The law applies to individuals for the first 5 years they are employed in Spain and they need to apply for it within 6 months of arrival. If they have benefited from it in the past, they must have left Spain for 10 years in between before reapplying.
The special tax regime is granted on an individual basis and will not apply to all the family members. If the individual is granted the special tax regime, they will be paying tax as a non-tax resident for a period of six years (the year when residence is acquired and the following 5 years) unless the taxpayer is excluded from or waives the right to be taxed under the special tax regime.
After this period, the individual will be considered as an ordinary resident in Spain for tax purposes and, consequently, they will be taxed at the progressive tax rates on worldwide income.
It is important to note that the individual must be deemed a tax resident in Spain in order to apply for the special tax regime. In addition, the following requirements must be met:
- The individual has not been deemed a tax resident in Spain in the 10 years prior to being transferred to Spanish territory (in the 10 tax periods prior to their assignment)
- The transfer to Spain has taken place as a consequence of:
a) An employment contract (either a local contract or through a letter of assignment).
b) The acquisition of the condition of administrator of an entity.
- The individual will not obtain any income qualified as obtained by means of a permanent establishment located in Spanish territory.