B Law & Tax
09 February 2024

Tax Advisor: Everything you need to know about the Beckham Law in Spain

What is the Beckham Law?

The Beckham Law establishes a special tax regime that allows foreigners who move to work in Spain to pay a fixed rate of Personal Income Tax (IRPF) of 24%, regardless of the income they earn in the country.

The main objective of this measure is to attract talent and qualified personnel, especially benefiting those with incomes exceeding 60,000 euros per year.

Therefore, if you decide to hire a foreign executive with an annual gross salary of 100,000 euros, this employee can take advantage of this provision to pay a 24% IRPF instead of the 32% that would correspond to a Spanish resident under normal circumstances. In summary, this could mean a savings of up to 8,000 euros per year in taxes for both the company and the employee.

Requirements to qualify for the Beckham Law

This special regime is available to foreign workers who move to Spain for work reasons and who have not been residents in the five previous tax periods before the transfer.

In addition, the transfer must occur in the first year of application of the regime or in the previous year, due to:

  • An employment contract, either with a Spanish company or with a foreign company with which a displacement letter has been signed.
  • Digital nomads, that is, when there is an employment contract with a foreign company that allows remote work through telematic means.
  • Assumption of the position of administrator of an entity. In the case of a patrimonial entity, the administrator cannot have a participation equal to or greater than 25%.
  • Carrying out an economic activity in Spain, either as self-employed, qualified as a business activity.
  • Performing an activity provided by a highly qualified professional who provides services to emerging companies or carries out training or R&D activities, and these represent more than 40% of their income.

Family members: Family members of foreign workers, including spouses and children under 25 or with disabilities, can also choose to pay taxes under this system.

Reduced taxable base: The worker has the option to pay taxes only on income generated in Spain, reducing their taxable base.

Tax rate: The tax rate on the taxable base is fixed: 24% up to 600,000 euros and 47% from that amount.

How long can one avail this regime?

The duration of the regime is six years, including five additional years to the year in which tax residency is acquired in Spain. Tax residency in Spain is understood to be acquired for the calendar year, meeting the requirement of spending more than 183 days in Spain.

This means that if, for example, the relocation is done in December 2023, I will not be a tax resident in Spain during 2023, but rather will acquire residency in 2024; thus, the duration of the special regime will be from 2024 to 2030.

What are the fiscal advantages and disadvantages of the Beckham Law?

The Beckham Law offers exclusive taxation at a reduced rate of 24% for income generated within Spanish territory, which is favorable compared to the higher rates of the general regime. Additionally, this tax is only applied to income earned in Spain, simplifying the tax situation for new residents.

Capital gains obtained abroad are tax-free in Spain. Regarding Wealth Tax, payment is only required for assets and rights located in Spain, especially for non-tax residents in the country.

Since the Beckham Law considers the taxpayer as a non-tax resident, there is no need to file the declaration of assets abroad (Model 720). As for Inheritance and Gift Tax, “impatriated” individuals must pay taxes in the corresponding Autonomous Community, regardless of the location of the received assets.

Foreign workers opting for this regime in Spain cannot take advantage of most Double Taxation Agreements. Additionally, impatriates do not have access to the same tax benefits as other taxpayers, such as the deduction of Social Security expenses.

Exclusions from the Beckham Law: Eligibility Requirements

There are certain requirements that must be met to benefit from the advantages of the Beckham Law, as there are specific circumstances in which it does not apply. Those who are not eligible for this benefit include:

Self-employed workers, unless they are involved in an economically entrepreneurial activity or possess highly qualified skills.
Professional athletes. Although initially professional athletes could benefit from this special regime, they are now excluded under current regulations and cannot avail themselves of the Beckham Law.

B Law & Tax International Tax & Legal Advisors.

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“In B LAW&TAX we specialize in international tax advisory services for both companies and individuals. If you would like to obtain further information, we would be delighted to assist you at 917817194 or at  [email protected]