Last year, the Spanish government approved a draft law aimed at encouraging the development of a thriving startup ecosystem. Better known as the Startups Law, the legislation seeks to make Spain one of the most attractive destinations for investment, talent, and innovative entrepreneurs.

Among the key propositions, the law aims to provide tax breaks, eliminate red tape and make procedures more flexible to encourage the creation of and investment in tech startups. It also includes critical initiatives to attract international experts and bring back Spanish talent, and encourage “digital nomads,” remote workers and entrepreneurs to settle in Spain.

Through a special visa scheme, foreigners working remotely and their close family members will be able to reside in Spain for five years, and be eligible for a special tax regime with lower rates, paying Non-Resident Income Tax. With the aim of drawing talent back to Spain, the general requirements for eligibility in this regime will be eased with the requirement for previous non-residence in Spain reduced from ten to five years.

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Spain’s Startup Law hasn’t come into force yet, meaning that the so-called digital nomad visa scheme is still not up and running. But based on information garnered from the draft law by Telework Andalucia, a company that provides legal advice to remote workers and digital nomads in Andalusia, the following elements are amongst the key benefits and implications which can be expected from Spain’s forthcoming digital nomad visa:

• Digital nomads who come to Spain to work for a local startup, work independently or are digital entrepreneurs will benefit from streamlined visa processing.
• Specific visa schemes will be launched to cover different profiles. All will benefit from favorable taxation and a lower tax rate. The tax regime of the Non-Resident Income Tax will be applicable to managers and employees of startups, investors and digital nomads and will provide visa holders and their family members with the ability to access a special visa of up to five years.
• Non-resident Spanish nationals and expatriates who have been abroad for more than five years will also be eligible for the digital nomad visa. The period of enjoyment for them will be extended from five to ten years, and their family members will be able to benefit from it.
• Non-Resident Income Tax will be reduced from 25% to 15% during the first four years. It’s worth noting that anyone residing in Spain for more than 183 days are considered by the law as a resident, and are liable to pay tax on all the revenues they earn, regardless of where that money comes from. This means that there are risks of double taxation for nationals from countries which Spain hasn’t signed a double taxation agreement with.

Spain’s Startups Law is currently facing parliamentary processing, and is expected to come into force later this year.

Digital nomad visa schemes proliferate

Spain is following on the lead of other countries around the world that have recognized the need to change immigration laws to attract foreign talents and align with changing working standards.

Last year, Croatia introduced a digital nomad visa program that allows third-party nationals from countries outside of the European Union (EU), European Economic Area (EEA) and Switzerland, to stay in Croatia from six months up to a year. These remote workers are allowed to apply for a one-year residence permit after arrival, are not subject to income tax, but aren’t allowed to provide services to Croatian businesses during their stay in the country.

Malta, Cyprus and Greece are other EU countries that launched in 2021 special residency permits targeted at foreign remote workers. Malta’s Nomad Residence Permit enables holders to retain their current employment based in another country while legally residing in Malta for up to a year. Like in Croatia, they are exempted from income tax for a year. Cyprus’ Digital Nomad Visa Scheme Greece’s Digital Nomad Visa are similar programs that allow holders to reside legally in the country with their family members for up to a year, with a possibility of renewal for further two years.

Georgia, Iceland, Costa Rica and Dubai are other juridictions that provide arrangements for foreign remote workers.

Since Estonia introduced the first digital nomad visa back in 2020, at least 25 other countries and territories in Europe, Africa, Asia, and Latin America and the Caribbean have launched their own programs, according to a new report by the Migration Policy Institute, a trend that accelerated during COVID-19, amid travel restrictions, lost tourism revenues, and widespread adoption of remote work practices.

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