1. They cannot have lived in Spain for 10 years prior to taking up employment - a measure to stop tax cheats
2. They must be employed on the payroll of a Spanish company, though this can be a subsidiary of a foreign multinational
3. The application to be treated as non-resident must be filed with the Spanish tax authority within 6 months of taking up the position
4. Finally, as commented earlier, the individual cannot earn in excess of EUR 600,000 in any one tax year during the following 5 years
Finally, don't think that it is always beneficial to apply for this special tax treatment. Though the overall rate of 24.75% is very attractive and significantly lower than the higher rates currently applicable, it's only of interest to high-income employees. The downside to this non-resident scheme is that the tax payer cannot claim the normal tax allowances and deductions applicable to resident tax payers so, as a general rule, it will only be of interest to individuals who expect to earn in excess of approximately EUR 65,000 in a full tax year.
To make the correct decision about claiming the tax status or not, it's best to speak to a tax advisor who can compare the two regimes for the individual tax payer and take his or her specific fiscal circumstances into account.
This article has been updated by David Cook. A tax expert for Expatica, David is the owner of Spain Accounting, a firm specialising in helping foreigners living or working in Spain and giving advice on their tax affairs. For more information on their range of services, visit www.spainaccounting.com or email David at email@example.com. To ask David a question, visit our Ask the Expert section under the tax category.
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