieve new international commercial agreements in 2022 with the following countries: EU, US, Canada, China and South Korea.

 

Setting up a company in 20 minutes, a 'boom' for Ecuador

On 28th of February 2020, the new Entrepreneurship and Innovation Law came into force in Ecuador. This law constitutes an important advance for business promotion in Ecuador.

 

The said law introduced, among other benefits, the inauguration of Simplified Stock Companies (SSC) (Sociedades de Acciones Simplificadas) which reduced the costs and time required to set up a company.

 

Some of the characteristics of Simplified Stock Companies (Sociedades de Acciones Simplificadas) are the following:

• Unlike other corporate structures regulated in Ecuadorian legislation, the SSC can be constituted with only one shareholder.
• No minimum capital is required.
• The SSC takes just 20 minutes to set up, and two days for completing its legalization before the Superintendence. (Superintendencia).

Written by Laura Gallego Herráez.

 

Read more about Corporate & Commercial.

 

The types of transformations are indicated in its Article 4. Below we address two of the most common transformations.

 

Transformation of a Public Company into a Limited Company

In order to transform a public company into a limited company, the following requirements are needed:

1. The company’s transformation must be agreed at a General Meeting by its shareholders, with a Reinforced Quorum.

 

2. Unless the transformation agreement is agreed unanimously through a Universal General Meeting, the company must give access to its shareholders at the company’s headquarters, the following information:
• Report produced by the Director(s) explaining the reasons for the proposed transformation indicating the consequences that the transformation may have for shareholders. Moreover, the said report should indicate the potential gender impact that this transformation may have over the governance structure of the company.
• A balance sheet of the company, which has to be closed within six months of the date on which the General Meeting, called for the purposes of transformation, will take place.
• Auditor’s report concerning to the balance sheet which the company being transformed is required to submit for audit.
• A draft of the new Articles of Association of the new company, alongside other agreements between shareholders, which will be registered at the Mercantile Register.

The company’s transformation agreement should be published at the Official Gazette of the Spanish Mercantile Register (BORME per its acronym in Spanish).

 

Those shareholders who did not vote in favour of the transformation agreement, will have the right to leave the company.

 

Transformation of a Limited Company into a Public Company

According to Article 199 of the Spanish Company Act the transformation of a limited company into a public company must be carried out through a General Meeting agreed by a Reinforced Majority of votes of it’s shareholders.

 

As to the rest of the requirements, these are the same as above mentioned in relation to the transformation from a public company to a limited company.

 

Written by Laura Gallego Herráez.

 

SPANISH CORPORATE TAX REFORMS IN 2022

CIT rate of 15% for Companies whose profits are equal to or over 20 million euros

On 8th of October 2021, the Organisation for Economic Co-operation and Development (OCDE) announced an agreement, known as BEPS 2.0, between its 136 member countries, which include the USA, Spain, the Republic of Ireland and the United Kingdom, to establish a common CIT of 15% for companies whose net profits are equal to or over 20 million.

 

This was a historic agreement achieved by 136 jurisdictions, which represent more than 90% of worldwide GDP, seeking for such companies to avoid tax evasion.

 

According to OECD these companies evade up to 10% of the total amount of the corporate tax due using establishments of headquarters in territories of low taxation. Even though it was envisaged that the reform would be enforceable in 2023, it is likely to be delayed until at least 2024. This situation is due to some governments who need to work out internal political issues before implementing the said tax reform.

 

In the case of Europe, Poland has blocked, at the moment, the approval of this tax reform within the European boundaries.

 

In this scenario, Spain has decided not to wait until the European Union achieves an agreement to implement the tax reform. Therefore, it has modified its domestic legislation approving CIT of 15% for companies whose net profits are equal to or over 20 million Euros.

 

This new legislation applies from 1st of January 2022.

 

CIT rate of 10% for Companies of new creation

Another tax reform approved by the Spanish Government consists of reducing the CIT from 15% to 10%, for Companies of New Creation in their first tax period where has had benefits and in the following one.

 

What is a company of new creation?

The Spanish Company Act (Ley de Sociedades de Capital) regulates in its Articles 434 to 454 what constitutes a Company of New Creation as follows:

1. Only a maximum of 5 individuals can be shareholders of the company who in addition must not already be a shareholder of another company.
2. The capital of the new company must be larger than € 3,000 but not more than €120,000;
3. The share capital has to be paid by monetary contributions₁;
4. The name of the company must consist of the two surnames and the name of one of the founding members followed by an alphanumeric code enabling the identification of the company in a unique and unequivocal manner.

Written by Laura Gallego Herráez.

 

Read more about Taxation.

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₁ Read our article about non-monetary contributions.