The popular Beckham Law is named after British football star David Beckham. During the time he played for the Real Madrid team, Beckham was one of the first foreign citizens to benefit from the Spanish tax inpatriate regime. Thanks to this regulation, Spain has managed to attract more than €2,000,000 during the last 3 years.
What is the Beckham Law?
“Beckham Law” is the name given to the Spanish Royal Decree-Law 687/2005, which intends to attract highly skilled professionals from abroad through tax benefits. This special tax regime treats foreign workers moving to Spain as non-resident tax payers. In this way, their tax rate is reduced from the usual 45-47% to 24% – concerning the income tax (IRPF). As the purpose of the Beckham Law is to attract high-income earners, the tax rebate only applies to expats who earn a maximum of €600,000 per year. However, in 2017 the average salary in Spain was €26,730.
What are the requirements to benefit from the Beckham Law?
Foreigners moving to Spain for work purposes can benefit from the Beckham Tax Law:
- If they haven’t been residents in Spain for the last 10 years
- They must have relocated to Spain on behalf of a work contract
- They must work or become the administrator of a Spanish company
- Their employment duties must be carried out in Spain (15% of the time can be spent abroad)
- The working income cannot be exempt from the Spanish income tax law
It is important to know that capital gains are not exempt. Likewise, dividend gains, as well as profits generated through the property (whether moveable or not) will be taxed at a fixed rate from 19% to 23%.
How to apply for the tax reduction
Once approved, the Beckham Law starts to be valid during the year of the application and it continues to be applied for 5 consecutive years. For this reason, it is advisable to submit the 149 Form during the first 6 months of employment in Spain. The application will need to be completed with extensive details about the company, starting date, type of activity, etc.
As long as the Beckham Law is applied, the taxpayer does not need to submit the annual Overseas Assets declaration (Model 720). However, this does not take from the obligation of doing the yearly tax return and declaring all incomes obtained in Spain (whether from employment, savings, capital gains, dividends, profit obtained for selling property and more).
Downsides of the Beckham Law
The Beckham Law also has some disadvantages. Apart from paying taxes on the income generated in Spain, the worker will also pay on the worldwide revenue. Besides, taxation in the country of origin will depend on regional legislation. The existence of treaties and double taxation agreements between Spain and the country of origin will also have a relevant impact on the tax burden.
Soon after it was passed, it became obvious that the Beckham Law benefited the rich and famous football players from the Spanish Liga. For this reason, the first limit of €600,000 a year was imposed in 2010. In 2015, the conditions were modified so as to exclude professional athletes.
Nowadays, the Beckham Law remains an interesting option for highly qualified professionals and companies willing to expand or launch offices in a southern European country like Spain.
In case you are interested in exploring the best combinations that apply to your case, we invite you to contact the Legal and Tax Help team. You can also leave your comments in the section below this article.
Author: Rosana Tejada
Biographical Info: Rosana Tejada Crespo is a tax advisor holding a Master’s Degree in International Taxation. She specialises in companies and freelancers, tax regulations concerning foreign employees (Beckham Law), non-resident tax, inheritance tax and Spanish income tax. She is one of the founders of Legal & Tax Help (2000), which comprises a group of English speaking solicitors, economists and architects.