What is Beckham Law?

Beckham Law, formally known as the special tax regime for inbound workers to Spanish territory (Article 93 of the Personal Income Tax Law), allows certain individuals who move to Spain for work reasons to be taxed under Non-Resident Income Tax (IRNR) rules for the year of arrival and the following five years, even if they are considered tax residents in Spain.

This can result in significant tax savings, as IRNR rates for employment income are typically fixed (currently 24% up to €600,000 and 47% for the excess) and not progressive like in the general Personal Income Tax (IRPF). Furthermore, under this regime, only income obtained in Spanish territory is taxed in Spain, with the exception of employment income, which is taxed globally.

Main Requirements to Qualify for Beckham Law:

• Not having been a tax resident in Spain for the 5 years prior to relocating (previously 10 years, but reduced with the Startups Law).
• The move to Spain must be a consequence of an employment contract (with a Spanish employer or a foreign employer with a permanent establishment in Spain) or by acquiring the status of director of an entity.
• The work must actually be performed in Spain. If part of the work is done abroad, the income generated obstáculos cannot exceed 15% of the total (this limit may be higher in certain cases).
• Employment income must not be exempt from IRNR taxation.
• The application for the regime must be submitted within 6 months from the start of the activity as registered with Social Security.

Advantages of Beckham Law:

• Reduced and fixed tax rate for employment income (24% up to €600,000).
• Taxation only on Spanish-source income for most types of income (except employment income). This means, for example, that investment income (interest, dividends) or real estate income obtained outside Spain would not be taxed in Spain.
• No obligation to file Form 720 (informative declaration on assets and rights located abroad).
• Simplification in Wealth Tax declaration, being taxed only on assets in Spain (like a non-resident).

Disadvantages or Considerations:

• Most deductions and exemptions of the general Personal Income Tax cannot be applied (e.g., for personal and family minimums, rental housing, etc.).
• The benefits of many double taxation treaties may not apply to employment income, as you are taxed as a non-resident but on worldwide employment income.
• Capital gains obtained in Spain may have a fixed rate (generally 19%) but without applying abatement coefficients or monetary correction.
• If income is very low, the fixed rate of 24% could be higher than the effective rate that would result under the general Personal Income Tax.

How to Apply for Beckham Law?

The application is made by submitting Form 149 to the Tax Agency, within the aforementioned 6-month period. It is crucial to comply with all documentary requirements.