Does the idea of retiring to Spain sound just perfect to you, apart from the fact you are too young to access your pension? Do you think you could do your job from anywhere, as long as you had a desk, laptop and telephone? Then a Spanish ‘Digital Nomad’ Visa might be the answer.

The House of Lord’s Economic Affairs Committee recently published a report suggesting that 565,000 people have left the UK jobs market from March 2020 to date. The majority of these are believed to have taken early retirement with many of these likely to have . Many of those would have moved to Spain – the UK’s favourite retirement destination.

Would you have been one of them if you had been old enough to access your pension?

“If are in your early 50s and dream of retiring to sunnier European climes, then the new Spanish digital nomad visa might act as an interesting stopgap, while you work away the last few years before you can retire,” said Jason Porter, director of specialist expat financial advisory firm Blevins Franks. “What better way can there be of doing that in a warmer, more relaxed environment, with a lower cost of living?

“You will also benefit from a very attractive tax rate for up to five years.

“If you have an understanding employer who you think would be open to you performing your role from a desk in Spain, or you have a number of contracts, then this might be an option worth investigating.

“Not only might this visa allow you to get to Spain sooner than you thought, but it will also mean you pay tax on your earnings at significantly lower rates than you would in the UK.

“And, as you are regarded as a non-Spanish resident for all other taxes, you should not suffer Spanish taxes on:

1. Interest, dividends or other investment income where this arises outside of Spain, and
2. Capital gains from disposals of non-Spanish assets
3. Wealth tax on non-Spanish assets

This new digital nomad visa option limits Spanish tax to a flat rate of 24% on the first €600,000 of earnings for up to five years (any excess each year is taxed at the top rate of tax).

Under this option the taxpayer does not benefit from personal allowances or any other reliefs and deductions normally due, so it will require you to have relatively substantial annual earnings to make it not only financially worthwhile, but also to justify the initial cost of any move to Spain.

Whilst some advisers have stated it is open to both employed and self-employed individuals, this may not actually be the case, as “first adopter” freelancers are finding in their dealings with the Spanish immigration authorities. Any employer cannot be a Spanish entity, it must have been in existence for at least a year, and the employment contract for at least three months.

If the employee has shares in the employing company, then at this point under 25% has been mooted as an acceptable figure, though this still needs clarification.

You must hold a suitable qualification or have at least three years’ work experience. You will need to spend at least six months a year in Spain and remain non-tax resident in the UK to benefit.

“While the digital nomad visa initially appears interesting to young tech-types who can work anywhere, closer inspection confirms it is really designed for the wealthier remote worker, who has sufficient earnings to fully benefit from the 24% tax rate,” said Jason Porter of Blevins Franks. “So you have to be sufficiently committed to invest in a long-term lease or intend to exchange your UK home for one in Spain and similarly prepared to pay the cost of private medical insurance each year you benefit from the visa.

“But the total tax benefits could be tremendous, when you factor the other Spanish tax savings which might arise on investment income, capital gains and wealth tax.”