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Beckham Law: All you have to know
What is the Beckham Law?
The Beckham Law is known as the tax regime for workers relocated to Spanish territory. This tax regime grants tax benefits similar to those of a non-resident for those who relocate their residence to Spain for work purposes.
Spain is not a particularly attractive country fiscally speaking, so it is up to the Spanish government to introduce benefits or special regimes to attract foreign professionals, and this is exactly what this regulatory framework is intended to do.
It was introduced in Royal Decree 687/2005, and after some modifications is still in force in 2023.
Once granted, the beneficiary will be able to enjoy the tax advantages for a period of 6 years. It is important to note that this period is not renewable and cannot be applied for again, so once this period has elapsed, the taxpayer will be taxed under the normal Spanish resident regime.
Requirements for Beckham Law
Although it is voluntary and decision of the applicant, certain requirements must be met and the application must be submitted to the Tax Agency in order to benefit from the Beckham Law.
Beckham´s law requirements:
1. The applicant must not have been a tax resident in Spain for the last 5 years.
2. Proof of a new job justifying the person’s move to Spain.
3. The peson applying cannot obtain income through a permanent establishment located in Spanish territory.
4. Fulfil all formalities in due time and form. This refers to official documentation, maximum time since the impatriate’s entry into employment, and other formalities.
On the other hand, the self-employed, directors of companies located outside Spain, those which own more than 25% of a company in Spain, and surprisingly sports professionals, are excluded.
Advantages of the Beckham Law
Probably the best known aspect of this regime is the advantages of using it, and not surprisingly. Many of them are reminiscent of the taxation of a non-resident, although this is not really the case.
Reduced personal income tax
In the “normal” regime there are several income brackets with a corresponding applicable rate, which is progressive and amounts to up to 47% for incomes of more than €300,000.
However, with the regime applied by the Beckham Law, only 2 brackets are established:
24% for incomes below €600,000.
47% for incomes above €600,000.
Only income obtained in Spanish territorty is taxable.
The taxpayer will only be taxed on income obtained in Spanish territory, excluding income obtained worldwide. Under the normal regime, all assets in worldwide would also be taxed.
Wealth tax benefits
With regard to wealth tax, you are only liable to tax on your assets located in Spain. Under the normal regime the tax is levied on the net value of your worldwide wealth.
You will not have to fill form 720
There is no obligation to file form 720 because the taxpayer is treated as a non-resident.
This form is for those assets outside the country with a value of more than 50,000, and must be filed by tax residents.
Disadvantages of the Beckham Law
Double taxation treaties cannot be applied
Double taxation treaties are not applicable in this case because the worker is considered a non-resident and cannot access the certificate of tax residence in Spain.
No deduction of expenses
The applicant will not be able to apply tax benefits provided for the rest of taxpayers in the normal regime such as Social Security.
You are not entitled to severance pay
Once this regime has been adopted, the right to exemption from severance pay is lost, as is the right to the deduction for the minimum family allowance or descendants.
Can my family benefit from the Beckham Law?
The spouse together with their children under the age of 25 may qualify for this scheme, and in the case of disabled children, their age will not be taken into account.
To do so, the family members must apply in the same tax year, and their joint annual taxable income must be lower than that of the “main expatriate”, who is the beneficiary of the employment relationship.
How to apply for the Beckham Law in Spain
First of all, you should bear in mind that you must apply for this scheme during the 6 months following the date of registration with the Social Security (that is, from the start of the employment relationship). We recommend that you start the procedure as soon as possible because if you do not submit it in time, it will be considered null and void.
The application must be submitted to the Tax Agency using form 149, along with a copy of your passport and NIE, Social Security number and employment contract with the Spanish company.
What happen if my application is rejected?
The application is likely to be considered rejected if mistakes have been made in the submission of documentation, if deadlines are missed, if the applicant does not meet the requirements, and so on.
If your Beckham Law application is refused you will not be able to reapply and you will have lost your chance to benefit from the scheme. So please make sure you follow the correct steps.
Apply for the Beckham Law with fiscal advisors
As you have been able to see, before applying for the Beckham Law tax regime, it is advisable to carry out a prior tax study of the applicant’s situation as, although everything seems to be advantageous, in reality it is aimed at a very specific profile of worker.At Legal Iuris we will analyse your tax situation and manage the application process so that you can take advantage of the tax benefits of this regime as soon as possible.
Contact our lawyers for more information and advice on taxation.
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