How to save taxes in Spain: we tell you all about the Beckham Law
How to save taxes in Spain: we tell you all about the new 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.
Like other countries such as Portugal, Italy, Germany or Belgium that have updated their own special regimes making them more attractive in certain aspects than the current Spanish regime, the government has approved this Draft Bill to adapt to the new needs of the market and create a more attractive legislative framework in this aspect.
Last July, the text of the Draft Bill for the Promotion of the Startup Ecosystem was approved. One of the measures designed to help these companies attract international talent is the updating and improvement of the conditions for the application of the special “Beckham Law” tax regime for employees posted to Spanish territory.
What will the new Beckham Law 2023 look like?
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.
This new framework described in the text of the Draft Bill will mean more attractive conditions for the beneficiaries of this special regime.
What changes are envisaged in this new tax regime for impatriates?
We explain you the new advantages and benefits you can take advantage of to save on tax.
- – Extending the duration of the special scheme for beneficiaries from a maximum of 6 to 11 years (the year in which the change of residence takes place and the following 10 years).
- – The scope of application of the special regime is extended to the spouse of the posted employee and includes children under 25 years of age or disabled children (with no age limit in this case), or even their parent, in the event that there is no marital relationship with the employee posted to Spain, provided that they move to Spain no later than the first year in which the special regime applies to the posted employee and that they meet certain requirements.
- – The new regulation provides for a certain relaxation of the requirements for eligibility for the special regime. The number of years in which the person must not have been considered a tax resident prior to arrival in Spain is reduced from 10 to 5.
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.
Taxation of digital nomads, a new feature of this law.
The new regulations contemplate new reasons for relocation. Until now, only physical relocation was contemplated for an employment relationship or by the acquisition of the status of administrator (with a shareholding of less than 25% of the share capital). From now on, this will change and will also be allowed for teleworking work, which is carried out remotely, using exclusively telematic and telecommunications means and systems.
Who else will be able to benefit from this new Beckham Law?
Others who will be able to benefit are the administrators of entities regardless of their shareholding. If the company is an asset-holding company, then a shareholding of less than 25% of the share capital will be required.
It is will also contemplated that it will be an economic activity qualified as an entrepreneurial activity (article 70 of Law 14/2013), which is of an innovative nature, of special economic interest for Spain and which has a 24 report from the competent body of the General State Administration.
Highly qualified professionals who provide services to companies, who carry out training or R+D+i activities, may also benefit from this new legislation.
Taxes for foreigners in Spain
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.
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
Inheritance and gift tax
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.
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
- 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.