The Beckham Law, implemented in Spain, is a special tax regime designed to attract foreign talent and stimulate the arrival of skilled professionals to the country. This tax regime offers a fixed income tax rate, benefiting expatriates by applying a reduced rate during the first years of fiscal residence in Spain.
What is the Beckham Law?
The Beckham Law is a special tax regime that establishes a fixed tax rate of 24% on the income of foreign workers, regardless of the amount, during their first six years of fiscal residence in Spain. This regime is particularly beneficial for those earning more than 60,000 euros annually. For high-level expatriates, this regime can result in significant tax savings, as they are taxed at a considerably lower rate than Spanish residents would be under normal conditions.
In the case of an employee with a gross annual salary of 100,000 euros, the tax rate would be 24%, resulting in a tax saving of up to 8,000 euros annually compared to the standard tax rate of 32% for a tax resident in Spain.
Tax Advantages under the Beckham Law in Spain
This regime offers several advantages that are attractive both for expatriates and the companies that hire them:
- Limited taxation on income generated in Spain: Beneficiaries of the Beckham Law are only taxed on income generated within Spain, excluding foreign income. This results in lower taxation, as taxpayers do not need to declare their worldwide income, unlike regular tax residents in Spain.
- Fixed tax rate: Income earned in Spain is taxed at 24% under the IRPF, with a higher rate (45%) for income exceeding 600,000 euros annually. For non-residents, this tax rate is more advantageous than the general tax regime in Spain.
- Exemption from taxes on capital gains: Capital gains earned abroad are not taxed in Spain, unlike those generated within the country, which are subject to a progressive rate ranging from 19% to 23%.
- Wealth tax: Although Beckham Law beneficiaries must pay wealth tax, only assets located in Spain will be taxed.
- Inheritance and donation tax: Expatriates who opt for this regime will be taxed in Spain according to the inheritance and donation tax legislation of the corresponding autonomous community.
Who can benefit from this tax regime and what are the requirements?
To qualify for the Beckham Law, the foreign worker must meet certain requirements:
- The worker must move to Spain for more than 183 days a year and must not have been a tax resident in Spain in the five years prior to their arrival.
- The reason for the stay must be signing a work contract with a Spanish company. If the individual is a company director, they cannot own more than 24% of the company for this tax regime to apply.
Additionally, the regime can be extended to the worker’s immediate family members, such as a spouse, children under 25 years old, or disabled adult children, or a parent in the case of single-parent families. Specific conditions and requirements also apply to these family members.
Duration of the tax regime under the Beckham Law
The Beckham Law tax regime lasts for six years, consisting of five years plus the year of acquiring tax residency in Spain. For example, if the worker moves in December 2023, the regime will apply from that year until 2028.
What are the requirements to qualify for the Beckham Law?
In order to benefit from the tax advantages offered by the Beckham Law, certain specific requirements must be met:
- Previous Residence in Spain: The applicant must not have been a tax resident in Spain during the 5 years prior to their move. This means that even Spanish citizens who have lived abroad during that time may apply for this regime, as long as they meet the other requirements.
- Reason for Relocation: The worker must move to Spain for work-related reasons, such as:
- A work contract, excluding professional athletes.
- Teleworking from Spain without being ordered by the employer.
- Management of a company: In this case, the manager cannot own more than 24% of the company.
- Restrictions on Income and Permanent Establishment: The regime does not apply to those who earn income that is considered derived from a permanent establishment in Spain, unless the company is considered emerging.
Disadvantages of the Beckham Law
Despite its clear tax advantages, the Beckham Law has some disadvantages. Among the negative aspects are:
- Restrictions on deductions: The worker under this regime will not be able to deduct certain personal expenses.
- Non-exempt severance pay: In the event of dismissal, any severance pay received will not be exempt from taxation.
Is it possible to annul the Beckham Law regime?
Yes, the worker can voluntarily renounce the regime, but must do so between November and December, with effect for the following year. However, if the worker changes jobs or is dismissed, they will not lose the right to benefit from this tax regime for the time they continue working under the established conditions.
How to apply for the Beckham Law regime?
The application to join the Beckham Law regime must be made within the first six months from the start of the employment relationship with the Spanish company. The steps for processing include:
- Registration in the Taxpayer Registry: To do this, the worker must submit Form 030 to the Tax Agency.
- Submission of Form 149: This form is necessary to grant the special regime. Additionally, the following documents must be included:
- Valid passport and NIE (Foreigner Identification Number).
- Social Security number.
- Employment contract with the Spanish company.
- Tax residence certificate in Spain to avoid double taxation.
Once the application has been submitted, the Tax Agency has an official period of 10 days to resolve the request, although the deadline can extend up to two months.
When to file the income tax return under the Beckham Law?
The worker under this regime must file the IRPF (Personal Income Tax) return during the period established by law, which runs from April 1 to June 30 of the following year. Those who are subject to the Beckham Law must file their IRPF return through Form 151, which is specific to these cases.
Regulatory Framework of the Beckham Law under the Startup Law
The Startup Law (Law 28/2022), published on December 21, introduces significant improvements for beneficiaries of the Beckham Law, expanding its scope and adapting it to new realities such as digital nomads. Key changes include:
- Expansion of the scope of application: The law now includes not only workers employed by companies but also entrepreneurs, investors, and digital nomads who work remotely from Spain, as long as at least 40% of their income from these activities is from Spain.
- Exemption for income in kind: The Startup Law also establishes that income in kind (such as the use of company cars, health insurance, etc.) will be exempt from taxation, allowing companies to offer more efficient compensation packages to employees.
- Expansion of family coverage: The regime also extends to the worker’s family members, such as the spouse and children under 25 years of age (or of any age in the case of disability). Additionally, family members may be considered non-residents for the purposes of taxation in the Wealth Tax and the Temporary Solidarity Tax on Large Fortunes, exempting them from certain taxes such as the Modelo 720.
Frequently Asked Questions about the Beckham Law regime
- Do I need to file a special tax form as a company with employees under the Beckham Law? Employees under the Beckham Law will be declared as non-residents on Form 216 with the Tax Agency. There is no special form for these employees, so they will be included in the same forms as other non-resident employees.
- Can an employee request the Beckham Law certificate? The worker must request the Beckham Law directly from the Tax Agency using Form 149. This procedure must be completed within the first six months after arriving in Spain. The company does not have direct access to this certificate, as the application must be managed by the employee on their own behalf.