If you are moving to Spain for work purposes or you have a company and you want to move a team to Spain, you need to know the so-called Beckham Law so that you can save on taxes. In this post we will tell you what it is, what requirements must be met, who can benefit from it and how to apply for it.
What is the Beckham Law?
The Beckham Law is a regulation that enables a special tax regime for foreigners who move to Spain. It establishes a flat rate of 24% on the income obtained in Spain, instead of applying the progressive percentages on the income obtained worldwide, which range from 19% to 45%. Therefore, it is possible to pay less tax as long as certain requirements are met.
Actually, it is not a law in the strict sense of the word, but a modification made to section 93 of the Personal Income Tax Act in 2004. Its name comes from the football player David Beckham, who was the first person to benefit from its advantages.
Before the creation of this regulation, foreigners who came to live and work in Spain, and stayed in our country for more than 6 months a year, were considered tax residents and, therefore, had to pay the IRPF for the income they obtained in all of the countries and, in addition, a progressive percentage was applied depending on the amount of the income.
Beckham Law Requirements
In order for the Beckham Law to be applied, a series of requirements must be met, which are as follows:
- The person requesting this special regime must not have resided for tax purposes in Spain for the last 10 years.
- The transfer to Spain must be justified with a new job. The employee must have an employment contract in Spain with a Spanish company. If the employee also receives a salary abroad, it cannot represent more than 15% of their total income.
- The person applying for the regime cannot make money through a permanent establishment located in Spain. Basically, this person must not be self-employed or carry out a self-employed activity.
- The regulation establishes a series of deadlines that must be met regarding the start date of the job, the period of time to move countries or to request the application of the special regime.
Advantages of the special regime of the Beckham Law
The main advantages of applying to this special regime are the following:
- Application of a flat rate of 24% on a maximum of 600,000 euros. Amounts exceeding this will be taxed at 47%.
- Tax must only be paid on the income earned in Spain, and not on the profits made in another country.
- With respect to the wealth tax, only the net value of the assets located in Spain will be taxed.
- No need to file the form 720, also known as the informative declaration of assets abroad.
- For inheritance and donation tax purposes, the foreign person will be considered a resident.
- If the person benefits from dividends or from the sale of real estate, both assets and property, the applicable tax rate is 19%, which will be fixed.
Who can request the application of the special regime of the Beckham Law?
The ones who may request the application of the special regime of the Beckham Law are:
- Foreign employees who have recently settled in Spain.
- Administrators of a company who move to Spain to work in a firm. In this case, they cannot own more than 24% of the company.
- Expatriates who have high incomes and executive or management positions.
However, self-employed workers, company directors and professional athletes are excluded from this regime.
How to apply for the Beckham Law in 2022?
In order to request the application of the Beckham law in 2022, Form 149 must be filed with the Tax Agency and the following documents and information must be attached: the employment contract with the Spanish company, the Social Security number, a copy of the passport and the foreigner identification number (NIE).
The deadline to apply for the regime is 6 months from the moment the worker is registered in Social Security as an employee of a Spanish company.
If you are in any of the situations we have seen and want to take advantage of the benefits of the Beckham Law, it is better to get advice from tax experts in Spain, instead of using an online calculator or other tools to know how much you would save if you applied to this Law. Tax consultancy service at Leialta we will study your case, give you the best alternatives to comply with the law and save on taxes, and we’ll do all the paperwork for you.