BackThe Beckham Law, also known as the Impatriate Law, has, since its application in Spain, benefited people living abroad who choose to reside in Spain with respect to their tax obligations.
What does the Beckham Law entail?
The Beckham Law, also known as the Impatriate Law, establishes a special tax regime for foreign residents who choose to move to Spain.
Under this law, foreigners are taxed at a flat rate of 24% on their income obtained in Spain, instead of the progressive tax that can range from 19% to 54% on worldwide income, depending on the Autonomous Community of residence in Spain.
This provision allows them to be taxed as if they were non-residents. The main purpose of the Beckham Law is to attract talent, qualified professionals, entrepreneurs and investors to the country.
How does the Beckham Law affect taxation?
To understand the benefits of the Beckham Law, it is useful to compare the tax situation of foreigners before and after its implementation:
Before the Beckham Law:
Foreigners who were resident in Spain for at least 183 days in Spain were considered ordinary tax residents and were subject to:
- Paying tax on all their worldwide income, i.e. both inside and outside Spain.
- A progressive tax that increased with income, ranging from 19% to 54%.
After the Beckham Law:
With the entry into force of the Beckham Law, impatriates pay considerably less during the first six months of residence in Spain if they opt for this regime.
In this case, they are taxed similarly to non-residents, mainly on income generated in Spain.
Specifically, they pay a flat tax of 24% on income earned up to 600,000 euros. If they exceed that amount, a tax rate of 47% is applied.
Tax advantages of the Beckham Law:
In addition to the reduced personal income tax, the Beckham Law brings with it other tax advantages, including:
- Wealth Tax: only on assets in Spain.
- Inheritance and Gift Tax: the same treatment applies as for personal income tax.
- Taxation in foreign countries: no taxation is required in Spain on income generated abroad.
Are there any disadvantages to the Beckham Law?
Yes, the main disadvantage is the impossibility of applying double taxation agreements, as non-resident regulations apply to impatriates under this regime.
Requirements to benefit from the Beckham Law:
To benefit from the Beckham Law, the following requirements must be met:
- Not to have been resident in Spain for the 5 years prior to the application.
- That the move to Spain is carried out in order to carry out an activity or to be a director of a company.
Who can apply for the Beckham Law?
Those who have moved to Spain can apply in the following cases:
- Workers who have recently arrived in Spain by means of an employment contract signed with a Spanish company.
- Teleworkers.
- Administrators who move to provide their services to a Spanish company.
- Impatriates with high incomes and executive or management positions.
Self-employed workers and professional athletes are excluded.
Beckham Law application process:
The application must be submitted within the first six months of registration with Social Security or maintenance of Social Security contributions in the country of origin.
Form 149 must be filed to qualify for the Beckham Act.
Once approved, the benefit is extended for the year in which tax residence is acquired, and five more years, i.e. six years in total.
It is compulsory to file an annual income tax return form 151.
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