Beckham Law in Spain

By Lucia Lagunas Reyes | Updated on 14 February 2024

Spanish Tax System and How to Save Taxes as a Foreigner

The tax year in Spain operates from January 1st to December 31st. The Spanish tax returns must be filed and paid between the 2nd of May and the 30th of June. The period for declaring and paying PIT is established annually by a ministerial order. It usually ends on 30 June.

The Spanish tax system for individuals is officially composed of two personal income taxes. The first income tax category is the “PIT” or the Spanish Personal Income Tax Reform Bill (Proyecto de Ley de Reforma Fiscal de IRPF). Residents have until June 30th to declare and pay the Spanish PIT tax, which is set by a ministerial order.

The PIT is identified for individuals who reside in Spain for tax purposes. The second income tax category is the Spanish non-residents’ income tax (NRIT). The NRIT is for persons who do not reside in Spain for tax purposes, but who obtain income in Spain.

In other words, persons who receive income in Spain are responsible for paying the Spanish PIT or Spanish NRIT tax income. Residents in Spain also are required to pay global income tax under the PIT category under statutory progressive rates. However, non-residents are liable to pay NRIT only on their income sources in Spain.

What’s new in the beckham law in 2024?

In 2024, the new digital nomad visa has been created in Spain, this allows many citizens to come to work in Spain with their remote work with a company outside Spain.

Therefore, to make this visa more attractive, they have applied the beckham law so that citizens who come to Spain to work for companies outside Spain can benefit from the advantages provided by the beckham law.

In addition, people with Spanish nationality who have been out of the country for more than 5 years will also be able to apply for the beckham law and obtain all the tax advantages.

The David Beckham Law in Spain

Currently, if you are going to move to Spain or you plan to work in spain, you can save taxes thanks to the great English soccer player David Beckham. The Royal Decree 687/2005 better known as The Beckham Law spain states that when you are taxed as a non-resident you will pay less taxes than if you were a resident. Legally in Spanish paperwork, the Beckham decree is “Régimen especial para de trabajadores desplazados.”

The Beckham tax mandate was so named because it coincided with David Beckham taking residence in Spain to work for Real Madrid. It is said that he was the first sports celebrity to benefit from this special tax. Foreign workers must first apply before they are accepted for the tax exemption.

When Mr. Beckham moved to Spain, it was his contention that any incomes obtained from any of his global image rights should not be subject to any Spanish income taxation laws. In 2005 the legal Beckham mandate was designed to stimulate the Spanish economy by granting Beckham and foreign entrepreneurs a special tax plan. The Beckham Law was not without its statutory ups and downs. However, it was reinstituted and is currently the new tax income law for well-to-do expats.

Benefits of the Beckham Law Spain

This tax exemption is recognized in the year of your arrival and applies to the following 5 tax years up until the 6th year. If there are any capital gains received from a Spanish territory, then that income will be taxed at 35%.

The Beckham statute regimen changed the previous tax law for expats in paying taxes. Today, a person with considerable wealth and who has moved from another country to Spain, the option to be taxed either as a Spanish resident or as a non-Spanish resident.

This means that individuals who opt to be taxed as a non-Spanish resident can declare their Spanish income and assets and may avoid tax on their global income up to 6 tax years having met with certain conditions.

Past Tax Laws

Prior to the Beckham law, foreign workers who stayed in the country more than 183 days in a tax year were deemed to be a “tax resident.” This meant that they were responsible for paying a resident income tax on their income in any other country outside of Spain and not just their income and assets from Spanish sources.

When individuals are identified as a tax resident in Spain, their income is subject to the Spanish Personal Income Tax or PIT. What this means, is that a PIT tax is progressively taxed at rates up to 48%. However, under the Beckham Law Spain, foreigners will be taxed as non-residents at a fixed rate of 25% on the income they earned in Spain instead of rising tax scale that ranges from 24% to 43%.

Requirements for the Beckham law?

There are exemptions under the Beckham Law prescript that are applicable during your initial arrival. It continues for a total of 6 years. What requirements must foreign nationals, that is, foreigners who come to work for a company located in Spain, satisfy to take advantage of this tax regime? The requirements include the following:

• Foreign nationals have moved to Spain to work. All business responsibilities must be carried out in Spain. If any part of a business is doing business outside of the country, then the percentage of income earned from these activities may not exceed 15%.
• Expats must have relocated to Spain to work under an employment contract. The contracted employer must be a Spanish business. Also, any non-resident company must operate through a permanent establishment in Spain, having acquired tax residence in Spain.
• Foreigners must not have lived in Spain for the last 5 years.
• You must have equity in no more than 25% of a company that you are a director of based in Spain.
• The Beckham Law application must be made within 6 months of starting an employment contract.

Sports – The Beckham Law

How does the Beckham Law affect athletes like Mr. Beckham? Under this generoso decree, individuals who are professional sports players who plan on moving to Spain and who have an annual income of less than €600,000 are able to take advantage of these tax breaks.

The income will break down to athletes being taxed at 24% for the first €600,000 and any remainders taxed at 45%. Remember also that any foreign wealthy person who will be working and living in spain are addressed under the beckham law.

What Forms of Taxation Is Affected?

People from outside of Spain are exempt from paying the regular tax rate because of the following income types that are acquired outside the country of Spain:

• Capital gains: Expats will be responsible for income tax on profits gained from the sale of assets and dividends located in Spain. However, under the Beckham law as a non-resident, you will not have to pay income tax in Spain on any profits from capital gains outside of Spain.

• Dividends: The advantages under the Beckham ley for dividends from outside of the country is that they are not taxable. Dividends stemming from Spanish and non-resident subsidiaries are not taxable in Spain. Dividends from the ETVE to non-residents are not taxable in Spain if coming from income generated by the non-resident companies.

ETVE is any spanish company subject to Spanish Corporate Tax rules on its Spanish derived income, but is exempt from taxation on foreign-sourced dividends. Additionally, dividends distributed to foreign investors from Spain’s sociedades capital riesgo (SCR) are not taxable.

• Rental income: The tax on rental income in Spain for Spanish residents is taxed at 19%. Individuals can also deduct any expenses to help maintain the upkeep of the property. In other words, you would not pay tax on any rental property income.

The change from these sources occurs if they were gained within the country of Spain. If this occurs, then the income tax rate will be affixed at 19%. Please be apprised that to apply as a tax resident in spain, you must live and work longer than 183 days in a spanish territory.

Like David Beckham, any wealth tax category for foreigners experiences a reduction in Spain’s tax rate. Wealth tax is assessed on the net value of your assets. These assets include stocks, savings interest, and properties. But, under the Beckham enactment, this type of asset tax only applies to assets that are or have been acquired in Spain.

The Beckham Law Application Process

To apply for the Beckham law or Special Expats’ Tax Regime (SETR), from the Spanish Régimen Especial para Trabajadores Desplazados, you must take the following steps:

• First, you must submit a form identified as Form 030. You can download it from the internet.
• Fill it out and submit it to the Spanish Tax Agency requesting your registration in the Spanish Census of Liable Taxpayers

When you receive your tax income approval for being added to the Spanish census, then you will be asked to submit another application known as form 149 under the Beckham Law spain. In addition, other types of specific documentations, depending on your local spanish territory will be requested. The common documents required include your passport, your NIE number, social security number, and a signed copy of your work contract.

After these processes you will be notified that you can apply the special tax regime. You will then receive a certificate that should be given to your employer in order that they may begin applying the Beckham prescript’s special withholding rate.

Beckham Law Update

The current special Beckham ley tax decree has an income tax rate at a flat 24%. However, in 2021, any income over €600,000 will be taxed at 47%.