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B Law & Tax
26 October 2023

Tax advisor: The Beckham Law will not attract the wealthy or pensioners living abroad

The revised legislation does not serve to bring back Spanish residents with fiscal residence in Portugal and other countries.

The latest fiscal assessment of the Beckham Law or Regime will not facilitate the return to Spain of the high net worth individuals, nor will it help retirees with generous pensions, many of whom are in Portugal.

It is also unlikely to serve as an incentive for those high-income individuals, including independent professionals and large capital, who have established themselves in places like Madrid, waiting for a change in government that might somehow reduce the Temporary Solidarity Tax on High Net Worth Individuals.

Something that does not seem likely to happen, as indicated in the news with the disclosure of the judgment to be discussed on October 24th in the plenary session of the Constitutional Court, a judgment prepared by Justice María Luisa Balaguer, in which “the appeal of unconstitutionality presented by the Government Council of the Community of Madrid is completely rejected.”


Inspections by the Tax Authority under the Beckham Law

Cantavella warns about the high likelihood of inspections carried out by the Tax Agency (Hacienda) in the case of these taxpayers, so it cannot be superficially recommended that a retiree or a person with substantial wealth returns to Spain, especially when, in some cases, this has resulted in inspection reports with extraordinarily high sums.

This is because many individuals with substantial assets misunderstood that the regime applied to them when, in fact, it did not.

Furthermore, he adds, “The Tax Agency frequently reviews whether the applicant is eligible or not and if they have resided in Spanish territory in the five years preceding the regime application.”


Too much taxation

Daniel Lacalle, Chief Economist at Tressis, pays attention to the decision of the Constitutional Court regarding the appeal filed by the Community of Madrid, in which the constitutionality of the Temporary Solidarity Tax on High Net Worth Individuals is questioned.

Lacalle expresses concern about what he sees as a bias of the Constitutional Court towards a specific part of the political spectrum. He believes that this decision is fragile and that the review of the Beckham Law in 2023 will not attract new taxpayers.

This economist emphasizes that Spain is one of the countries with a high tax burden for investors, savings, and capital.


Other destinations

Considering the details of the Beckham Law, Marc Cantavella maintains that undoubtedly, the restrictions in the application of the regime, the fear of inspections, and the Temporary Solidarity Tax on High Net Worth Individuals make individuals with substantial wealth not consider Spain as an option. Despite appearances, Portugal continues to be a short-term choice, as the Portuguese tax regime for non-residents still has a few months before it expires and guarantees the right to enjoy that regime, at least for 10 years.

Cantavella also highlights that Portugal does not have a Wealth Tax, while Spain does. Regarding the autonomous communities that offer tax incentives for this tax, it remains to be seen what will happen. However, he points out that Isabel Díaz Ayuso’s measure to reduce the regional income tax (IRPF) rate could make Madrid an attractive destination for high net worth individuals, provided they can avoid the Solidarity Tax.

Meanwhile, in the tax landscape for high net worth individuals, the Managing Director of R&S points out that there are also other options in places like Italy and Greece, with maximum taxes of 100,000 euros or a 7% tax rate for retirees; Andorra, with a 10% tax rate or exemption for capital gains from funds and stocks; or Malta.


The door closed to high net worth individuals

Miguel Ángel Bernal, a wealth expert and partner at the Bernal & Sanz Bujanda law firm, analyzes the Beckham Law, taking into account that this regime, from which athletes were excluded, “offers certain benefits as long as certain requirements are met by new residents. Therefore, it is not a rule applicable to Spanish residents moving to another country, such as Portugal. In this case, it is necessary to consider Spanish regulations on changing residence, as well as the laws of the country to which one is moving,” he clarifies.

Furthermore, he points out that in the case of Portugal, its ‘Beckham Law,’ known as NHR (Non-Habitual Resident), has a very close expiration date for Spaniards who wish to move to the neighboring country. However, according to Bernal, Italy, Greece, and the United Kingdom are among the most attractive countries for wealthy individuals with high net worth, as they have removed the tax advantages that Portugal used to offer.

Bernal also comments on the Temporary Solidarity Tax on High Net Worth Individuals (ISGF) promoted by the government with the assistance of the President of the Constitutional Court, Cándido Conde Pumpido. According to Bernal, this measure seeks to hinder the departure of Spanish residents abroad in order to improve tax revenue.


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