B Law & Tax
14 December 2023

Tax Advisor: Timelines and Regulations: Updates and Deadlines in the Tax Regime for Individuals Relocating to Spain

The Law 28/2022, dated December 21, promoting the development of the startup ecosystem, introduced modifications to the special tax regime for individuals relocating to Spain (impatriates), effective from January 1, 2023. These changes include an expansion of the subjective scope, as detailed in our publication on the Startup Law of December 22, 2022. From 2023 onwards, the regime applies to relocations motivated by various circumstances, specified below.

This regime now includes employment contracts, the exercise of administrative functions in entities, relocations not ordered by the employer for remote work, entrepreneurial economic activities, and services to startups or entities dedicated to R&D. Additionally, it extends to dependent children under 25 (or with disabilities) and spouses, provided specific requirements are met.

 

Regulatory Development of  the Startup Law: News and Deadlines in Royal Decree 1008/2023

The Startup Law left certain aspects pending regulation in future decrees, and since the law came into effect, the model for choosing this special regime has not been updated. In the Official State Gazette of December 6, 2023, Royal Decree 1008/2023, of December 5, has been published to address this regulatory development. Specifically:

  1. Entrepreneurial activity is defined as innovative or of special economic interest to Spain, requiring a favorable report from ENISA and authorization for business residence before relocating to Spain. EU citizens and other beneficiaries of free movement rights must obtain a favorable report from ENISA, requested before the move and issued within 10 business days. This report is also necessary for taxpayers who, having opted for the special regime, wish to undertake an activity different from the one that prompted their relocation.
  2. A highly qualified professional is defined as someone holding the qualifications according to Article 71 of Law 14/2013. This condition is considered fulfilled when obtaining the corresponding residence authorization before relocating to Spain.
  3. Activities are considered to be in the fields of training or R&D+i if the conditions specified in letters a), b), c), and d) of Article 72, paragraph 1, of Law 14/2013 are met, especially when the taxpayer has residence authorization before moving to Spain.
  4. In the withholding and advance payment regime, only income from professional activities in economic activities is subject to withholding. For these cases, invoices must indicate the applicable withholding rate. Additionally, taxpayers earning income from economic activities must comply with formal obligations, such as keeping records of income and expenses and retaining invoices, according to non-resident regulations.
  5. Apart from modifying the conditions for renunciation or exclusion from the regime (now including spouses/parents and children of the taxpayer), deadlines for choosing this regime are established.

Taxpayers have a maximum period of 6 months from the start of the activity, whether they are registered with Social Security in Spain or have documentation allowing the maintenance of the Social Security legislation of their origin.

For spouses (or parents of children) and children of the taxpayer, the deadline is 6 months from entry into Spanish territory or from the start of the counting for the taxpayer (whichever is longer). The determination of the relationship and age or disability is made on the date of exercising the option.

 

Finally, a transitional regime is established that includes:

  • Taxpayers who moved to Spain in 2023 as a result of relocation to Spanish territory in 2022 or 2023 may choose the special regime within a maximum period of 6 months from the entry into force of the ministerial order approving the new communication model.
  • In specific cases, the choice of the special regime can be made before the ministerial order, using the procedure until December 31, 2022. This applies to situations such as the start of an employment relationship in Spain, relocation ordered by the employer, non-employer-ordered remote work, or acquisition of the status of administrator. In remote services, the documentation according to the tax regulation must be sent to the AEAT within six months from the ministerial order.

 

Summary:

Law 28/2022 amended the tax regime for individuals relocating to Spain from January 1, 2023. Royal Decree 1008/2023, published on December 6, 2023, complements the Startup Law, defining entrepreneurial and highly qualified professional activities, establishing conditions for training or R&D+i activities, detailing the withholding tax regime, and modifying conditions for waiver or exclusion. It also sets deadlines for choosing the regime and introduces a transitional regime for those who moved to Spain in 2023 due to a transfer in 2022 or 2023.

 

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