While the EU does its level best to discourage any economic prosperity, individual countries like Spain are still trying to recuperate from the pandemic, or at least weather this global recession.
October 3, 2022
By: Bobby Casey, Managing Director GWP
No matter how beautiful someone tells you Spain is, it could never do it justice. There’s no shortage of people raving about their love for its cities, people, and food. All rightly deserved.
Spain is also one of the countries in the EU that just can’t seem to get out from behind the economic eight-ball. To be fair, some of their economic folly is so big you can see it from space!
Like most Western European countries it’s trying to get back on its feet, but it’s also up against some ripples from the Russia-Ukraine war in terms of energy costs. This is on par with the rest of the union.
Where things start falling apart is how they are trying to juggle a Green Agenda, taxing the wealthy, but also trying to attract wealthy people to come and stay.
Green Agenda
Holland purging its husbandry and livestock… Germany ditching its nuclear energy production plants… and virtually all Western Europe coming up with some strapping way to achieve net zero emissions by some absurd date is a ridiculous agenda sweeping through the region right now.
Spain is no exception to this dragnet policy:
European Union plans to cut greenhouse gas emissions by at least 55% before 2030 could discourage tourists from visiting Spain, according to new estimates.
The report from consultancy firm Deloitte looked at the potential impact of the European Commission’s ‘Fit for 55’ plan on the tourism industry.
It predicts that environmental measures like ticket taxes and sustainable aviation fuel could mean the loss of 11 million international tourists to Spain. The country could also lose billions of euros in tourism revenue and 430,000 jobs that rely on the industry.
Tourism is a $12 billion industry and the report indicates these measures will make travel to Spain more expensive. Those Green premiums could discourage tourists from visiting Spain, and cost them dearly.
Spain’s Tax Regime
It never ceases to amaze me how governments will pursue a policy that inevitably hurts the poor, and when that happens, they immediately set their crosshairs on the rich.
This is a new (and potentially temporary) wealth tax. People with personal worth:
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3-5 million euros ($2.9m-$4.8m) will be taxed 1.7%
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5-10 million euros ($4.8m-$9.6m) will be taxed at 2.1%
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Above 10 million euros ($9.6m) will pay 3.5%
Of course it doesn’t stop there:
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Increase the income tax rate from 26% to 27% for people earning more than 200,000 euros ($191,870)
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Increase capital gains tax for incomes above 300,000 euros ($287,805) by 2% to 28%
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Approved windfall taxes on large energy companies and banks
Spain intends to reduce income taxes on those making annual wages up to 21,000 euros ($20,146), and has temporarily reduces the sales tax on natural gas from 21% to 5%.
Digital Nomad Visa
So if it sucks to be a rich resident, and it sucks to shell out a lot of money for a short trip, what can one do?
There’s this little sliver of Spanish existence that has a lower tax burden and could make the cost of your travels there worthwhile.
If you remember, during the pandemic, people were spending most of their vacations in quarantine and going through so many hoops it wasn’t worth the effort. In response, many countries designated a longer term visa that allowed people who could work remotely to stay longer with their families and live there for a longer period.
Whatever the hassle of getting to one destination or another might be, it could be worthwhile if you can spend more time, and have a more enriching experience.
The details are still being ironed out, but the goal, according to Economic Affairs Minister Nadia Calviño, is to “attract and retain international and national talents by helping remote workers and digital nomads set up in Spain.”
Some of the terms of this digital nomad visa being discussed are:
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The visa will be available to people who work remotely for non-Spanish companies. They would be limited to a maximum of 20% of their income from Spanish businesses.
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Applicants must be from outside of the European Economic Area.
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Proof they have been working remotely for at least a year, have a contract of employment or, if freelancing, have been employed by a company outside of Spain.
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Proof of earnings to be self-sufficient (expected to be around €2,000 a month) – and must have an address inside the country.
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Whether applicants must undergo a criminal record check is yet to be determined.
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It’s rumored this visa will be valid for 12 months. After that, qualified applicants would be allowed to extend their stay for up to five years.
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Children and spouses of applicants would also be extended the visa.
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Possible tax breaks for digital nomads working and living in the country under this visa. Visa holders may only pay a 15% tax rate during the first four years of their stay instead of the usual 24%+ rate.
The options for nomads is expanding. Countries do not want to give up their tourism revenues, and rely more on the wealth of interlopers than residents. It’s the simple difference between a traffic and transaction model. More traffic means a higher long term or lifetime value from people than a transaction based model where you might see one or two visits in a lifetime.
These countries are showing their hand. They know they can’t be economically unwelcoming. They know they need people to keep coming. And if they can’t get as many people to come, then they need those who to stay longer.
Take advantage of this!
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