10th February 2022
Buoyant demand for contractor management solutions in Spain
With the economy and job creation expected to grow steadily during 2022, Spain continues to cement its reputation as one of the top destinations for global contractors, offering many incentives for digital nomads to enjoy much of what the country has to offer. While this is very positive news, recruitment companies placing global contractors and offering contractor management solutions must still be wary of the stringent tax and compliance laws that must be adhered to. We take a look at all the key employment regulations for contractors plus the latest taxation news that businesses need to know.
Given the changes to our working habits and with many individuals now looking for opportunities as contractors abroad, Spain has been quick to embrace the current climate and entice skilled professionals to base themselves in the country. While not yet approved by the government, it is widely expected that a visa for digital nomads will be introduced in 2022 for both EU and non-EU workers, who would all benefit from non-resident status for tax purposes. “The digital nomad visa will attract and retain international and national talents by helping remote workers and digital nomads set up in Spain,” said Nadia Calviño, the Minister of the Economy.
The visa itself would allow freelancers to work in Spain for up to 12 months, as long as 80% of their income is derived from working for non-Spanish companies. This is another move by the Spanish government to stimulate economic activity post-pandemic and further boost tax revenues, which are at an all-time high. A clear indicator of economic growth and the country’s future potential. The country registered record receipts of over €223m in 2021, the highest figure since 1995 when recent records began, as reported by Spain’s English language newspaper, EuroWeeklyNews.com.
The number represented an increase of almost €30m, a jump of over 15% in 2020, which even surpassed the Treasury’s forecasts of €222m. Most of the added revenue came from personal income tax, which rose by 7.5% compared to the previous year. Given that 840,000 jobs were created in 2021, an increase of 4.4%, this wasn’t altogether surprising. The €70m plus VAT figure collected, which rose by 14.5% in 2020 and even eclipsed the amount raised in 2019, also broke the previous record. VAT collected in Spain equates to around one-third of total tax revenues.
Minister of Finance and Civil Service, Maria Jesús Montero, said that “the collection is expressing the good evolution of both the economy itself and the creation of employment” which will, in turn, lead to “a significant reduction in the public deficit”. This is yet further evidence and confirmation that “economic growth in our country is solid, robust and sustained over time,” she noted while adding that “Spain has already recovered the pre-pandemic level of recovery”. This bodes well for both individuals looking to work in Spain and companies specialising in contractor management solutions.
Spain: a hotbed for contractor management solutions
In other news, the European Commission has instigated proceedings with Spain, seeking further clarification as to the differences in treatment in terms of how it handles capital gains tax for residents and non-residents. The current rules allow for residents to defer payments whereas non-residents must pay their tax liabilities when the actual transfer of assets takes place. The International Tax Review article goes on to explain that in the Commission’s eyes, this could be discriminatory and “an infringement of the free movement of capital, which is prohibited by Article 63 of the Treaty on the Functioning of the European Union”. Should Spain not reply within the specified timeframe of two months, the matter could be escalated to the Court of Justice of the European Union (CJEU).
Meanwhile, authorities in Spain are still very concerned about the spread of the now dominant Omicron variant and are taking all necessary measures to prevent the spread of the virus. Spain will only accept negative antigen tests taken 24 instead of 48 hours before departure as of 1st February according to SchengenVisaInfo.com. However, the 72-hour rule regarding the results of PCR tests remains unaffected. As well as personal details such as the name and surname of the individual, the type of test and country of origin must be provided in both cases. According to the latest World Health Organization (WHO) figures, Spain has registered over 10 million cases and 93,000 plus COVID deaths.
With tax revenues on the up and an optimistic economic sentiment, the Spanish economy is looking to maintain its recovery by creating more jobs and enabling more contractors to set up in Spain thanks to its digital nomad visa. However, given the complexities of local and EU tax regulations concerning resident and non-resident taxpayers, businesses looking to place contractors in Spain must ensure that they pay the correct amount of corporation tax or risk facing severe financial penalties. If you’re unsure about your obligations or require advice on any matter surrounding contractor compliance, please contact our 6CATSPRO experts.
