Last Updated on August 23, 2024 by Laila Oliveira
Spain and Portugal are similar in many ways: the lifestyle, the presence of rich culture, tranquility, a low cost of living, and so on. But ever since Portugal’s NHR Tax Regime underwent changes, expats have looked for alternatives to maximize tax benefits. Does the Spain Beckham Law do that for expats?
This law is designed for high-earning professionals, making it a perfect fit for executives and skilled workers. With the Beckham Law, you’re eligible for a flat tax rate of 24% for up to 6 years! That means savings of thousands of euros if you meet the criteria.
Keep reading as we talk more about what the law entails, the exact criteria for its eligibility, and details about how you can benefit from it. Happy reading!
What is the Spain Beckham Law?
The Spain Beckham Law was originally introduced in 2005 and has been popular ever since!
It originated as a law, later being given the nickname “Beckham Law” after famous footballer David Beckham was the first foreigner to benefit from it.
However, the law is aimed at all foreign workers who are living in Spain.
This law offers significant tax advantages for foreign workers, allowing you to be taxed as a non-resident, even while living there. Your income earned outside Spain remains untaxed, and your Spanish income is taxed at 24%. This is a much lower rate compared to the usual progressive scale that can go up to 47%.
The Spain Beckham Law has helped the country rank higher as an excellent retirement destination for people who wish to move somewhere with lower taxes.
- Read More: Retire In Spain: Complete 2024 Guide.
Who can qualify for the Beckham Law?
So, who can qualify for the flat 24% tax rate?
Take a look at this list below to check whether you meet any of the following criteria:
- Foreign employees relocating to Spain to work for a Spanish company.
- Expats in managerial or significant roles within a company. This is so that the law does not separate administrators from other employees.
- Expats moving to Spain for remote work.
- Highly qualified professionals providing services to startups, engaging in training, research, development, and innovation activities, with at least 40% of their income derived from these services.
- Company administrators in Spain can hold roles if they do not own more than 25% of an asset-managing entity. The company can retain a higher ownership stake if it is not an asset-management entity. In such cases, it’s recommended to set up a wholly-owned LLC (SL) engaged in economic activity.
- Family members of remote workers, including spouses and dependents.
Who can not qualify for the Beckham Law?
It’s a bit of a bummer to know that not all individuals can qualify for the Beckham Law. But it’s important to know who doesn’t so you don’t end up wasting time and effort.
The following people can not qualify for the Spain Beckham Law:
- Freelancers or self-employed expats, except those who have a digital nomad visa.
- Sports professionals, including athletes, regardless of their income or status in their fields.
Requirements and Conditions
The law states that you must not been a tax resident in Spain for five years before relocating. Additionally, you need to be moving to Spain for work, which can be through a job offer, a digital nomad visa, a company transfer, or as a director with over 25% ownership in a non-asset-managing company.
However, the last condition doesn’t apply if you have a startup/entrepreneur visa. The law also exempts most global income from Spanish taxation.
To maintain eligibility, your work in Spain should be the main focus of your professional activities. Any income obtained through a permanent establishment must come from highly skilled economic or entrepreneurial activities.
Certain incomes, such as Spanish-sourced gifts or inheritances, are taxed at rates ranging from 7.65% to 34%, depending on their value. Spanish-sourced capital gains are taxed between 19% and 26%.
Employment income earned outside of Spain is subject to tax rates ranging from 19% to 47%. Spanish assets exceeding €167,129 are subject to a wealth tax ranging from 0.2% to 3.5%, depending on their value.
Beneficiaries of this law are not eligible for specific personal allowances and family deductions. These conditions also apply to your spouse, dependent children under 25, and elderly parents or disabled family members who relocate with you.
Tax Benefits
Does the Spain Beckham Law beat other tax incentives in Europe? Let’s find out!
The Spain Beckham Law comes with a fair share of benefits. Mostly for investors and remote workers with a full-time contractual job, Beckham Law grants exemption on most foreign income. This means that income earned outside of Spain is not subject to Spanish taxes, allowing expats to keep more global earnings.
These long-term benefits can be enjoyed for up to 6 years, giving expats a stable and predictable tax environment. The extended period allows people to fully benefit from Spain’s tax conditions as they settle professionally and personally.
Six years of tax savings add up to a lot when you calculate how much you would be paying otherwise!
- Read More: The 15 Cheapest Cities To Live In Spain In 2024.
Application Process
So, how can you apply for to qualify? Do you need to do it before relocating or after? What documents do you need to file the application?
Let’s break it down for you.
The application for the Spain Beckham Law must be submitted within six months from the date of your Social Security registration or your arrival in Spain, whichever comes first. To apply, you must complete and submit both Form 149 and Form 030 to the tax agency.
Here’s a list of all the documents you’ll need for the application:
- Employment contract with a Spanish company (if applicable);
- Social Security number;
- A copy of your Passport;
- NIE or Foreign Identification Number;
Tax administration can take up to 1 to 2 months to process your application. Once you have completed the application process and received the final approval, you’ll receive a certification or resolution document from the Spanish Tax Authorities.
You must ensure that this document is filed correctly. The resolution document verifies your acceptance into the special tax regime and is essential for correctly applying the tax benefits outlined in the Beckham Law.
Let’s Move to Europe
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- Need help to maintain compliance with tax laws in Spain? Consult a professional from Viv Europe now!
Pros
We want to make sure you evaluate this tax regime by assessing both the pros and cons of the Spain Beckham Law.
Here are some of the main advantages:
- The Beckham Law simplifies tax compliance for expats by taxing them as non-residents while living in Spain. Expats can then avoid the complexities of reporting income on a global scale and dealing with multiple tax systems.
- It provides a stable tax environment for high-skilled professionals, crucial for long-term financial planning.
- Expats benefit from a flat tax rate and clear income tax rules in Spain, which provide greater financial predictability and help establish a stable economic base.
- The 6-year duration encourages expats to settle in Spain, integrate into society, and enjoy favorable tax treatment.
- It reduces the tax burden and frees up more of an expat’s income.
Cons
With every incentive comes some limitations. Check out these potential cons of the Spain Beckham Law:
- The tax benefits are most advantageous for high-income earners. Expats with lower incomes might find the standard tax system more beneficial due to the availability of personal allowances and deductions.
- The flat tax rate under the Beckham Law does not allow for personal or family deductions, which could reduce the benefits for lower-income individuals.
- After 6 years under the Beckham Law, you must switch to Spain’s general tax regime, which could result in a higher tax burden.
- The law does not apply to all expats.
- There is a cap on the income eligible for the reduced rate, with earnings over €600,000 (annually) taxed at a higher rate. This may reduce the law’s appeal for very high-income individuals.
How does taxation of foreigners in Spain work without the Beckham Law?
Without the Spain Beckham Law, expats in Spain are taxed like any other resident. If you spend more than 183 days in Spain in a year, you will qualify as a tax resident.
As a result, you’ll need to pay taxes on all your income worldwide, not just what you earn in Spain.
The country follows a progressive tax system, which means your tax rate increases as your income rises. Tax rates start at 19% for lower incomes and go up to 47% for higher incomes. Check the table below to visualize it better.
| Taxable Income Bands | Tax Rate |
|---|---|
| Up to €12,450 | 19% |
| €12,450 – €20,200 | 24% |
| €20,200 – €35,200 | 30% |
| €35,200 – €60,000 | 37% |
| €60,000 – €300,000 | 45% |
| €300,000 + | 47% |
In addition to that, you might have to pay wealth tax on your global assets and local taxes based on your location within Spain.
Do you need help moving to Spain?
There’s no reason not to ask for help with tax laws when you need it! Navigating tax regulations of a new country is anything but easy. Professionals exist to help individuals, families, and corporations maintain compliance.
If you’re looking to move to Spain but don’t have that step-by-step plan ready, feel free to get in touch with professionals who do. Book a consultation with Viv Europe and start your process now! See you soon!
