How to save taxes in Spain: we tell you all about the Beckham Law

In order to encourage the transfer of particularly qualified workers to Spain, the special tax regime for workers posted to Spanish territory, more commonly known as the Beckham Law, has been in place for many years.

This regime allows a lower taxation to those who move to Spain to work and meet a series of requirements, being a great attraction for Spanish companies in the search for talent. In today’s post we explain everything you need to know to save on paying taxes in Spain.

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What is the Beckham Law?

The Beckham Law is a tax regime for expatriates that makes it possible to pay much lower taxes.
It allows all those workers residing abroad who want to come to work in Spain to pay their property and income taxes as if they were non-residents for the first 6 years.

 

In practice, this regime means not applying a progressive rate and being taxed at a flat rate of 24% for all earned income obtained in Spain, so that the highest incomes will pay, in general, the same percentage of tax. In the event of exceeding €600,000 per year, the rate would increase to 45%.

Are you under the Beckham Law? From Centre Gestor we can help you with your Income Tax Return. We have expert tax advisors who will guide and advise you along the way.

 

Taxes for foreigners in Spain

In order for you to understand how much you can benefit from this tax law, let’s take a look at what the situation was for foreigners before it came into force.

 

Before Beckham Law

Until 2005, all foreigners who moved to Spain and spent more than 6 months (183 days) a year in the country became tax residents.

When you become a resident the following happens:

  • You start paying income tax based on your worldwide earned income. This includes money generated in Spain as well as in any other country in the world.
  • The percentage you pay is progressive, increasing as your income increases. It goes from 19% on the first income bracket and increases up to a maximum of 45%.

 

After the Beckham Law

After the law came into force, things changed completely. Now expatriates can pay much less during their first 6 years in the country, and they can save taxes as long as they apply for this regime because:

  • Under this law it doesn’t matter if you spend more than 183 days in the country, you will pay tax under very similar taxation rules to non-residents.
  • You will only pay income tax on the income you earn in Spain.
  • Instead of paying this tax at a progressive rate, you pay a flat rate of 24% up to the amount of €600,000. In case your income exceeds the maximum amount, a flat rate of 45% will be charged.

 

The Beckham Law is a great tax advantage in terms of tax savings. This constant 24% is lower than the tax rates applied to residents, which can be as high as 45%.

Do you want to know if you are a tax resident in Spain? We tell you everything in this post

 

Tax advantages of the Beckham Law

This regime will not only benefit you in terms of income tax. There are other applications that will allow you to optimize your taxes even more.

 

Inheritance and gift tax

Since you do not pay personal income tax but non-resident income tax, this is also transferred to the inheritance and gift tax and you are considered as a resident.

 

Capital gains

Capital gains are not exempt either, as profits obtained from dividends or from the sale of real estate or personal property will be charged at a flat rate of 19%.

Please note that capital gains obtained outside Spain will still have to be paid to the corresponding country according to its tax regulations. The fact of not having to pay in Spain all the income obtained abroad does not mean that they are not taxable in the rest of the world.

 

Property tax

Under this special regulation for foreigners, wealth tax will only be applied to property held in Spain.

 

¿Qué es la Ley Beckham? - Centre Gestor

 

Worldwide income taxation

The Beckham Law also has another important advantage. The worker will not be obliged to pay for the income he/she earns worldwide, he/she will only be taxed for the income generated in Spain.

This is undoubtedly a great advantage. You will be able to diversify your income and investments in order to pay the lowest possible tax rate. Therefore, in addition to reducing the taxable base, this possible diversification will help you to reduce risk in your investment portfolio.

You might be interested in: Model 720: frequently asked questions

 

Who can apply?

  • Foreign worker who has just moved to Spain.
  • Expatriate with high incomes who occupy managerial or management positions
  • Administrators coming to work in a company
In contrast, the following individuals are excluded:
  • Self-employed workers
  • Professional sports athletes
  • Directors of business entities

 

Main requirements for the Beckham Law

What are the main requirements to be fulfilled in order to benefit from this tax law and save taxes?

  • The expatriate has not been resident in Spain for the last 10 years.
  • The foreigner must have an employment contract. This means that he/she is moving to Spanish territory for work purposes.
  • This work contract must be signed with a Spanish company.
  • For those people who come to Spain to work as administrators, they cannot own more than 24% of the company for the law to be applicable and thus benefit from the tax saving.
  • The core of the employees’ professional activity must be in Spain. However, it is possible to obtain work and income from abroad, as long as it does not represent more than 15% of the total income.

 

How to apply for the Beckham Law in Spain

You must keep in mind that the application must be submitted within 6 months from the date on which you register with the Social Security as a worker of the Spanish company that hires you. Doing it later will mean that your request will be denied and you will not be able to benefit from this law.

In order to start benefiting from this regime, you must inform the Spanish Tax Agency by filling in and sending the form 149:

  • Your passport and NIE
  • Social Security number
  • Employment contract with the Spanish company

Thereafter, you will be able to benefit from this law for a total of 5 years.

 

At Centre Gestor we manage all your paperwork for you.

We manage all your paperwork

Do you need more information?

If you need legal assistance, you’re in the right place. We will manage the application process for you so you can start saving taxes as soon as possible. In addition, we will plan and advise you with your tax situation, so that you optimize and pay only what is necessary.

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