Tax breaks available in Spain and Tenerife.
Special Spanish tax breaks mean that it’s not just the football stars such as Ronaldo and Kaká who pay far less taxes. All foreigners who work for Spanish companies can also apply.
David Beckham has the looks, the talent and - perhaps most importantly - the bank balance to make many green with envy. But it seems David Beckham’s good fortune where money is concerned improved when he signed for Real Madrid. His transfer to the Spanish giants Real Madrid was not just a great move as far as his footballing career was concerned. In fact he left Manchester United just as the Spanish tax system was changed to benefit foreigners in an effort to draw more highly-paid professionals to these shores.
Designed to be part of the government’s budget for the 2004 financial year it came into operation on 1 January 2004 and basically allowed foreign employees to be treated as “non-resident” for tax purposes even though they were living and working in Spain. In simple terms a foreigner since then is entitled to cut his rate of income tax from a punishing top rate of 45 percent of his earnings to just 24 percent overall.
Former prime minister Jose Maria Aznar’s conservative government altered the tax laws to make it more attractive for foreigners to live here and to help companies that employ many workers from abroad - who are often paid high wages. This law has helped the highly-influential and affluent bosses of most of Spain’s biggest football clubs as it leaves them with substantially lower wage bills and hence even bigger spending power to bring more stars to their domestic game.
Without a doubt, the law change was engineered to help football clubs to reduce their wage bills as it was reckoned if the players were paying much less tax, the cost to the clubs would be lower. Though it might seem like these pampered prima donnas on the football pitch are having it all their way, it is not just a perk for the rich and famous. Sources from the Spanish Treasury Department emphasised that even though the new tax rules were principally brought in to help footballers, the tax change applies to anyone who is working here as a professional.
There are a few qualifications to which foreigners have to submit however:
- They cannot have worked in Spain for 10 years before - a measure to stop tax cheats
- They must work on the payroll of a Spanish company, though this can be a subsidiary of another multinational
- The application is be taxed as non-resident must be filed with the Spanish tax authority within 6 months of taking up the position
Finally, don’t think that it always beneficial to claim for this special tax treatment. Though the overall rate of 24 percent is very attractive and significantly lower than the highest rate currently applicable, it’s only of interest to high-income employees. The downside of this non-resident regime 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 when the individual expects to earn in excess of EUR 70,000 -75,000 in a full tax year.
