Spain has become a “tax trap” for expats who are being “fleeced” by its authorities, according to international law firm Amsterdam & Associates LLP.
The firm has launched a campaign called “Spanish Tax Pickpockets” to highlight the plight of foreigners who moved to Spain for financial reasons.
These expats have subsequently found themselves subject to “punitive tax claims”, the campaign claims.
The campaign’s website states that families have been hit by “unprompted and unexplained audits, attempted asset seizures of foreign property [and] onerous, expensive, and confusing compliance requirements”.
Spain is popular with expats PARobert Amsterdam, partner at the law firm, told The Telegraph he had been contacted by 80 victims, many of them British, whose “lives have been ruined” by tax probes.
The firm has taken a major step of publishing full-page adverts in the Financial Times to highlight the issue.
The law firm claims that foreign workers who expected fair legal treatment have instead faced a harsh and unfair tax crackdown. This has left many “distressed and bitterly disappointed”, according to Amsterdam.
Those targeted are “often denied any explanation of why they are being audited and any right to challenge investigations until just before they conclude.”
The situation has created what he calls a crisis with a “troubling incentive system”.
The dispute revolves around the “Beckham law,” a tax break introduced in 2005 to attract wealthy foreigners to Spain.
Many expats are now having their “Beckham law” tax status reassessed, according to León Fernando del Canto, a tax lawyer with offices in Spain and Britain.
He said: “We are now seeing the tax office contesting the granting of the status after two or three years in the country. This has upset a lot of people and created insecurity, as they are no longer confident that only a certain amount of their income would be taxable.”
The legislation allows qualifying foreign workers to pay a flat 24.75 per cent tax rate on Spanish-sourced income up to €600,000 (£497,000) per year for a maximum of six years.
This is far lower than the progressive tax rates of up to 47 per cent paid by native Spaniards.
Dividends, interest and capital gains generated outside Spain are generally exempt from tax under the regime.
Beckham law was introduced in 2005 to attract wealthy foreigners to Spain
GETTY
The law earned its nickname when David Beckham became one of the first foreigners to take advantage of it after moving to Spain to play for Real Madrid. Since then, it has become popular with footloose high-earners looking to slash their tax bill.
Amsterdam explained the response to the initiative has been immense stating that a vast number of people have been affected by Spain’s unfair tax system.
The “tax trap” controversy is yet another signal that wealthy foreigners are increasingly unwelcome in Spain. Last April, the Government abolished its “golden visa” scheme, which had allowed non-EU citizens to gain residency by investing €500,000 in property. The program is officially set to end on April 3 this year.
Then, in January, Spain’s Prime Minister Pedro Sánchez announced plans for a 100 per cent tax on property purchases by non-EU residents, accusing foreign buyers of being “speculators” who are only in it “to make money.”