QROPS in Spain

Tax in Spain

There is no specific reference to QROPS in Spanish Law.

However, the following applies to the best of our knowledge.

Tax residents in Spain pay tiered rates of income tax on their income no matter where it is sourced. 183 days or more per annum resident in Spain qualifies an individual as a tax resident. However, other criteria can also mean an individual is classed as a tax resident. For example, if Spain is the main base or centre of the individual’s business, economic interest or work, or if the spouse of the individual is a tax resident.

There are special conditions for those who move to Spain in order to work. If this applies to you, you may choose whether to pay standard income tax or submit to non-resident income tax rules for six years including the tax year you moved to Spain.

David Beckham famously chose this option and some call it the “Beckham rule”.

This tax regime benefits expats in Spain as income tax rates apply only to earnings arising in Spain, not worldwide. This amounts to 24% on the first €600,000 and 45% over and above that. No tax is levied by Spain on foreign earnings (UK pensions for instance) nor on remittances.

Spain taxes non-residents on income sourced in Spain through a different regime.

Non-residents, or those under the expat scheme described, don’t pay tax on their pensions. Those who are tax resident under the standard conditions do pay tax on their foreign-earned pension.

Also relevant to pensioners in Spain are the rules around ‘irregular income’. A lump-sum from a UK pension up to €300,000 is taxed at a rate 30% lower. Spain offers a tax credit to account for any foreign tax incurred on pensions as long as the individual is a tax resident.

Spain also levies a Net Wealth tax. This, depending on the total figure, is applied at between 0.2 and 2.5%. Net wealth is calculated worldwide for residents. Non-residents are liable to the same tax on their net wealth in Spain only. The tax free allowance is €700,000 and the individual’s main dwelling up to €300,000 is also tax-exempt. Some of these tax powers are devolved so autonomous regions may have slightly different tax regimes with respect to the Net Wealth tax.

Also differing in autonomous regions are inheritance taxes. These apply to all residents of Spain. Inheritance tax is between 7.65% and 34%. This applies to all beneficiaries, heirs and recipients who are resident in Spain. Inheritance tax is also levied on those not resident but who receive assets in Spain such as property.

83 DTAs exist for Spain with the UK and Malta included.