For members


Spain to clamp down on tax fraud by digital nomads and fake non-residents

Spain’s tax agency has announced it will double down on investigating tax evasion by digital nomads and other remote workers who claim not to reside in Spain in order to get better tax rates.

Spain's Tax and Budget Minister María Jesús Montero addresses the press. Hacienda's warning comes just weeks after the Spanish government fully approved its highly anticipated Startups Law, which includes favourable tax conditions for foreign workers. (Photo by Pierre-Philippe Marcou / AFP)

Spain’s Agencia Tributaria on Monday February 27th announced that it wants to “intensify its control on residents who artificially reduce their fiscal bill by using the non-resident tax”.

Spain considers its resident population to be tax residents if they spend more than 183 days in Spain, their main economic interests are in Spain and their spouse and/or children live in Spain.

According to Hacienda, as Spain’s tax agency is also known, the focus will be on residents in Spain who meet this criteria and should therefore pay IRPF that applies to all their worldwide income, but instead file their taxes using the more favourable IRNR non-resident tax which applies only to income made in Spain.

Non-resident tax (IRNR) is generally 24 percent whereas IRPF income tax is progressive based on earnings and can go up to 47 percent.

José María Mollinedo, general secretary of the Spanish Tax Technicians Union (Gestha), told 20minutos that these ‘fake non-residents’ usually have a high income and live in Spain with their families.

Of the measures announced by Hacienda, the ones that stand out for catching residents who claim to be non-residents are “strengthening control over online payments through entities or applications located abroad” and “boosting investigations into cryptocurrencies to locate assets subject to seizure and with links to criminal networks”.

READ ALSO: How does Spain know if I’m a tax resident?

The Spanish tax agency also talks about carrying out peinados, ‘combing’ the country’s underground economy, in the sense of tracking undeclared payments.

These plans to crack down on tax evasion have been published in Spain’s BOE state bulletin and form part of the agency’s 2023 official control plan.

The warning comes just weeks after the Spanish government fully approved its highly anticipated Startups Law, which includes favourable tax conditions for foreign entrepreneurs and digital nomads who move to Spain and bring their talent with them.

READ MORE: Everything you need to know about applying for Spain’s digital nomad visa

According to the legislation, foreign workers who get Spain’s new digital nomad visa can pay non-resident tax AND stay longer than 183 days a year, but this is subject to them not earning more than 20 percent of their income from Spanish companies, and earning below €600,000 a year.

Spain’s digital nomad visa is for non-EU foreigners, giving them the right to residency in Spain. Hacienda’s message will serve as a deterrent from breaching the rules of the new visa.

But perhaps the tax fraud crackdown should be primarily aimed at EU digital nomads and remote workers whose EU rights to freedom of movement within the bloc and free movement of capital allow them to sidestep the 183-day rule more easily.

READ ALSO: What are Spain’s penalties and prison sentences for tax evasion?

A 2021 report by Spanish tax advisors concluded that more than half of the tax address changes from Spain to overseas (or even another Spanish region with better fiscal conditions) were fake, in the sense that they’d only moved on paper and remained living at the same place in Spain.

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For members


Where your taxes go: how local government spends your money in Spain

Have you wondered how your local town hall raises funds and what your money is being spent on or how it's divided? Here's what you need to know.

Where your taxes go: how local government spends your money in Spain

Politics in Spain is incredibly regional and localised, with governments at the regional (known as autonomous community) and local level (municipality) wielding significant amounts of power over how things are done.

Local governments also have a significant amount of power over how and where your money is spent and on what. If you’ve ever wondered where it all goes to, then read on. 

Where the money comes from?

Municipalities in Spain generally receive money in three ways: from the government, from the regional government, and, of course, from its residents: that is, the local taxes they levy and the fees they charge for providing public services such as rubbish collection.

According to RTVE, money from the national and regional governments combined makes up around a third of municipal income (35 percent) on average across the country. But it’s municipal taxes that generate the most money for town halls, often 50 or 60 percent of the total income they receive.

Municipalities charge their citizens three taxes: a property tax, known as IBI; a road tax, known as VTM; and the Economic Activities Tax, called the IAE.

There are also two optional taxes that can be levied at a local level: the IIVTNU, which taxes the surplus value of a property when it is sold, and a tax on construction and buildings works that effectively functions as a licence to be able to build in the municipality.

READ ALSO: Ten acronyms you need to know to buy a property in Spain

Generally speaking, the tax that costs inhabitants the most (and brings in the most for town halls) is the Impuesto sobre bienes inmuebles or IBI, wich is the property tax. According to statistics from the Spanish treasury, on average it contributes over a quarter (27.5 percent) of the non-financial income to municipal governments and councils.

READ ALSO: What is Spain’s IBI tax and how do I pay it?

In fact, in Spain, there are fifty municipalities that collect more than €2,000 per inhabitant solely on IBI alone.

But that’s not the norm. The average collection in Spain is €365 per inhabitant, though more than 4,000 municipalities collect less than €300 per inhabitant.

Among the most popular places for foreigners to live in Spain, the average IBI revenues per inhabitant (per year) between 2019 and 2021 were:

  • Alicante – €275.54
  • Málaga – €241.76
  • Madrid – €459.38
  • Palma de Mallorca – €275.71
  • Valencia – €299.99
  • Barcelona – €421.83

How do they spend the money?

So, what do the local governments and town halls do with all the tax money they’ve gathered from various places and how do they spend it?

Municipalities spend their tax revenue on providing public services, which can be maintaining public parks, sweeping the streets, repairing lampposts and removing graffiti.

These basic services take around up an average of 40 percent of a town hall’s total expenses, double the 20 percent they allocate to general expenses such as running and paying the staff on the city council itself.

Another 15 percent is spent on public services such as schools, libraries and sports facilities, and 12 percent goes to social services such as care and employment services. Another seven percent goes on local infrastructure such as local transport networks.

READ ALSO – EXPLAINED: How to pay less Spanish IBI property tax

The amount local governments spend, however, can vary wildly, and depend on the size, location and needs of each municipality.

Towns with less than 5,000 inhabitants allocate twice as much per inhabitant to general expenses, while bigger cities spend more on basic services, as they need to devote more resources to a much larger number of people. Often, this is reflected in the tax burden.

From 2019 to 2021, the average expenditure of the 7,751 municipalities across the country was €1,557 per inhabitant per year. Most municipalities spent between €1,000 and €2,000 per person in that time, although there were 2,200 localities below that threshold.

In municipalities of interest to foreigners, the average spend per inhabitant between 2019-2021 was:

  • Alicante – €728.86
  • Málaga – €1041.93
  • Valencia – €1069.65
  • Barcelona – €1680.50
  • Palma – €959.78
  • Madrid – €1419.59