We have had a very controversial debate for a few days due to the recent move of the youtuber The Rubius to Andorra. The reason is simply that with this movement will pay taxes in the small Pyrenean country and will stop doing so in Spain. The savings for the famous will be quite large, since the personal income tax in Andorra is much lower than in Spain.
The discussion on the matter, always greater on Twitter than in the rest of society, is highly polarized. On the one hand, there are those who defend that the taxation in Spain is abusive and therefore Rubius is within his right to leave; by another who says that he should not be allowed to use public services when he returns to Spain. However, a serious debate on the matter is lacking because this points to changes that are occurring in society that cannot be ignored.
Change of residence and taxes
First of all, let’s see how personal income tax works. IRPF is a tax levied on any natural person residing in Spain. In fact, it works like this in almost all the countries of the world, being perhaps an exception USA, which taxes the income of all its citizens or holders of a work visa regardless of their residence (although later there are agreements to avoid double taxation).
That taxes are paid for the residence makes a lot of sense: where you reside you use public services and therefore it is logical that the taxes are paid there. In addition, to avoid irregularities, the States fix what exactly the residence is: almost everyone sets it to 183 days a year, six months. This is the case in Spain and Andorra, by the way.
Of course, there are countries that seek to increase their tax income by making it easy to establish residence and not establishing the 183 minimum days: a case within the EU is Cyprus, what only requires 60 days of residence per year.
Andorra has been in the news repeatedly in recent years because it is the destination of several youtubers Spanish people. His personal income tax is really low (10%) and he is relatively close to Barcelona (2 hours by car). It is somewhat unfair because Andorra saves a lot of public spending due to the fact that France and Spain provide them with services, including Defense. But you don’t have to go that far either: Portugal also offers foreigners a special income tax of 10% for 10 yearsIt is a safe, cheap, pleasant country and close to Spain.
Spain, by the way, also offers a special personal income tax for foreigners (the so-called Beckham Law because it seemed made to suit him when he came to play for Real Madrid): up to 600,000 euros of annual income, taxes to pay are 24% (from hence 45%). Much better conditions than Spanish residents.
The future of work
And here is where special laws that applied only to highly qualified workers, and that existed to attract headquarters of multinational companies, are beginning to become general.
We have web pages that analyze the best countries to establish residence for people who can perform your roaming work, even with company structure recommendations in one country and worker in another in the case of freelancers, which are quite similar to what Google, Facebook and company do to avoid a large tax bill … This that previously could only be done Allowing multinationals can now be used by a worker with a high income (100,000 euros a year) to significantly reduce their tax bill.
And this case of El Rubius shows us that there is already a problem: workers who can carry out their activity from anywhere already behave like multinationals when it comes to reducing their tax bill. Teleworking has taken off with the pandemic and in the future there may be a large number of people with high salaries looking for this tax optimization.
This is coupled with the fact that the typical anchor of the past is in decline: the family. There are more and more professionals without children and earning a lot of money, which can make them start looking for residence by looking only at personal income tax without having to contemplate changes in schools, which is what usually prevents these movements.
What we must do to retain these workers and attract others
In the post-pandemic world many companies will consider having remote workers. Especially very high-level workers, who are those who can work completely relocated. And as a country we are interested in attracting them, for tax revenues and for the expense they leave.
We have a very interesting ingredient, the same one that attracts tourism: we are a country with a good climate, where people live very well from a certain level of income, with medium and large cities well stocked with available leisure, good services and good infrastructure for travel.
We also have, as we have seen, an interesting tax structure for foreign workers who come to reside in our country temporarily, but we must bear in mind that we must not only attract but retain.
And to retain we need to stop thinking that tax revenues are going to come from having higher tax rates in the highest sections of personal income tax. This makes us see escapes like El Rubius. It is true, we cannot compete with the 10% of personal income tax in Andorra, but surely if we didn’t have the highest leg at 45-50% (depending on the Autonomous Community), Spain offers other more interesting things (such as having more space, climates, variety and leisure than Andorra).
Spain’s tax revenue is too focused on the top marginal. The earned income of people who earn more than 60,000 euros collect 15% of the total, but they are only 4% of the workers. If we go to more than 30,000 euros are 22% of workers but 46% of the total is collected.
Do not forget that taxes discourage. In fact, taxes are used in some cases for precisely that: that is why there are taxes on tobacco, alcohol, and sugary drinks. And if we want workers with high incomes not to leave and even come to Spain, we must replenish the structure of personal income tax.
We must also take into account the voracity that the Treasury often presents. The Rubius has complained about how they have treated him on some occasions and although it may be true that he committed some type of irregularity, it is necessary to be careful with the image we give outside.
In fact, when the first confinement of 2020 for the coronavirus ended, many foreign workers who did not have residence in Spain had to leave shot because The Treasury did not want to lift the requirement of 6 months of residence to contemplate the Spanish residence, when from March to June it was really very difficult to leave the country because of the border closures.
We are facing some very important changes in society: globalization makes it culturally quite similar to live in one place than in another; connectivity makes it possible, on many occasions, to work anywhere; and the increasingly tenuous family ties do not tie people to their place of residence. The controversy of El Rubius has given a wake-up call, you have to react.
Source: El Blog Salmón by feeds.weblogssl.com.
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