From Sweden to Spain: A Comprehensive Guide for Expats on Business, Taxes, and the Beckham Law

Unlocking Business Opportunities and Tax Advantages in Spain: A Guide for Expats

In my previous newsletters I wrote about practical, family related steps when settling in Spain. This time, I will delve more into business-related topics: starting a business, understanding taxes in general, and the "Beckham regime," among others.

David Beckham, former English professional football player.

Hiring a lawyer

Moving to a different country, learning about taxes and laws can be challenging especially if you do not speak the local language well. You can decide to learn all that yourself and make it a project, which can take a long time to complete. It might seem less expensive to do it that way instead of hiring some help, but I do not think it is worth it. Especially if you are a paid professional, and your time is more valuable being spent somewhere else.

Try to find a lawyer established in the area where you want to settle. In that case lawyers connections and familiarity with local officials can help you speed up any process. We have been extremely satisfied with services provided by “Lexur abogados” from Malaga. One big advantage with this company was that they do business also in Sweden and are familiar with Swedish legislation as well. 

So if you are coming from Sweden like us, they can help you settle all real estate and tax related issues in both countries. That was quite valuable in our case.

An important tip: Outsourcing legal work and getting help was one of the best decisions in our case. When settling in Spain, you will be visiting public offices and notaries many times. If your Spanish is not so good and if you do not have plenty of free time, I strongly recommend hiring a lawyer in Spain to help you with all administrative steps. 

Beckham Law

Navigating the tax system inSpain was a top priority, and the Beckham Law (or Beckham Regime) has been a game-changer. I'm excited to share our experiences with obtaining the Beckham Law benefits here in sunny Spain. 

Discovering the Beckham Law

When I first considered moving to Spain, the idea of dealing with a foreign tax system seemed daunting. That's when I stumbled upon the Beckham Law, named after the famous footballer David Beckham, who benefited from it during his time in Spain. This special expat tax regime, established in 2005, is designed for foreigners like us, making the tax situation much more favourable.

The Sweet Perks of the Beckham Law

Under normal circumstances, living in Spain for more than six months would make us tax residents, subject to up to 45% income tax and taxed on our worldwide income. But, thanks to the Beckham Law, we only pay a 24% income tax rate for earnings up to 600,000 euros, for the period of 6 years, and our income outside Spain isn’t taxed. This is a massive relief, especially considering our freelance projects.

2023 Beckham Law Changes - A New Horizon

Previous year brought some exciting changes to the Beckham Law. The residency requirement before applying has been reduced from 10 years to 5, which was not relevant for us but could be for someone. Plus, freelancers and remote workers are now eligible. 

What was really beneficial, was the change that spouses and children who are under 25 years old and accompany the worker are now also eligible to be included in the tax regime. And if you decide to start a small business in Spain, local company administrators can now apply irrespective of the share capital percentage they own (24% share ownership was the limit before 2023).

These changes have made Spain even more attractive for expats and digital nomads than before. In my view Spain has surpassed Portugal thanks to these changes. 

It feels like Spain  is really opening its doors to global talent!

Who is eligible for the Beckham regime?

You can apply for this regime in Spain if you are in one of following categories:

• You have not lived in Spain in the last five years before the application

• You are relocating to Spain because of work

• You are classified as highly qualified worker

• You are a freelancer or entrepreneur

• You are a company administrator of local company, regardless of the percentage of ownership

Applying for the Beckham Law

The application process was straightforward. The key was to be prompt and organised, as any delay could lead to rejection. 

The official necessary form is Form 149. The following information is required:

• Details of the company which is hiring an employee

• Employee’s personal details (name, address, social security, etc.)

• Start date of the employment contract

• Copy of the employment contract

Our lawyers helped us to send in the application and we received a positive decision within 10 working days.

An important tip: One has  to file the necessary paperwork within six months of signing an employment contract in Spain. 

A Few Considerations

While the tax benefits are fantastic, there are some drawbacks. Being taxed as a non-resident means I can't enjoy certain tax benefits available to regular residents. Also, there’s a bit of a grey area regarding double taxation treaties with some countries.

Another point to note is the introduction of the Solidarity Tax, potentially affecting those in higher income brackets. It's a reminder that tax laws are ever-evolving, and staying informed is crucial.

Final Thoughts

Overall, the Beckham Law has made our transition to life in Spain much smoother financially. It's an incredible opportunity for expats like us to enjoy this vibrant country without the heavy tax burden typically associated with such a move. If you're considering a move to Spain, I'd definitely recommend looking into this – it might just make your Spanish dream a bit more attainable!

Starting a limited company in Spain

Before moving from Sweden, we decided to start a new limited liability company (Sociedad Limitada or SL) in Spain. This was because we worked as freelancers and already owned a similar company (Aktiebolag or AB) in Sweden.

This decision provided several benefits:

• Working remotely, we can continue serving clients in Sweden and around the world.

• It facilitated our eligibility for the "Beckham regime" as owners/administrators of the company.

• As employees of our own company, we gained access to the public health insurance system, in addition to our private health insurance.

I will outline all the necessary steps to start an SL company in Spain. Again, we relied on our lawyer for all these steps, which expedited the process significantly. We granted him power of attorney, enabling him to handle many tasks on our behalf, saving us frequent trips from Sweden to Spain and visits to public offices.

Step 1. Obtaining the NIE Number

The first step for foreigners in Spain is to acquire the NIE number, essential for activities like opening a bank account and tax identification. The process duration varies for EU and non-EU citizens, ranging from 3-5 working days for EU citizens. It can be obtained either from the Spanish consulate in the country of origin or by making an appointment at a police office in Spain. You can read more about NIE in one of my previous newsletters. 

Step 2. Naming the Company

After getting the NIE, the next step is to secure a certificate of uniqueness for the company name from the Corporate Register of Spain. This involves submitting three potential names and choosing one based on availability, a process that takes up to 48 hours.

Step 3. Opening a Business Bank Account

With the NIE, one can open a business bank account in Spain. For a Limited Liability Company, a minimum of €3,000 is required as capital, either in cash or equivalent assets, though cash is recommended for ease in future company share transactions.

Step 4. Establishing Shareholders and Directors

The company must decide on its shareholders and director type. There are two types of directors: a corporate director, who doesn't require a salary or work permit but necessitates having an employee, and a director with combined corporate and working roles. A shareholder agreement is crucial, outlining each member's share percentage.

Step 5. Signing the Public Deed at the Notary

Necessary documents including the NIE, bank certificate, and certificate from the Registro Mercantil are required at the notary to sign the public deed of incorporation. This step involves defining investors/shareholders, administrators, company address, and business activities. The notary then registers the company, a process taking up to 3 weeks, and provides a provisional VAT number for immediate business commencement.

Step 6. Registering with the Tax Agency

The next step involves registering the notary deed with the Spanish Tax Agency to obtain the final Tax Identification Number (CIF) for the company.

Step 7. Getting the CIF

This involves downloading and filling out a form from the tax agency’s website, and presenting it at the local tax agency office with the NIE.

Step 8. Registering with Social Security

The final step is to register the business with the local social security office, presenting necessary forms and identification.

Doing business within EU

When a Spanish "Sociedad Limitada" (SL), which is a type of limited liability company, engages in business within the European Union (EU), it must adhere to a set of rules and regulations that govern intra-community trade and taxation. One key aspect of this is the VAT Information Exchange System (VIES), which is crucial for VAT-related matters in cross-border transactions within the EU. Here’s an overview of the rules and considerations for a Spanish SL company doing business within the EU, particularly focusing on VIES:

VAT Registration

A Spanish SL company must be registered for VAT (Value Added Tax) in Spain. This is a fundamental requirement for trading within the EU.

VIES Registration

If the company intends to engage in transactions with businesses in other EU countries, it must also register in the VIES. This is a system used by EU tax authorities to share information about VAT transactions and combat fraud.

An important tip: You can verify the validity of a VAT number issued by any Member State through VIES VAT number validation service.

Insurances

Here is a short description of how and where to get some of the most important insurances for your family and your business.

Company liability insurance

If you own a limited private company which provides freelancing services, chances are your clients will require liability insurance from you. I’ve done extensive research and found many insurance companies who provide this type of insurance in Spain. To name just a few: Allianz, Zurich, Axa etc. 

An important tip: we got a very good offer from an insurance company called Hiscox and I can recommend it. They were very helpful and I was able to sign the contract and do everything online. Liability insurance for freelancers, for the damages of up to 1 million EUR, cost around 550 EUR per year.

Health insurance

When moving to another country, health insurance is an important consideration for you and your family. In Spain the rules can be different depending if you are from EU countries or third countries (non-EU). The Spanish healthcare system is known for its high quality, and there are several options available for expats to access healthcare services.

EU nationals who are temporarily in Spain can use the European Health Insurance Card (EHIC) for access to necessary healthcare during their stay. It's important to note that the EHIC is not a substitute for comprehensive health insurance, as it does not cover all health services and does not work for permanent residents.

If you're an EU national moving to Spain permanently and are a retiree or not working, you can use the S1 form to access healthcare. The S1 form entitles you to healthcare in Spain on the same basis as a Spanish national, provided you're not eligible for healthcare cover by your home country.

Non-EU nationals typically need to obtain private health insurance to meet visa and residency requirements. The insurance must be comprehensive, without co-payments, and cover the entire period of residency in Spain.

An important tip: if you own a limited private company (SL) in Spain, you can get private health insurance for your entire family on the company expenses. It costs around 220 EUR per month for a family of four.

Car insurance

In my previous newsletter I talked about buying a car through an official dealership. If you buy a car that way, the salesman in the dealership is going to help you to take care of car insurance. We have chosen MAPFRE, but you can choose among many other companies. A full coverage for a mid range car costs from around 450 EUR to 780 EUR per year, depending on coverage details..

In Spain, car insurance is mandatory for all vehicle owners. The basic, legally required insurance is known as "third-party liability" insurance. Here is some basic information about different types of car insurances::

• Third-Party Insurance: This is the minimum required by law and covers damages to third parties and their property. It does not cover the insured's own car damages or theft.

• Third-Party, Fire, and Theft: This includes third-party coverage and also covers the insured vehicle in case of fire or theft.

• Fully Comprehensive Insurance: This offers the most extensive coverage, including third-party liability and damage to the insured's own vehicle, regardless of fault. It often includes extras like roadside assistance, legal defence, and sometimes even a courtesy car.

Additionally, there are special considerations for expatriates in Spain. Expats can usually use their existing driving licences for a certain period before needing to obtain a Spanish licence. Insurance policies may be available in English, and some companies specialise in services for expatriates.

An important tip: You can find a good comparison of car insurance prices here.

Spanish digital certificate

Last but not the least, I will also mention a very valuable little thing - digital certificates. You can apply to get a digital certificate only after you have got your NIE number. I recommend getting this certificate as it can save you many unnecessary trips to the government offices.

A Spanish Digital Certificate ("Certificado Digital"), is a digital identification mechanism for individuals, companies, and entities. It serves as an electronic signature and a secure way to confirm identity online. 

This certificate is issued by various authorised entities in Spain and is widely used for various administrative and personal purposes. You can use this digital certificate for your tax declarations, to access social security services, health services and other public administrative services.

An important tip: Follow this link to read more about digital certificate and how to get it. 

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Thank you for taking the time to read through to the end. Your continued interest and support are greatly appreciated. 

Let me know in the comments if you want to hear more about any specific details.