Introduction
The Beckham Law in Spain is a special tax regime originally designed to attract highly qualified professionals from other countries to work in Spain. Formally, the tax regime is called the Special Tax Regime applicable to workers, professionals, entrepreneurs, and investors moving to Spanish territory (in Spanish, Régimen fiscal especial aplicable a los trabajadores, profesionales, emprendedores e inversores desplazados a territorio español), provided for in Article 93 of Law 35/2006, of November 28, on the Personal Income Tax in Spain, but it is commonly known as the Beckham Law due to David Beckham, a famous English footballer who was one of the first public figures to benefit from this tax regime after his arrival at Real Madrid.
This regime essentially allows workers who move to Spain to pay taxes as if they were non-tax residents, despite technically being considered tax residents in the country. Its main advantage is that, in general, those who benefit from the Beckham Law only pay taxes on the income generated in Spain and at a tax rate usually lower than that applicable to other residents with that level of income.
Main advantages of the Beckham Law
The Beckham Law, in its current version today (it has varied over the years), offers several key advantages to workers moving to Spain, focused on providing a more favorable tax regime. The main advantages are briefly described below:
- Flat rate of 24%: Beneficiaries of the Beckham Law can enjoy a fixed tax rate of 24% on their work income. This rate is especially beneficial for those workers with high incomes, as they would normally be subject to higher progressive tax rates as normal tax residents (which can reach up to almost 50%). This rate applies up to an annual income limit, which is currently set at 600,000 euros, from which a 47% is applied.
- Taxation only on income generated in Spain: Another great advantage of this regime is that beneficiaries are only required to pay taxes on the income they generate within Spain, except when it comes to work income. This means that their income obtained outside the country is not subject to taxes in Spain, which is a relevant incentive for people who have assets in other countries.
- Taxation only on wealth located in Spain: Beneficiaries of the Beckham Law do not need to pay taxes in Spain on their wealth outside of Spain. This is particularly advantageous for those taxpayers who have considerable value assets in other countries, as they would only pay taxes on the wealth regarding the goods and rights located in Spanish territory.
- No obligation to file Modelo 720: Beneficiaries of this regime are not required to file Modelo 720, which is an informative declaration about assets and rights located abroad. For tax residents in Spain, this declaration is mandatory from certain wealth thresholds, and non-compliance can lead to significant penalties.
These are just some of the advantages that make the Beckham Law a very attractive tax regime for those considering establishing their residence in Spain, especially those with high incomes and/or considerable wealth. However, it is crucial to bear in mind that there are certain requirements and conditions to benefit from this regime.
Who can apply for the Beckham Law
The Beckham Law is undoubtedly a very interesting regime for people with high incomes and/or considerable wealth. Why don’t more people benefit from this regime? In some cases, it is simply due to lack of knowledge, but in the majority of cases, it is because they do not meet the requirements needed to benefit from this regime. In this regard, the following fundamental requirements could be highlighted:
- Not having been a fiscal resident in Spain in the last 5 years: Nationality does not matter, what is required is that those who want to apply for this regime have not been fiscal residents in Spain during the 5 years prior to their move to Spain. This basically implies not having lived in Spain during that period.
- Moving to Spain because of a job: On the other hand, it is required to work after moving to Spain (except in the case of close relatives of a beneficiary of the Beckham Law). There are different forms of work compatible with the Beckham Law: Working as an employee for a Spanish entity, as a remote worker, being an innovative entrepreneur, acquiring the status of a director of a Spanish entity, etc. Such work should start shortly after arriving in Spain.
- Submitting the application on time: It is necessary to submit the application to benefit from the Beckham Law within a maximum period of 6 months from the start of work in Spain. This seems like a simple requirement, and yet, there are many cases of people who have not been able to benefit from the special regime because they missed the deadline.
These are just some of the requirements, and each requirement has different ramifications, so it is advisable to thoroughly study this aspect before making any decisions.
