Taxation

Beckham's Law Uncovered: How to Leverage the Expat Tax Regime

Published on May 23, 2024

Successful expat professional on a balcony in Spain, representing the benefits of Beckham's Law

Key Takeaways

  • What is it? A tax regime allowing new residents to be taxed like non-residents at a 24% flat rate.
  • Who can apply? Workers, company directors, entrepreneurs, and digital nomads who meet specific requirements.
  • Main Advantages: Reduced flat rate on personal income tax, no taxation on most foreign capital gains, and exemption from filing Form 720.
  • Essential Requirements: Not having been a tax resident in Spain for the previous 5 years and having a professional reason for moving.
  • Critical Deadline: The application must be filed within 6 months of registering with Social Security.

What Exactly is Beckham's Law?

Beckham's Law, technically known as the "Special Tax Regime for Workers Displaced to Spanish Territory," is a tax incentive designed to attract talent and qualified professionals to Spain. Its main appeal is that it allows those who opt-in to be taxed for their first 6 years in Spain in a way very similar to a non-resident, despite being tax residents.

In practice, this means that instead of paying the progressive Personal Income Tax (IRPF), which can reach 47% or more, you pay a much lower flat rate on your employment income earned in Spain.

The 3 Major Advantages of Beckham's Law

  1. Flat Rate on Income Tax: You will pay tax on your employment income at a flat rate of 24% for up to €600,000 in annual income. For any amount exceeding this threshold, the rate is 47%. This represents significant savings compared to the progressive rates of the general regime.
  2. Taxation on Spanish-Sourced Income Only: With the exception of employment income (which is taxed globally), you will only pay taxes in Spain on capital gains (interest, dividends, stock sale profits) generated within Spanish territory. Those earned abroad are not taxed in Spain.
  3. Exemption from Form 720 and Wealth Tax on Foreign Assets: You will not be required to file the informative declaration on assets abroad (Form 720). Additionally, you will only be subject to Wealth Tax on your assets located in Spain, not on your worldwide assets.

Who Can Apply for Beckham's Law? Key Requirements

Desk with tax documents about the Special Impatriate Regime

Following the Startups Law reform, the range of profiles eligible for this regime has expanded. The fundamental requirements are:

  • Not having been a tax resident in Spain for the five tax periods prior to the move.
  • The move to Spain must be for one of the following reasons:
    • A new employment contract with a Spanish company.
    • A transfer ordered by a foreign employer (with a letter of secondment).
    • Becoming a director of a company.
    • Carrying out an entrepreneurial activity in Spain.
    • Being a highly qualified professional providing services to startups.
    • Holding a digital nomad visa.
  • Not obtaining income that would be classified as derived from a permanent establishment located in Spanish territory (except in cases of entrepreneurial activity).

Attention to the Deadline! The application (Form 149) must be submitted within a maximum period of 6 months from the date of registration with Social Security. This deadline cannot be extended, and missing it means losing the right to the regime.

Are There Cases Where Beckham's Law Isn't Advisable?

Yes. Although very attractive, it's not always the best option. For example:

  • Low income: If your income is low, your effective tax rate under the general regime might be lower than 24%.
  • Severance pay: Severance payments are exempt up to €180,000 under the general regime, whereas they would be taxed at 24% under Beckham's Law.
  • High-income spouse: If you have a spouse with a high income, you cannot file a joint tax return, which could be a disadvantage.

A personalized analysis is crucial before making a decision. For a more technical breakdown, you can visit our main page on Beckham's Law.

Do You Think Beckham's Law Is for You?

The application process and tax planning can be complex. Our team of experts can analyze your specific case, confirm your eligibility, and manage the entire process so you can make the most of this tax benefit.

Contact a Tax Advisor