The recently approved by the Spanish Congress Law of Startups contemplates the creation of a Nomad Visa. It will allow people who work remotely and are not citizens of the countries that make up the European Economic Area to reside in Spain.
Consequently, American, Asian, or African freelancers, for example, could benefit from this opportunity.
About the Spanish Nomad Visa
- The permit will be valid for one year and may be renewed annually as long as the requirements are met.
- The Nomad Visa application will cost approximately 75 euros, not including the consular fee.
- After receiving approval, about 15 euros must be paid for the residence card. Embassies and consulates may take up to two months to respond to applications.
All these details should be clarified before April 1 of this year.
However, not all nomads will be welcome…
Who can apply?
According to Forbes Argentina, the following nomads can apply:
- Those… who can prove that they work for one or more companies outside Spain, are qualified professionals with a degree or postgraduate degree, a minimum of three years of related professional work experience, and a way to guarantee the continuity of their work for at least one year.
- Those with a clean criminal record and who have never been banned from entering Spain, have nationally valid private health insurance coverage, and can provide proof of accommodation during their stay in Spain.
- Those self-employed and provide their services independently may dedicate 20 percent of their professional business activity to a company domiciled in Spain.
Not all remote workers are the same
RTVE, on the other hand, explains that a “remote worker” is a person employed by a company located outside Spain or who mainly provides professional services to international clients and has a way of proving that his work is done remotely.
“In addition, it is necessary to be a graduate of universities, vocational training, or business schools ‘of recognized prestige’ or have at least three years of professional experience.
“To avoid fraud, the law also requires demonstrating that already in the last three months you have worked for the companies involved and that they have maintained a ‘real and continuous activity’ in the last year.
There will also be an income requirement, which is estimated to be set at twice the Spanish national minimum wage. While this is currently 1,050 euros per month, the nomads’ income should be at least 2,100 euros per month.
Less fiscal mistreatment
Francisco Ortíz is an Argentine Youtuber who advises on finance and entrepreneurship. Consulted by Spanish Radio and TV, he did not hesitate to value Spain as a country but criticized its taxation:
“I think Spain is an incredible country. It’s probably one of the alternatives where we want to end up in more years, have children, and everything. But today, Spain would kill us with taxes in our particular situation. My girlfriend left Italy partly for that reason. What we would get in return is not enough for the huge amount we would have to pay.”
In Spain the Personal Income Tax (IRPF) scales range from 19 percent to 47 percent. And whoever earns more than 20,200 euros is already hit by a rate of 30 percent.
In the International Tax Competitiveness Index 2022 published by the Tax Foundation, Spain ranks 34th out of 38 countries. In turn, in the Tax Hells Index 2022 published by The 1841 Foundation, although it shows an intermediate position thanks to the strength of its institutions, the level of quantitative tax pressure is among the highest.
Ironically, the Nomad Capitalist website places Spain among the fifteen countries with the highest taxation in 2022.
In order to avoid such tax disincentives, digital nomads will be taxed under the Non-Resident Income Tax. Thus, those with incomes of up to 600,000 euros will be taxed at 24 percent. Beyond that, the tax almost doubles to 47 percent.
Rents vs. cozy villages
One fear expressed time and again about digital nomads who might settle in Spain is that they would be responsible for driving up the cost of renting. According to this view, nomads would not only have tax benefits, but their presence and purchasing power would cause rents to rise, especially in major cities.
Unfortunately, Spanish authorities often take this problem seriously, whether unfounded or not. Barcelona, for example, has issued numerous truly medieval edicts against the AirBnB platform for similar reasons.
In this sense, perhaps an attractive alternative could be the National Network of Remote Workers Friendly Towns. Consisting of 30 communes with less than 5,000 inhabitants each, they actively seek new residents to breathe life into their communities. The Network of towns guarantees the minimum conditions to develop a working life at a distance and offers contact with a “host” who provides advice and guidance, as well as reviews and experiences of other members.
In any case, we do not yet know if the peaceful life in one of these small towns is interesting for nomads who usually choose their destinations for the kind of experiences they offer.
Will it be enough?
Spain has a rich history, distinctive architecture and art, some of the most delicious dishes in the world, a friendly population, and a privileged climate throughout most of its geography.
People are often willing to pay more in goods, services, or taxes to live in more beautiful places with more days of sunshine. In the United States, California has been a clear beneficiary of this. However, the Golden State has been losing population for years to states like Texas, whose climate is much harsher but whose taxes and regulations are much milder.
In addition, there are already 52 countries that offer visas for digital nomads, so the competition facing Spain is robust. Even Argentina has ventured into these waters…
Moreover, in terms of taxation, many countries offer much more convenient taxation. The Caucasian Republic of Georgia and Panama, for example, do not tax income generated outside the country; the United Arab Emirates do not tax the earnings of individuals; and Estonia (a member of the European Union) has a flat tax of 20 percent, whose transparency and simplicity place it among the best tax systems in the world.
Although Spain is willing to inflict a lesser tax penalty on nomads than on its own citizens, the outlook is still worrying.
For those nomads considering a path to residency, a potential personal income tax rate of 47 percent and a national administration that has raised taxes 54 times await them.
And nomads and residents alike will have to contend with a tax agency infamous for ruining taxpayers’ lives.
It remains to be seen how “welcoming” these taxes and regulations are to digital nomads.
* Federico N. Fernández is Executive Director at Somos Innovación (a Latin American pro-innovation alliance) and CEO at We Are Innovation (Somos Innovación’s sister organization for Europe). Federico is Founder and President of Fundación Internacional Bases (Rosario, Argentina) and also the Chairman of the Organizing Committee of the International Conference “The Austrian School of Economics in the 21st Century,” which takes place in Europe and LatAm alternatively.
Source: We Are Innovation
