To encourage the reception of qualified personnel to Spain, the special tax regime for workers posted to Spanish territory, more commonly known as the Beckham Law, has been contemplated for years.
This regime allows lower taxation for those who move to Spain to work, having to fulfill a series of requirements, being an excellent attraction for Spanish companies in the talent search.
Like other countries such as Portugal, Italy, Germany, and Belgium, which have updated their special regimes, the government has approved this Draft Bill to adapt to the new market needs and create a more attractive legislative framework.
Last July, the text of the Preliminary Draft Bill for promoting the startup ecosystem was approved. One of the measures designed to enable these companies to attract international talent is the updating and improvement of the conditions for applying the special tax regime “Beckham Law” for employees relocated to Spanish territory.
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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.
This new framework described in the text of the Draft Bill will mean more attractive conditions for the beneficiaries of this special regime.
Amendments to the Beckham Law 2023
We explain the new advantages and benefits you can take advantage of to save on taxation.
- The special regime’s application scope is extended to the spouse of the second employee. It includes children under 25 years of age or disabled (with no age limit in this case), or even their parent, in the event that there is no marital relationship with the employee seconded to Spain, provided that they move to Spain no later than the first year of application of the special regime to the seconded employee and meet specific requirements.
- The new regulation provides a certain relaxation of the requirements to be eligible for the special regime. Number of years in which the person must not have been considered a tax resident before 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.
Main requirements for the Beckham Law
What are the main requirements to be fulfilled to benefit from this tax law and save tax?
- The individual must have been absent from Spain during the five tax periods before the one in which they move to Spain.
- The move to Spanish territory must take place, either in the first year of application of the regime or in the previous year, as a consequence of some of the following circumstances:
- Due to an employment contract with an employer in Spain.
- As a consequence of the acquisition of the condition of administrators of entities, regardless of their participation, if the company is patrimonial, then the participation of less than 25% of the capital stock will be required.
- As a consequence of the performance in Spain of an economic activity qualified as an entrepreneurial activity (Article 70 of Law 14/2013), which is of an innovative nature, of particular financial interest for Spain, and which has for such purpose a favorable report from the competent body of the General State Administration.
- Due to the performance in Spain of economic activity by a highly qualified professional, who provides services to companies and carries out training or R&D&I activities, they may also benefit from this new legislation.
The core of the workers’ professional activity must be in Spain. However, it is possible to obtain work and income from abroad, as long as it represents at most 15% of the total revenue.
Who are excluded under the law?
- Self-employed workers.
- Professional sports athletes.
- Directors of business entities.
Benefits of the Beckham Law in Spain
To understand how much you can benefit from this tax law, we explain how the situation of foreigners was before it came into force.
Taxation before the 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%.
Taxes since the beginning of the Beckham Law
After the law came into force, things changed completely. Expatriates can pay much less during their first 6 years in the country and save tax if they apply for this regime.
- Under this law, spending more than 183 days in the country doesn’t matter. 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. If your income exceeds the maximum amount, a flat rate of 45% will be charged.
The Beckham Law is a significant 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 when it comes to income tax. Other applications will allow you to optimize your taxes further.
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 the sale of real estate or personal property will be taxed at a flat rate of 19%.
Please note that capital gains obtained outside Spain must still be paid to the corresponding country according to its tax regulations. The fact of not having to pay in Spain all the income received abroad does not mean that they are not taxable in the rest of the world.
Wealth tax
Under this special regulation for foreigners, wealth tax will only be applied to property held in Spain.
The Beckham Law also has another critical advantage. The worker will not be obliged to pay for the income they earn worldwide, they will only be taxed on the revenue generated in Spain.
This is undoubtedly a great advantage. You will be able to diversify your income and investments to pay the lowest possible tax rate. Therefore, besides reducing the taxable base, this diversification will help you reduce risk in your investment portfolio.
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Taxes on digital nomads, new figure of this law.
The new regulation contemplates new reasons for relocation. Until now, only physical relocation due to an employment relationship or the acquisition of the status of administrator (with a shareholding of less than 25%) was contemplated. From now on, this changes and will also be allowed for teleworking work activities, which are performed remotely, through the exclusive use of telematic and telecommunication means and computer systems.
How to apply for the Beckham Law in Spain
You must remember that the application must be submitted within 6 months from the date you register with Social Security as an employee 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.
To start benefiting from this regime, you must inform the Spanish Tax Agency by filling in and sending form 149:
– Your passport and NIE
– Social Security number
– Employment contract with the Spanish company
After that, you can benefit from this law for a total of 5 years.
