The Beckham Law in Spain is a special tax regime designed to attract foreign talent by offering significant tax advantages making it very attractive due to its low taxation benefits.
Named after footballer David Beckham, who benefited from it during his time in Spain, this law allows expatriates to enjoy reduced tax rates on their income.
This article highlights the key aspects of the Beckham Law, including eligibility criteria, application steps, and the broader impact on taxation for foreigners in Spain.
With the help of experts at TaxMove, you can achieve the benefits of the Beckham Law and taxation system in Spain. We help you apply for the Beckham Law and the application process by meeting all the requirements of government authorities.
What is the Beckham Law?
The Beckham Law, officially known as the “Special Expatriate Tax Regime,” was introduced in Spain in 2005.
It allows eligible individuals to be taxed as non-residents for six years, thereby benefiting from low taxation (zero tax in some cases) on their worldwide income.
The Beckham Law, also called the special regime for posted employees, allows people working in Spain to benefit from a favorable tax rate.
Key Features of the Beckham Law
- Lower Tax Rate: Eligible individuals pay a flat tax rate of 24% on their income earned in Spain, up to €600,000 and 47% onwards.
- No Tax on Worldwide Passive Income: They are only taxed on their Spanish income, not on their income from other countries except from their employment income which is taxed on a worldwide basis.
- Duration: These benefits last for up to six years.
General taxation in Spain:
Let’s dive into a brief review of the taxes typically applicable in Spain for residents without the Beckham Law.
General Taxable Income
To qualify for the Beckham Law, the following criteria must be met:
- Non-Resident: You must not have been considered a tax resident in Spain for the past ten years.
- Employment Contract: You need an employment contract with a Spanish company or a foreign company through an international assignment.
- Limited Activities: The law primarily applies to employees and excludes self-employed individuals except for certain qualifying activities mainly on the R&D field.
Savings Taxable Income
Capital gains tax is levied on the profit from the sale of assets such as property and shares.
The tax rates for residents are 19% for gains up to €6,000, 21% for gains between €6,000 and €50,000, 23% for gains between €50,000 and €300,000 and 28% for gains over €300,000.
Non-residents are taxed at a flat rate of 19%.
Non-Resident Income Tax
Non-residents are subject to tax on their Spanish-sourced income only.
The standard tax rate for non-residents is 24%. However, this rate can vary depending on the income source and may be reduced under certain tax treaties Spain has with other countries, or if the non-resident lives in a European Union country.
Wealth Tax
Wealth tax applies to the assets individuals own.
Residents are taxed on all their assets worldwide, while non-residents are taxed only on assets in Spain.
Rates range from 0.2% to 3.5%, depending on asset value.
Inheritance and gift tax
In Spain, gift and inheritance tax applies to goods and rights acquired by Spanish tax residents through inheritance, legacy, or other types of succession, as well as through donations or other inter vivos transfers without compensation.
Spanish gift and inheritance tax also applies to goods and rights acquired by non-residents in the aforementioned ways, regardless of their nature, if they are located in Spain, can be exercised in Spain, or must be complied with in Spain.
However, if a Double Taxation Treaty (DTT) exists between Spain and the non-resident’s country of residence, the applicable taxation will be determined by the DTT.
Property Tax
Property owners in Spain have to pay various taxes, including:
- IBI (Impuesto sobre Bienes Inmuebles): This is an annual local tax based on the cadastral value of the property.
- Non-Resident Property Tax: Non-resident property owners must pay an annual tax based on the property’s cadastral value.
Here is a brief table summarizing the key taxes in Spain:
| Tax Type | Resident Tax Rate | Non-Resident Tax Rate |
|---|---|---|
|
General Taxable Income |
19% - 47% |
24% (19% for EU tax residents) |
|
Savings Taxable Income |
19% - 28% |
19% |
|
Wealth Tax |
0.2% - 3.5% |
0.2% - 3.5% (Spanish assets only) |
|
Inheritance and Gift Tax |
7.65% - 34% |
7.65% - 34% |
|
Property Tax (IBI) |
Varies by municipality |
Varies by municipality |
|
Non-Resident Property Tax |
N/A |
Based on the cadastral value |
Exit Tax
Spain introduced an exit tax in 2015.
It targets individuals who have been residents for at least 10 out of the past 15 years and own certain qualifying shares.
The exit tax is triggered when an individual moves out of Spain.
It taxes the entire gain from the date the shares were acquired, not just the gain during residency in Spain.
Scope of the Exit Tax
The tax applies if:
- The total value of shares exceeds €4 million.
- The individual owns at least 25% of an entity, and the value of that holding exceeds €1 million.
- The taxable gain is the difference between the market value at the end of the last year of residency and the acquisition cost, taxed at rates between 19% and 28%.
Deferral of Exit Tax
The tax can be deferred for up to five years if:
- The move is due to a temporary work assignment.
- The host country is not blacklisted.
- The individual notifies Spanish tax authorities and provides a guarantee.
The tax can also be deferred for up to 10 years if the individual moves to a European Economic Area country and if the individual does not sell the shares during this period.
Advantages of the Beckham Law for Expatriates
- Duration: 6 years (year of arrival + 5 subsequent years).
- Overseas Income: Zero tax on capital gains and dividends earned outside Spain.
- No Remittance Conditions: Exemptions apply even if income is brought into Spain.
- Wealth Tax: Exemption on foreign assets.
- Foreign Assets Declaration: No need to file the 720 form.
- Flat Income Tax Rate: 24% for worldwide employment income up to €600,000; 47% for higher income.
- Family Benefits: Tax benefits extended to spouses and children under 25.
- CFC Rules: Not applicable under this regime.
- Nationality: Years under the Beckham Law count towards acquiring Spanish nationality.
Potential Disadvantages of the Beckham Law
- Worldwide employment income is taxed.
- Freelancers typically do not qualify.
- You cannot benefit from the Spanish Double Tax Treaty Network.
- It only lasts for 6 years.
Eligibility for the Beckham Law
To qualify for the Beckham Law, the following criteria must be met:
- Non-Resident: You must not have been considered a tax resident in Spain for the past ten years.
- Employment Contract: You need an employment contract with a Spanish company or a foreign company through an international assignment.
- Limited Activities: The law primarily applies to employees and excludes self-employed individuals except for certain qualifying activities mainly on the R&D field.
How to Apply for the Beckham Law
Here are the steps for applying for the Beckham Law in Spain:
- Evaluate and Plan:
- Decide if the Beckham Law benefits you.
- Plan how you will apply for it.
- Obtain NIE:
- Get your Número de Identificación de Extranjero (NIE), which translates to Foreign Identification Number, for administrative and tax purposes.
- Submit Form 149:
- Apply for the Beckham Law by submitting Form 149 within six months of registering with Social Security.
- Receive Confirmation:
- If your application is approved, you’ll get a confirmation of your special tax status from the Tax Authorities.
- Declare Status with Form 151:
- Use Form 151 to declare your status under the Special Expatriate Regime.
How Can We Help You?
The Beckham Law in Spain offers significant tax advantages for expatriates, providing a reduced tax rate and exemption from worldwide passive income making Spain an almost zero-tax country for individuals moving from abroad. It is one of our favorite special tax regimes in the EU, along with the Non-Dom status in Cyprus and Malta.
Our experts at TaxMove guide you through every step, from obtaining your NIE and submitting forms to declaring your status.
Take advantage of the Beckham Law with TaxMove to enjoy a favorable tax environment while living and working in Spain.
Submit the form to get tailored advice from our experts
What is the Beckham Law in Spain?
Who is eligible for the Beckham Law?
To qualify, you must:
- Not have been a tax resident in Spain for the past ten years.
- Have an employment contract with a Spanish or foreign company through an international assignment.
- Be employed (self-employed individuals are generally excluded, except for certain R&D activities).
What are the tax rates under the Beckham Law?
How long does the Beckham Law apply?
How do I apply for the Beckham Law?
- Evaluate and Plan: Determine if the Beckham Law is beneficial for you and plan your application.
- Obtain NIE: Get your Foreign Identification Number (NIE) for administrative and tax purposes.
- Submit Form 149: Apply within six months of registering with Social Security.
- Receive Confirmation: Await confirmation from the Tax Authorities.
- Declare Status: Use Form 151 to declare your status under the Special Expatriate Regime.
Can family members benefit from the Beckham Law?
Yes, tax benefits can extend to spouses and children under 25 years old.
What is Form 149 and Form 151?
- Form 149: Used to apply for the Beckham Law within six months of registering with Social Security.
- Form 151: Used to declare your special expatriate tax status once approved.
