León Fernando Del Canto
Spanish tax expert León Fernando del Canto argues that Spain can be an attractive tax jurisdiction for wealthy foreigners who know how to manage the system.
“Don’t let the tax tail wag the dog,” my mentor Tony used to say back in 2000. During that time, he was a senior partner at Deloitte, overseeing the Private Clients department across Great Britain, including the Channel Islands. With his guidance at Deloitte and previously at KPMG, I trained as an international tax adviser last century, when non-domicile status and trusts, including offshore settlements, were common practice.
After twenty-five years and over 600 cases of individuals and businesses relocating between Spain and the UK, I have observed a significant shift in how the UK and the Spanish tax authorities approach residence. The focus has shifted to economic substance and lifestyle evidence rather than appearance or day counting. Moreover, the concept of UK tax domicile is becoming less relevant with regard to an individuals’ actual whereabouts.
The UK is facing rapid changes in tax policies and uncertainty surrounding non-domicile tax regulations, particularly considering the recent proposed tax reforms by the Conservative party, which are likely to be expanded upon by the Labour Government. High-net-worth individuals (HNWIs) in the UK face increasing pressure on their long-term plans, and are exploring other countries that offer similar conditions to the UK with additional benefits. An recent article at SPI posited the idea that the recent election results in the UK (and France) will lead to an exodus of ‘tax refugees’ from the UK.
Lifestyle matters too
However, in my experience, it is a misconception that all HNWIs relocate to different countries only for tax reasons, as some media try to convey. The main factors influencing people’s decisions to move are typically related to their lifestyle, family, business and profession. This is supported by research from the 2024 LSE paper titled “Tax flight? Britain’s wealthiest and their attachment to place” and the 2023 IZA Institute paper titled “Taxation and migration by the super-rich.” These studies found that most of Britain’s High Net Worth Individuals (HNWI) do not leave the country to avoid taxes. However, they are indeed moving to other countries for different reasons.
Spain has become a popular lifestyle and professional choice for Britons due to its diverse destinations, from coasts to mountains, including city life, as in Barcelona, Bilbao, Malaga, Madrid, Valencia, Palma, and Ibiza. With nearly 18 million British tourists annually and more than 800,000 properties owned by UK nationals, it provides a good sociocultural environment, quality of life, safety, well-established English-speaking communities, and a reasonable tax system with the right advice.
While some criticise Spain as a tax hell, many myths must be dispelled. Everything depends on individual circumstances, and seeking professional Anglo-Spanish tax and legal advice is crucial. Contrary to popular belief, Spain offers tax advantages for investors and digital nomads using the Digital Nomad Visa or the Golden Visa, coupled with the well-known Beckham Rule.
Spain offers established and tax-efficient options for digital nomads and investors looking to relocate from the UK. However, many UK advisers are unaware that with the right planning and advice, high-net-worth individuals (HNWIs) – especially those with business and investment income – can effectively manage the Spanish tax system.
Wealth Tax and the Temporary Solidarity Tax on Major Fortunes
Wealth tax is bad news for many and is here to stay. It may come to the UK and the USA soon as global tax policymaking, and the Organisation for Economic Co-operation and Development (OECD) is recommending. A recent Patriotic Millionaires poll found that 58% of Americans with over $1 million support a 2% wealth tax on assets over $10 million and that 54% believe extreme wealth threatens democracy. The UK public agrees, with those surveyed strongly preferring a wealth tax. In 2020, Tax Justice UK found that 74% of people want the wealthy to pay more taxes. By 2023, 68% of voters believed the government should tax wealth over £10 million more. The UK has the second widest wealth gap in the OECD after the USA.
Wealth tax is a significant consideration for Spanish residents and Non-Residents alike. Spain’s Parliament passed Law 38/2022, introducing the Temporary Solidarity Tax on Large Fortunes (ITSGF). Like the Wealth Tax, the ITSGF expands the taxpayer base to the whole country. However, certain business interests and holdings can be exempt from these forms of wealth tax, providing significant tax-planning opportunities. For instance, shares in private companies may be exempt if specific conditions are met, including ownership percentage, trading activity, and some management elements. The interplay between Wealth and Solidarity tax and the Income Tax Rules (IRPF) must be carefully analysed based on your region. As a reference, please find below the Wealth and the Solidarity Tax tables currently applicable.
Wealth Tax Rates (IP)
| Wealth band | Tax rate % |
| Up to €167,129.45 | 0.2% |
| €167,129.46 to €334,252.88 | 0.3% |
| €334,252.89 to €668,499.75 | 0.5% |
| €668,499.76 to €1,336,999.51 | 0.9% |
| €1,336,999.52 to €2,673,999.01 | 1.3% |
| €2,673,999.02 to €5,347,998.03 | 1.7% |
| €5,347,998.04 to €10,695,996.06 | 2.1% |
| Over €10,695,996.06 | 2.5% |
Temporary Solidarity Tax on Major Fortunes
| Wealth band | Tax rate % |
| Up to €3,000,000 | Exempt |
| €3,000,001 to €5,347,998.03 | 1.7% |
| €5,347,998.04 to €10,695,996.06 | 2.1% |
| Over €10,695,996.06 | 3.5% |
What happens if you become a Spanish tax resident
As regular tax residents in Spain, individuals are subject to Spanish tax on their worldwide income, in addition to their net assets, under the Personal Income Tax rules (IRPF), which include employment income, investment income, and other earnings. Spanish tax residents are subject to tax on their worldwide income and net assets. The tax rates under the personal income tax (IRPF) rules are progressive and vary based on income levels and types. I have provided some examples below, and comparisons with the UK, not to be used without proper tax advice.
Employment and General Income Tax Rates (IRPF)
| Income band | Tax rate % |
| Up to €12,450 | 19% |
| €12,451 to €20,200 | 24% |
| €20,201 to €35,200 | 30% |
| €35,201 to €60,000 | 37% |
| €60,001 to €300,000 | 45% |
| Over €300,000 | 47% |
Example: For a salary of €350,000, using an approximated exchange rate, the total payments in the UK are €146,727.90 (comprising €135,642.93 in income tax and €11,084.97 in employee NICs), while in Spain they are €152,891.80 (comprising €149,401.50 in income tax and €3,490.30 in employee social security contributions), resulting in employees paying €6,163.90 more in Spain. For employers, contributions in the UK amount to €46,608.69, compared to €16,441.75 in Spain, making employer costs €30,166.94 lower in Spain.
Investment Income Tax Rates (IRPF), Including Interest, Dividends, and Capital Gains
| Income band | Tax rate % |
| Up to €6,000 | 19% |
| €6,001 to €50,000 | 21% |
| €50,001 to €200,000 | 23% |
| Over €200,000 | 26% |
Example: In the UK, the higher rate of 33.75% applies to dividends between £50,271 and £125,140 (€58,314 to €145,158). In contrast, Spain’s mid-bracket rate is only 23% for dividends between €50,001 and €200,000. For the top brackets, the UK imposes an additional rate of 39.35% on dividends above £125,140 (€145,158), whereas Spain’s higher rates are more favourable, with 27% for dividends between €200,001 and €300,000 and 28% for amounts above €300,000.
The ‘Beckham Rule’ combo with Digital Nomad or Golden Visa
Attractive residency options such as the Golden Visa and the Digital Nomad Visa, combined with the Beckham Tax Rule, make moving to Spain even more appealing. The Beckham Rule allows expatriates to be taxed as non-residents for their first six years in Spain, offering significant tax savings on Spanish-sourced income and exempting foreign income from Spanish taxation, being the main advantages:
- Reduced Tax Rate: Taxed at a fixed rate of 24% on Spanish-sourced income up to €600,000, compared to the normal progressive rates that can reach 47%. For income exceeding €600,000, the tax rate is 47%.
- Exemption on Foreign Income: Foreign income, except employment income, is exempt from Spanish taxation, a significant advantage for HNWIs with substantial earnings abroad.
Final thoughts
Relocating to Spain may be quite attractive for High-Net-Worth Individuals, whether they choose regular tax residency, leverage the Beckham Rule, or make it a purely lifestyle decision. With a favourable Investment Income and Capital Gains Tax regime and potential exemptions under the Wealth Tax and Temporary Solidarity Tax on Major Fortunes, moving to Spain may be sound with the right professional advice. The Beckham Rule and residency options like the golden visa and digital nomad visa further enhance Spain’s appeal by offering significant tax savings and exemptions on foreign income.
Beyond the financial benefits, Spain offers a sociocultural environment that appeals to HNWIs and their families, including proximity to the UK, excellent transport infrastructure and roads, healthcare, education, safety, and well-established English-speaking communities. Whether it’s the cosmopolitan charm of Barcelona, the coastal allure of Malaga, or the historic beauty of Valencia, Spain provides a setting that aligns with the aspirations and lifestyles of those seeking financial efficiency and an enriched quality of life.
Del Canto Chambers, Anglo Spanish Tax & Legal, has offices in Spain and the UK. Our Anglo-Spanish tax legal team is qualified to offer regulated tax and legal advice in both jurisdictions. For a complimentary consultation, please get in touch with us by mentioning ‘Spanish Property Insight’.
