Allows foreigners who move to Spain to work to pay taxes as non-residents
What is the special regime for workers posted to Spanish territory or Beckham Law?:
This is a special regime that allows people who are considered tax residents in Spain to pay taxes according to the rules of the Non-Resident Income Tax, that is, to be subject to taxation in Spain only on their Spanish-source income. .
What are the tax benefits of the Beckham Law?
The main tax benefits of the Beckham Law are:
- Personal income tax only in relation to income obtained in Spanish territory.
- Taxation of the Wealth Tax only in relation to the net value of the assets and rights located in Spanish territory.
- Taxation of the Tax on Large Fortunes only in relation to the net value of the assets and rights located in Spanish territory, provided that this exceeds 3 million.
- Exemption from the obligation to present the informative declaration of assets and rights located abroad (Form 720).
- Possibility of extending said tax regime to the spouse or economically dependent children of the main applicant.
Who can request the application of the Beckham Law?
- Employees who move to Spanish territory for work reasons through a transfer letter or local contract in Spain.
- Digital Nomads working for others for companies located outside Spanish territory
- Administrators of companies located in Spanish territory, and the administrator may be the sole shareholder of the company as long as certain requirements are met.
- Professionals who carry out an economic activity classified as a business activity.
- Highly qualified professionals who provide services to emerging companies or who carry out training, research, development and innovation activities.
- Spouse and economically dependent children of the main applicant for the special regime as long as certain requirements are met.
What are the main requirements for the application of the Beckham Law?
- Not having been a tax resident in Spain in the last 5 tax years.
- Move to Spanish territory for any of the reasons mentioned above.
- The application for application of the special regime must be made within a period of 6 months from the date of registration with the Spanish Social Security, or from the date of granting the corresponding certificate of coverage for Social Security purposes.
- Not having a permanent establishment in Spanish territory, except in certain cases expressly provided for by law.
What are the drawbacks?
The problem is that there are many drawbacks that could affect new residents, specially with important income originated outside Spain like:
- Ineligibility to benefit from double taxation agreements that Spain may have with other countries, potentially leading to less favorable tax treatment on foreign income.
- The regime’s tax benefits are most advantageous for high earners; expatriates earning below the threshold may find the standard tax system more beneficial due to personal allowances and deductions.
- The flat tax rate applies without the possibility of applying for personal or family deductions that residents typically enjoy, which could offset the advantages for lower-income earners.
- Once the six-year period under the Beckham Law ends, individuals will be subject to Spain’s general tax regime, which may result in a higher tax burden.
- The Beckham Law is not applicable to all expatriates; certain professionals, such as athletes, are excluded from its benefits.
- There is a cap on the income subject to the reduced rate; earnings above €600,000 are taxed at a higher rate, which may diminish the attractiveness for very high-income individuals.
How long does the process take and how long does the tax benefit last?
The processing time for the special regime is approximately 20 days, and the duration of the benefit of this special tax regime is 6 years from the taxpayer's first fiscal year of tax residence.