Named after the famous English football player, the Beckham Law is one of Spain’s most talked about tax regulations.
First introduced to attract top-tier talent from across the globe, the regime offers beneficial tax treatments for non-residents moving to Spain.
If you’re considering relocating to Spain for work, it’s important you understand the Beckham Law so that you can plan, financially, for the future.
Here, our experts at Fluent Finance Abroad discuss everything you need to know about the Beckham Law in Spain – from what it is to eligibility criteria.
So, what is the Beckham Law?
Back in 2004, the Spanish tax agency introduced the expatriate tax regime, to encourage foreign workers to move to Spain for work and allow them to pay taxes on their Spanish-sourced income ONLY, rather than on their overall, worldwide income.
More commonly known as the Beckham Law, the regime gained its name, as you might have guessed, from English footballer, David Beckham, who was one of the regime’s early beneficiaries.
The regime is entirely optional. However, several eligibility requirements must be met in order to apply.
What are the main advantages of the Beckham Law?
The Beckham Law offers many significant tax advantages to its beneficiaries, including:
- Flat tax rate
Those who qualify for the regime and earn less than 600,00 euros in employment income can benefit from a flat tax rate of 24%. This is much lower than the progressive tax rates, which can be as high as 45%!
Not only does this simplify taxation massively, but the flat rate also simplifies tax planning, and provides certainty regarding the amount of tax to be paid each tax year
- Exemption of foreign-sourced income
Dividends, interest, rental income and other earnings sourced from outside Spain will not be taxed, which is particularly beneficial for those who have investments or maintain rental properties in other countries.
Other forms of income, such as capital gains and foreign-sourced investment income also remain untaxed, providing that they are not earned within Spain.
- No obligation to declare foreign assets
Under the Beckham Law, there’s no obligation for beneficiaries to declare foreign assets either by using Form 720 or by including them in a Wealth Tax Return in Spain.
This reduces the burden and complexity for expats who hold significant assets abroad and ensures that they can maintain privacy when it comes to their foreign investments and assets.
- Extended duration
The benefits of the Beckham regime apply during the first tax year of becoming a Spanish resident and for five years after, allowing expats to enjoy significant savings over several years.
- Incentives for high-earning professionals
From executives and engineers to digital nomads, the Beckham regime is designed to attract high-earning professionals. And by offering a favourable flat tax rate, as well as foreign-sourced income exemptions, Spain becomes a much more attractive destination for these skilled workers.
What are the application requirements?
To take advantage of this tax regime, you must:
- NOT have been a Spanish tax resident for the last five years
- Move to Spain for new employment, after being transferred to a Spanish entity within your current company, to work remotely for a foreign entity, or to work as a director
- NOT earn an income through a permanent establishment in Spanish territory
- Submit your application within six months of registering with the Spanish tax authorities or your arrival in Spain, whichever comes first.
Who can’t apply?
Whilst many expats will be able to benefit from the Beckham Law, there are a number of exclusions to be aware of, and the following groups are, unfortunately, not eligible to apply:
- Freelancers or self-employed people, except those who hold a digital nomad visa
- Sports professionals, including athletes, regardless of their income or status within their fields
How do I apply?
As we mentioned earlier, your application must be submitted using Form 149 within six months of becoming a tax resident in Spain.
To apply, you’ll need to register for a Foreigner Identity Number, also known as an NIE (Número de Identidad de Extranjero) if you haven’t already, and also provide the following documents:
- Your passport
- Your National Insurance or Social Security number
- Your employment contract with a Spanish company
Once your residency has been established and your eligibility assessed, you’ll be required to declare your income using Form 151.
Need expert advice?
Whether you want to know more about Spain’s Beckham Law, or you’d like a little help obtaining and submitting your application, we’re here for you.
Get in touch with our team today by calling +34 952 85 36 47 or send us an email at info@fluentfinanceabroad.com and we’ll be in touch with more information shortly!
Why not check out our YouTube video, where we discuss the Beckham Law in Spain in detail with expert tax advisor, Pablo Mallo Barcena?
