SPAIN

i. Name of country

SPAIN

ii. Region

Southwestern Europe, bordering the Mediterranean Sea, North Atlantic Ocean, Bay of Biscay, and Pyrenees Mountains; southwest of France

iii. Population

47,260,584 (July 2021 est.)

iv. General Introduction

Spain, located in Southwestern Europe, is one of the world’s most popular vacation destinations. It is a vibrant country known for its majestic landscapes and high quality of life, as well as a country with a rich history and distinct culture and traditions. Spain has one of Europe’s most important economies. In addition, it is a full member of the EU and the Eurozone.

Spain’s economy has continued to grow in 2019. GDP grew by 1.8% in 2019, making it one of the fastest-growing developed countries, and substantially above average for the EU. Although Brexit has formally taken place, the future relationship between the UK and the EU is still uncertain. Spain has asserted its potential as a possible host state for companies that, as a result of Brexit, decide to leave the UK and move their headquarters to the EU.

Among other initiatives driven by the Spanish Government, the National Stock Exchange Commission (CNMV) has launched the “Welcome to Spain” programme. This initiative aims to attract investment firms and other financial institutions based in the UK that are no longer able to operate under the EU passport mechanism to carry out any or all of their activities in other EU member states under the freedom to provide services or the right of establishment.

Spain is an attractive destination for foreign investment due to both the possibilities offered by the domestic market and the ease of using it as a base from which to approach international markets.

Spain has a privileged and strategic geographic position as a member of the EU and is a gateway to both North Africa and Latin America (particularly the latter, due to strong economic, historic, and cultural ties).

Spain also has a modern knowledge-based economy, where services represent about 75% of domestic economic activity. It is also a centre of innovation and technological development, with highly skilled young professionals and competitive costs for a Western European jurisdiction.

Spain is a multinational country, made up of (to some extent) overlapping nations. This is reflected in the administrative organisation of the country. There are three levels of administrative government: central, autonomous and provincial.

The Spanish legal system is hierarchical, with the Spanish Constitution at the apex of its pyramid, followed by EU law, international treaties, organic laws (constitutional laws) and other domestic laws such as Royal Law Decrees, Legislative Royal Decrees then regulations made under Royal Decrees, Decrees and Ministerial Orders.

Customs will only be applicable in default of legal provision and the general principles of law apply in default of either of these sources. Case law complements the legal system and allows leave to appeal to the Supreme Court.

The Spanish economy has slightly recovered and no plans have recently been put forward by the government on immigration. In 2013 the investor visa was introduced and the government is currently being criticised for not putting in place further resources and/or measures to deal with the tremendous influx of illegal migrants trying to enter Spain but the government claims that this is a global problem to be solved by co-operative strategies at a supranational level.

v. Wifi Speed

Spain ranked 11th with an average speed of 88.73 Mbps. The average global data download speed in fixed networks was 46.41 Mbps, while the average speed was 22.48 Mbps.

vi. Electrical outlet

For Spain there are two associated plug types, types C and F. Plug type C is the plug which has two round pins and plug type F is the plug which has two round pins with two earth clips on the side. Spain operates on a 230V supply voltage and 50Hz.

vii. Per Capita GDP

Real GDP per capita
$36,200 note: data are in 2017 dollars (2020 est.)
$40,800 note: data are in 2017 dollars (2019 est.)
$40,300 note: data are in 2017 dollars (2018 est.)

note: data are in 2010 dollars

viii. Climate

temperate; clear, hot summers in interior, more moderate and cloudy along coast; cloudy, cold winters in interior, partly cloudy and cool along coast

ix. Residence-by-Investment

Spain is a highly sought-after investment destination and one of the most desirable destinations in the world. Every year, millions of visitors come to enjoy the country’s amazing nature, beautiful beaches, diverse culture, and rich history. The Spain Residence by Investment Program is the most efficient way for those who want to live in this vibrant country to obtain such status. The Spanish government has granted a large number of visas to individuals who wish to make a significant, qualified investment in the country in order to boost the economy through foreign direct investment. Individuals and their immediate family members can become permanent residents of Spain in less than a month under this program.

On the Global Residence Programs Index, the Spain Residence by Investment Program is ranked 5th out of 24 programs.

Investors

Law 14/2013 of 27 September provides foreigners outside the EU the chance to gain entrance and residency for the purposes of making a significant investment in Spain if they can offer any of the following:

• Initial investment of more than EUR2 million in public debt.
• More than EUR1 million in shares or participations in private Spanish entities or bank deposits in Spanish banks or financial entities.
• Real estate located in Spain more than EUR500,000 (where the minimum amount is free from charges or in other words, not borrowed).
• Business project of general interest in Spain, which: creates employment; has a socioeconomic impact in the area where it is being developed; makes an important impact on scientific or technological innovation.
• A significant investment made by a foreigner applying for a residency visa will also be considered where such investment is carried out through a company located outside Spain as long as the company is not incorporated in a tax haven jurisdiction (under Spanish law) and the foreigner holds directly or indirectly the majority of the voting rights and has the capacity to nominate or remove the majority of the board of directors.

Characteristics

The visa gives the successful applicant a right to reside in Spain for at least two years which can be extended for five years if the following conditions are met:

• Any extension is applied for within or after 90 days of the expiration of the initial visa.
• The applicant must travel to Spain at least once.
• A foreign investor who has EUR2 million in public debt or more than EUR1 million in shares or participations in private Spanish entities or bank deposits in Spanish banks or financial entities must prove that the investment has been maintained within the initial period of the visa.
• An investment in real estate located in Spain more than EUR500,000 requires the foreign investor to prove that he is the owner of either the property or the minimum equity required.
• For a qualifying business project, the foreign investor must provide a favourable report from the authorities confirming that the investment is of general interest.
• Where applicable, the foreigner investor must comply with Social Security and tax obligations.
• The investor residency visa can then be extended for a further five-year period.

Processing Time

• Approximately 20 days for the immigration procedure

Key Benefits

• High standard of living
• Ability to include a spouse or unmarried partner, financially dependent children of any age (adult children must be full-time students), and financially dependent parents of the main applicant and/or their spouse aged 65 and up.
• Access to the country’s public healthcare and education systems
• A vibrant EU country with magnificent landscapes
• Possibility of obtaining Spanish citizenship after two years of effective residence for Sephardi Jews and citizens of Equatorial Guinea, Latin America, and the Philippines, and after ten years for other nationals.
• Excellent schools offering instruction in English, French, German, Italian, Japanese, and Mandarin.

Requirements

A foreign individual must invest in a real estate project, a business project, company shares or bank deposits, or government bonds under the Spain Residence by Investment Program.

Applicants must complete one of the following investment options in the country:

• The purchase of real estate with a minimum purchase price of EUR 500,000. (one or several properties)
• The development of a business project in Spain that has been designated as being of “general interest.”
• Company shares or bank deposits in Spanish financial institutions with a minimum value of EUR 1 million
• A minimum investment of EUR 2 million in government bonds
• As part of the application process, documentary evidence of the investment must be provided.

Procedures and Time Frame

Applications for the program must be submitted using the prescribed forms and must be accompanied by the appropriate fees and supporting documentation. Residence permits are typically issued after a 20-day consideration period and have an initial duration of two years, renewable for five years upon request, provided that the applicant maintains a minimum investment in Spain.

The application procedure is divided into two stages:

• In the first phase, applicants apply for a Spanish residence visa in their home country, which allows them to live and work in Spain for a year.
• Applicants apply for a Spanish residence permit in the second phase. If they arrived in Spain on a regular tourist visa, they can apply for the residence permit directly, skipping the first stage.
• The main investor, spouse or partner (including unmarried or same-sex unions), and all economically dependent descendants are all eligible for the residence permit.
• There is no minimum stay requirement to maintain residency, but obtaining the first residence permit necessitates a trip to Spain.

xi. Natural Resources

coal, lignite, iron ore, copper, lead, zinc, uranium, tungsten, mercury, pyrites, magnesite, fluorspar, gypsum, sepiolite, kaolin, potash, hydropower, arable land

xii. Ethnic Groups

Spanish 84.8%, Moroccan 1.7%, Romanian 1.2%, other 12.3% (2021 est.)
note: data represent population by country of birth

xiii. Languages

Castilian Spanish (official nationwide) 74%, Catalan (official in Catalonia, the Balearic Islands, and the Valencian Community (where it is known as Valencian)) 17%, Galician (official in Galicia) 7%, Basque (official in the Basque Country and in the Basque-speaking area of Navarre) 2%, Aranese (official in the northwest corner of Catalonia (Vall d’Aran) along with Catalan, <5,000 speakers); note – Aragonese, Aranese Asturian, Basque, Calo, Catalan, Galician, and Valencian are recognized as regional languages under the European Charter for Regional or Minority Languages

xiv. Religion

Roman Catholic 58.2%, atheist 16.2%, agnostic 10.8%, other 2.7%, non-believer 10.5%, unspecified 1.7% (2021 est.)

xv. Median Age

total: 43.9 years
male: 42.7 years
female: 45.1 years (2020 est.)

xvi. Urbanization

urban population: 81.1% of total population (2021)
rate of urbanization: 0.24% annual rate of change (2020-25 est.)

note: data include Canary Islands, Ceuta, and Melilla

xvii. Physician density

3.87 physicians/1,000 population (2017)

xviii. Government type

parliamentary constitutional monarchy

xix. Unemployment Rate

14.13% (2019 est.)
15.25% (2018 est.)

x. Taxes

Headline Personal Income Tax Rate (highest marginal tax rate)

• 54% (in Valencian Community) 52% (in Navarre)
• 47% (estatal without regional)

Individuals who are resident in Spain for tax purposes will be taxed on their worldwide labour income, irrespective of where the employment providing income is performed.

Individuals who are non-tax resident in Spain for tax purposes will be taxed only on their Spanish source labour income. Labour income secured by a non-Spanish tax resident will be taxable when any of the following circumstances are met:

• the income derives, directly or indirectly, from a personal activity developed in Spain;
• the income is made up by public remuneration paid by the Spanish Administration; or
• the income is paid in connection with employment developed internationally on board a ship or aircraft by individuals or entities that carry out economic activities in the exercise of their duties and are resident in the Spanish territory or by permanent establishments located in Spain.

Tax resident employees

Tax resident employees are subject to personal income tax (PIT) on their worldwide labour income (Law 35/2006 on the Income Tax of Individuals). The PIT rate is progressive (roughly ranging from 19% to 45%, depending on the gross income of the taxpayer). The PIT Law provides for certain personal allowances and deductions depending on the circumstances of the taxpayer.

A special tax regime may temporarily (for five years) apply to workers relocating to Spanish territory, subject to the fulfilment of certain conditions. This regime allows Spanish taxpayers to be taxed only on their Spanish source income (interest, capital gains and so on) at the non-resident income tax (NRIT) flat rates (Royal Legislative Decree 5/2004 approving the revised text of the Non-Resident Income Tax Law (NRIT Law)). As an exception, they will be taxed on worldwide labour income at a fixed 24% rate, for the first EUR600,000 and at a fixed 45% rate for the excess.

Non-tax resident employees

Non-tax resident employees are subject to NRIT on their Spanish source labour income. The general withholding tax rate applicable to labour income earned by a non-tax resident employee is 24% (19% if resident in the EU). This rate can be lower if the employee is entitled to apply a double tax treaty. If so, the non-tax resident employee must provide a tax residence certificate duly issued by the tax authorities of its home jurisdiction attesting that it is entitled to apply the relevant treaty.

Headline Corporate Income Tax Rate (excluding dividend taxes)

• 25% (in mainland)
• 4% (in Canary Islands)

Taxes on personal income

The Spanish system for direct taxation of individuals is mainly comprised of two personal income taxes: Spanish personal income tax (PIT), for individuals who are resident in Spain for tax purposes, and Spanish non-residents’ income tax (NRIT), for individuals who are not resident in Spain for tax purposes who obtain income in Spain. Therefore, persons who obtain income in Spain are either liable to pay Spanish PIT or Spanish NRIT.

Residents in Spain are generally subject to PIT on their worldwide income, regardless of where it is generated, which is taxed, following statutory reductions, at progressive rates.

Non-residents are subject to NRIT only on their Spanish-source income.

Personal Income Tax Rate – 47%

Tax resident business

Income tax. Business vehicles have been a very contentious subject for the Spanish tax authorities. In general, business vehicles only give rise to tax for employees when they can make, totally or partially, non-professional use of the business vehicle provided by the employer. Most of the disputes with the tax authorities arise due to the lack of an express rule in the PIT Law governing the valuation of the non-professional use of the vehicle.

Value added tax

In general, 50% of input VAT borne in the acquisition of a business vehicle will be deductible. The taxpayer can claim for a higher deduction if it can evidence that the degree of professional use of the vehicle is above 50%.

The main taxes are:

• Withholding taxes on account of personal income tax (varying rates) and non-resident income tax (19% or 24% depending on whether the employee is resident the EU or not).
  Value added tax at 21%.
• Registration tax (various rates).

In principle, accounting expenses linked to business vehicles are tax deductible for Spanish corporate income tax purposes in the hands of the corporation owning the business vehicle, so far that it is an asset actually engaged in the economic activity of the relevant corporate income tax taxpayer. Tax deductibility of depreciation expenses is subject to certain thresholds.

The Spanish tax treaty network is made up of more than 90 treaties.

Spain has one of the largest tax treaty networks in the world, with 102 signed DTTs, 93 of which are currently in force. These include treaties with China, the UK and the US (which was recently amended). Spain also has DTTs in force with the majority of the Latin American countries, including the following:

• Argentina.
• Brazil.
• Chile.
• Colombia.
• Costa Rica.
• Cuba.
• Mexico.
• Uruguay.
• Venezuela.
• Spain also has three tax treaties for the avoidance of double taxation regarding inheritances with France, Greece and Sweden.

Struggling with US expat taxes in Spain? Our team can guide you – contact us.