The Beckham Law is a tax regime originally created to attract footballers like David Beckham to Spain. While playing for Real Madrid, Beckham was able to pay only non-resident tax on his Spanish income rather than being taxed on everything worldwide.
The 24% flat-rate regime, which is actually called régimen especial para trabajadores desplazados a territorio español, can be used by expats and even Spanish nationals living abroad who come to Spain for work purposes. In this article, we'll take a look at exactly who can qualify.
What exactly is the Beckham Law?
Those fortunate enough to benefit from the Beckham Law are tax resident in Spain but are taxed in the same way as a non-resident would be.
This means that Spain will levy a 24% flat-rate tax on their income deriving from Spain, but won't tax their income, gains or assets from anywhere else in the world.
Using the example of David Beckham, he would have paid Spanish income tax on his salary from Real Madrid but not on dividends earned from a UK limited company.
Many countries have a similar regime to attract well-off residents from abroad, including the UK with its non-domicile status.
Who can qualify for the Beckham Law?
The Beckham tax regime is for anyone (including Spanish and other EU nationals) that meets the following requirements:
1. You must spend more than 183 days in Spain
In order to qualify for the regime, you must become a Spanish tax resident by spending over 183 days in Spain during the calendar year.
This may sound obvious but the reason behind it is that there are two other ways that a person can become a Spanish tax resident: to have the base of their activities or economic interests in Spain, or for it to be the place where their family (spouse & kids) live.
The 183-day rule prevents anyone from abusing the regime by establishing a family home or business in Spain to avoid taxes they would otherwise pay elsewhere in the world.
2. You must not have been a Spanish tax resident in any of the past 5 years
The idea behind the regime is to attract newcomers by offering tax breaks for a limited period. Therefore, those who are already Spanish tax residents will not qualify. Note that paying Spanish non-resident tax will not disqualify you.
3. You must move to Spain to work
The move must be a direct consequence of either being transferred or choosing to take up a new role in Spain. While a week or two holiday before starting work is acceptable, what you cannot do is move to Spain, find a job and then qualify for the regime.
There are five possibilities of meeting this requirement:
a) New job with a Spanish employer
This applies to every kind of employment relationship with an employer registered in Spain, except for those of professional sports players (ironically, despite the name, sports players can no longer benefit from the Beckham regime).
b) Transfer to Spain within existing job
If your employer transfers you to a Spanish branch or subsidiary of their company, you would find yourself in this situation. In this case, you would need a letter from your employer ordering the transfer.
c) Digital Nomad employee (NEW in 2023)
This would apply if you move to Spain but keep your foreign employment, carrying out your work remotely.
It's important to note that in Spain, the concept of being an employee is different from countries such as the UK. In Spain, an employee cannot have control over a company. Therefore, it's unlikely that one-person companies will qualify without significantly changing the structure of their business.
d) Starting a Spanish company or becoming a Director in an existing company
Previously, the regime excluded those who held over 25% of the share capital, but it no longer maintains this restriction. The only exclusion is that the company cannot be a property or other asset-holding company.
e) Becoming self-employed in Spain if the activity is considered to be 'innovative' (NEW in 2023)
Until now, the self-employed were specifically excluded from the Beckham regime.
However the Start up Law has introduced the possibility of freelancers being able to benefit if they fall under one of the following categories:
- The activity carried out has special economic interest for Spain, with a favourable report by ENISA being issued
- The freelancer is considered a highly qualified professional who provides services to emerging companies, or with over 40% of the freelancer's income being derived from training, research, development and innovation activities
4. You must not receive income through a 'permanent establishment' in Spain (with exceptions)
This requirement means that you need to be careful about what kind of income you earn from within Spain. The concept of permanent establishment is wide and open to intepretation, which means that professional advice should be sought before undertaking any kind of activity which earns you money.
Previously, no income from a permanent establishment located in Spain was permitted, except for employment income, but now the regime has been amended to allow certain categories of freelancers to benefit (see point 3 above).
How to apply
If you fall under one of the older categories of employees, a good tax specialist can help you get all of the documents together to apply. You must do this within 6 months of starting your employment in Spain.
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