BackThe Special Tax Regime applicable to workers, professionals, entrepreneurs and investors relocated to Spanish territory regulated in Spanish regulations and commonly known as the “Beckham Law”, has been in the spotlight of debate recently. Although the amendments introduced in 2023 have been celebrated by the taxpayers, this regime has been the subject of controversy due to the increase of tax audits carried out by the Spanish Tax Administration to taxpayers under this tax benefit, object of criticism in the latest days in international press such as the Financial Times.
The “Beckham Law” is a Special Tax Regime that offers important tax benefits to those who change their residence to Spain under certain circumstances. The main advantage of this regime is that, for Personal Income Tax purposes, employment income is taxed at a fixed rate of 24% (up to a maximum of 600,000 euros, the excess is taxed at 47%) and the rest of the income obtained is only taxed in Spain if it is of Spanish source; for Wealth Tax purposes, taxpayers under this Special Regime are taxed by real obligation, that is, they are only taxed on assets and rights located, exercisable or enforceable in Spanish territory.
In contrast to other neighboring countries that have eliminated or restricted this kind of Special Regimes (most recently the United Kingdom with the “Non-dom” regime and previously Portugal with regard to the Non-Habitual Residents Regime), Spain has opted in 2023 to modify its regulations for the taxpayer’s benefit, introducing significant changes that allow access to this regime to a greater number of groups (e.g. digital nomads), and making some of its access requirements more flexible. This measure not only reinforces the competitiveness of Spain as a destination for foreign professionals, but also contributes to the attraction of international investment and talent.
While the requirements for access to the “Beckham Law” are in most cases simple to comply with, in practice, it is essential to understand that there are nuances relating to the taxpayer’s situation and circumstances that play a crucial role in having a “solid” request that complies with the applicable regulations.
Furthermore, it is important to point out that the tax audit procedures opened by the Tax Administration have been focused, fundamentally, on taxpayers under the Special Regime as employees or directors of Spanish companies, whose applications, a priori, were not properly supported in terms of basic aspects required by the regime’s regulations, among others, the existence of a causal relationship between the displacement to Spain and the beginning of the labor or mercantile relationship, the reality of the employment or mercantile relationship existence, or the absence of business activity of the employer company or the company in which they perform functions as directors. This kind of matters are subject to frequent examination by the Spanish Tax Administration, so a proper analysis and tax planning prior to the application are essential in order to avoid a tax audit at a later stage, after the Special Regime has been granted.
Consequently, even though the focus has recently been placed on tax audits around the “Beckham Law”, the truth is that taxpayers under this Special Regime who have received adequate tax advice from the beginning of their application, can have the peace of mind that comes with a Special Regime consolidated in the Spanish tax regulations and which has been in force for more than seventeen years.
At B Law & Tax we have a team of tax advisors specialized in this matter and we have a wide and extensive experience guiding taxpayers in their applications in order to ensure their situation as taxpayers under the “Beckham Law” in Spain.
Photo source: Financial Times
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