B Law & Tax
23 October 2023

Tax advisor: Portugal is ending its tax benefits, and opportunities of Beckham Law in Spain

On September 23, 2009, Decree-Law 249/2009 was issued, introducing a new tax system for the personal income tax (IRPF) aimed at non-residents in Portugal. This Decree-Law came into effect on January 1, 2009, regarding taxation in Portugal.

 

Benefits and advantages of this tax regime in Portugal

The non-regular resident system, implemented in 2009, resulted in a significant increase in the number of people choosing to relocate their residence to Portugal. From a tax perspective in Portugal, this regime proved very attractive to retirees who opted to live in Portugal and to working professionals in certain specific sectors.

 

End of tax benefits

The stated reason for ending this tax system in Portugal, which granted certain tax benefits to foreigners, is the crisis in the real estate market. The housing sector’s crisis in Portugal has led to the decision to terminate this special regime that benefited numerous foreigners. This measure will be implemented starting in 2024.

 

Reasons for the end

This decision has been made due to the significant increase in housing costs in the country. This has generated greater interest from foreigners with high incomes who can afford prices that Portuguese citizens cannot.

According to information from the Portuguese government, in just the year 2022, the Public Treasury missed out on 1.67 billion euros as a result of more than 74,000 non-resident individuals registered in Portugal who benefited from these policies.

Prime Minister Antonio Costa announced that as of January 1, 2024, the privileged tax treatment will come to an end. He stated that it was no longer justifiable to maintain it and considered it unjust.

This measure is taken with the purpose of preventing future increases in housing prices due to growing foreign investment. The aim is to combat real estate speculation and reduce the demand from foreign buyers.

 

Consequences of its elimination

The elimination of the tax regime in Portugal is not expected to benefit other countries, such as Spain, which also offer tax benefits to foreigners. These are different situations. In Spain, the well-known “Beckham Law” applies to people who relocate for work reasons and establishes a fixed tax rate of 24% or 47%, depending on their income, only on income generated in Spain, not on their global income.

 

What are the requirements of the “Beckham Law”?

Any individual who moves and establishes their tax residence in Spanish territory, demonstrating their contribution to the Personal Income Tax (IRPF), may be eligible to be taxed under this regime. They must meet the following requirements:

  •  Not have been a resident in Spain in the previous 5 years.
  • Their relocation must be the result of an employment contract, with the exception of the special employment relationship of professional athletes, for teleworking reasons carried out from Spain, or for assuming the role of administrator in an entity.
  •  Not receive income that can be considered as generated by a permanent presence in Spanish territory.

 

Duration of the “Beckham Law” in Spain

An individual who moves to Spain for employment reasons can benefit from the Beckham Law for a period of 6 years, including the year in which they acquire tax residence in Spain and the following 5 years. However, once these 6 years have elapsed, they cannot use the Beckham Law again. At that point, the individual must pay taxes in accordance with the regulations for tax residents.

 

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