Taxed income as local

Jan 3, 2012 · Ric · 3 replies · 2832 views

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Hello all,
New to the forum so apologies if this was covered a million times (did try to search, but didn?t find exactly what I needed)

Anyway, here goes:
I have been on ex-pat assignment with my US company in Madrid for the last year and a half. My assignment is coming to an end and was told I could take a "leave of absence" from my US contract and stay here for a couple of more years under a local contract.
They would make me an offer on a local contract, paid from Spain (vs current situation where I still get my salary in USD in the US)

As such, would I be subject to Spain tax rates, or can I claim this 24% non-resident tax for a few years, as some seem to have commented on? Seems like the local tax rate that I would fall under is over twice that of the flat rate, so clearly that would make a big impact on my decision to stay or not.

Other factors that may or may not make a difference:
- I am a dual citizen (US/UK) so would assume I?d stay here under UK passport
- Married with 2 kids (under the age of 3)

Would appreciate any insight

thanks in advance

Jan 5, 2012 · RiazorBlue

You'd have to look at your wife's situation here. How is her visa/permission situation? Regarding the non-resident rate of tax, I've never been subject to it here, but in Holland for example it had to be applied for by my company, you'd have to find out from your firm about this. One other thing to check out, if you go on a local contract, how much do they pay, normally it'd be a whole lot less than on an ex-pat contract, if so, the 24% rule probably wouldn't come into effect.

Feb 8, 2012 · Gretina

You should check with your employer on the type of contract they?re providing you and how they intend to pay the tax. One of my friends who is working in Spain for a foreign company, incorporated her own company and arranged a gestora to help with the tax and expense management. Of course it?s only worth it if you are being paid 50k? or more.

I found this site interesting if the company solution is for you:
http://www.strongabogados.com/corporate-taxes.php#company

Otherwise, I highly doubt that you are eligible to pay the foreign rate considering the time you?ve already been in Spain. Paying the local rate is not so bad if you have ways to reduce your taxable income. I believe you can put your rent and certain expenses, and also for being married (not too sure about if kids count) towards deducting your taxable income. Get a good gestora to help with this, the locals always seem to find a way to avoid all that tax, especially those who earn a good wage.

If you?re not earning a good wage, then the tax is as expensive as hell. That?s my situation! :(

Hope that gives you some ideas. Good Luck!!!