In Spain, the Beckham Law is referred to as Royal Decree 687/2005, which defines a special income tax regime for foreign individuals who move to Spain for work reasons.
Until 2005, a foreigner who became a tax resident of Spain paid the same taxes as a Spanish citizen.
However, in the same year, Spain adopted the Law on Special Tax Regime for Foreign Nationals, which has since allowed foreigners to save a significant amount of taxes when they move to Spain for work.
The famous Real Madrid football player David Beckham was one of the first to take advantage of this law, which is why it is still unofficially known as "the Beckham Law".
Features of the special regime under the Beckham Law
Any individual who acquires tax residency in Spain as a result of moving to the Spanish territory for work purposes may take advantage of the Beckham Law
However, in order to benefit from the special regime, a person moving to Spain must meet the following requirements.
Requirements
Any person moving to Spain who has acquired tax residency in Spain and is a taxpayer of personal income tax may pay personal income tax in accordance with the rules of Impuesto sobre la Renta de No Residentes - IRNR (annual declaration), provided that they meet the following requirements:
- He/she has not been a resident of Spain for the previous 10 years.
- The person's relocation was due to the following circumstances:
- To conclude an employment contract
- As a hired manager of a Spanish company, with a possible shareholding in it not exceeding 25%
- If the person does not receive income that can be considered as paid by a permanent establishment located in Spain
- As a highly qualified professional to provide services to certain categories of startups and conducts training or R&D activities, receiving remuneration in excess of 40% of total income
- For entrepreneurial activities of an innovative nature with a special financial interest for Spain.
Tax benefits
The first 6 years: the year of commencement of work in Spain, when the stay exceeds 183 days + 5 subsequent years, the foreigner may enjoy tax benefits.
In particular, a flat tax rate of 24% is applied to labor and business income if the total income threshold does not exceed €600,000. If it does, a 47% tax rate applies.
Tax on dividends and capital gains
Capital gains (dividends, sale of shares, interest, etc.) earned abroad are not taxable in Spain and must be taxed in the country of origin.
However, income earned in Spain by a person subject to a special regime must be taxed in Spain. Therefore, there remains an obligation to pay tax on dividends and capital gains at rates ranging from 19% to 28%.
Luxury tax
Under the Beckham Law regime, a luxury tax is payable, but only assets and rights located in Spain are taken into account.
To be liable to pay this tax, the taxpayer's financial position in Spain must exceed €1,000,000, so most people are not obliged to pay it.
Inheritance and gifts
Under the Beckham Law, immigrants will have resident status for inheritance and gift tax purposes.
This means that in the event of an inheritance or gift, they will have to pay the inheritance and gift tax of their autonomous community for all property received, regardless of where it is located.
The grace period
A person moving to Spain for work purposes will be able to apply the Beckham Law for 6 years (the year of acquisition of tax residence in Spain plus the following 5 years).
Please note that after the expiration of the six-year period, the Beckham Law cannot be extended or re-issued. The taxpayer will be taxed in Spain according to the general rules.
How to take advantage of the benefits?
The Beckham Law is a great opportunity to reside in Spain for a certain period of time while paying a significantly lower amount of tax than under the general tax regime. It is compatible with professional activities and does not require large upfront investments, as is the case with the Spanish Golden Visa.
If you are interested in information about the possibilities of the Beckham Law's preferential regime, please leave your questions, and our tax experts will help you with professional explanations.
