B Law & Tax
05 April 2024

Legal Analysis of Professional and Investor Attraction to Spain Upon the Conclusion of the “Nom-Dom” Regime in the United Kingdom

Due to the UK’s renunciation of its historic special expatriate regime known as “Nom-Dom,” Spain finds itself in a new situation offering the opportunity to attract both qualified professionals and substantial investments. This decision implies that professionals and holders of significant assets currently residing in the UK will lose their main tax benefit, thereby increasing the attractiveness of Spanish legislation, especially that resembling the Beckham Law.

According to recent information, the British regime, in force since 1799, is expected to be repealed from April 6, 2025, with limited transitional provisions for those currently benefiting from Non-Dom status. This abolition will represent a significant change for both the UK and the City of London in terms of talent attraction and large fortunes.

The British regime to be eliminated has been effective for decades by allowing new residents to only pay taxes on income generated and remitted to the UK, exempting all foreign income from taxes, such as foreign investments, trusts, image rights of athletes, royalties, among others.

In this context, the attractiveness of the Spanish tax regime is increased as a viable option for these taxpayers seeking a new destination. However, it is noteworthy that tax advisors receive more inquiries from professionals than from holders of large fortunes. Currently, the Beckham Law does not constitute an ideal refuge for large fortunes forced to leave the UK. The “Nom-Dom” regime attracted Russian oligarchs to the City of London in the 2000s, as well as millionaires from India who settled in London, such as the wife of the current president of the country, Rishi Sunak, and footballers who chose to play in the Premier League.

Therefore, for this group of individuals, the Beckham Law is not suitable, since it does not apply to rentiers or athletes. In their opinion, preferential regimes such as the flat tax of 100,000 euros in Italy or Greece, as well as countries like Andorra or Monaco, will attract a considerable portion of these large fortunes left without a jurisdiction following the end of the Non-Dom status.

On the other hand, expanding the scope of the Beckham Law to retirees, rentiers, athletes, and self-employed individuals could be a measure to consider by the legislator, which could facilitate the return of large fortunes that emigrated to the UK due to “Nom Dom,” as well as retirees who opted for Portugal due to the NHR, or even YouTubers who moved to Andorra. This return, the specialist points out, would represent a repatriation of talent and wealth within reach after recent legislative changes.

Regarding the Beckham Law, previously limited to employees, it has been expanded thanks to the approval of the Startup Law last year. Now, workers from foreign companies, self-employed individuals, and entrepreneurs can also benefit from this regime. Under this scheme, a taxpayer proving their tax residency in Spain will only pay taxes on income generated in Spanish territory and not on their global income.

Consequently, income earned abroad will not be subject to taxation in Spain, except for income from labor and professional activities, which must always be taxed in Spain, regardless of the country where they are generated. This is relevant because a taxpayer not under this regime must pay taxes on their entire global income, including income earned in Spanish territory and elsewhere in the world.

Also, the tax rates applicable to the income of expatriates under the Startup Law are lower than the maximum marginal rates of the Personal Income Tax (IRPF), with only two tax brackets. Up to 600,000 euros, a rate of 24% applies, and from that amount, a rate of 47%. This aspect is crucial since in Spain, the normal rates of the IRPF have a scale of six brackets, reaching 47% for income exceeding 300,000 euros.

Regarding capital gains obtained abroad (dividends, sale of shares, or interests), these will be exempt from taxation in Spain for individuals under the special regime. However, those obtained in Spanish territory by individuals subject to this regime must be taxed in Spain, with a progressive scale ranging from 21% to 28%, depending on the amount of the returns obtained.

Finally, under this regime, the Wealth Tax must be paid, but only assets and rights located in Spain are taken into account. To be subject to taxation, wealth in Spain must generally exceed the value of 1,000,000 euros.

B Law & Tax International Tax & Legal Advisors.


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