B Law & Tax
25 April 2024

The Beckham Law and its implications on payroll: key aspects

The Beckham Law, formally known as the “special tax regime applicable to workers, professionals, entrepreneurs and investors relocated to Spanish territory”, regulates the taxation, in accordance with non-resident regulations, of the income of individuals relocated to Spain who have acquired tax residence.

Since its introduction in 2005, this regulation has been the subject of attention and debate in the Spanish tax landscape.

Originally designed to attract foreign talent, including renowned athletes like David Beckham, it offers considerable tax advantages to impatriates during the first six years of residence in Spain.

Origin and purpose: The Beckham Law was conceived to attract highly skilled professionals to Spain, offering a fixed tax rate of 24% on income generated in the country during the first six years of residence, resulting in a significantly lower tax burden compared to ordinary tax residents.

Definition of tax non-resident: An individual is considered a tax non-resident in Spain if they spend less than 183 days during the calendar year in Spanish territory, whose main center of economic activities or interests does not lie in Spain directly or indirectly, and whose spouse and minor dependents do not habitually reside in Spain.

Types of tax residents: a distinction is made between ordinary tax residents and special tax residents. The latter can opt for the special regime upon request to the Tax Agency, meeting certain requirements, which allows them to apply non-resident tax regulations for a maximum of six years.

Tax rate and withholding: The tax rate and withholding rate are fixed at 24% for income up to €600,000 annually, unlike the progressive scale applicable to ordinary tax residents.

Tax base limit: A limit is set for those exceeding €600,000 annually, with an additional tax of 47% on the excess amount.

Impact on pension plans: Taxpayers under the Beckham Law are not exempt from paying taxes on contributions to pension plans, which are governed by general tax regulations.

Birth benefits: Parents covered by the Beckham Law are not exempt from taxation during maternity/paternity leave, as these benefits follow the current regulations regardless of the applied tax regime.

For specialized advice on these topics and others related to business operations in Spain, do not hesitate to contact our experts, who offer a wide range of consulting services. We are here to assist you with any steps you may need to take in the fiscal and labor context.

B Law & Tax International Tax & Legal Advisors.


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