Everyone dreams of paying the taxman less. And the good news is that in Spain, this dream can come true with the so-called Beckham Law. Expats who fulfill the right conditions have a special dispensation to pay less tax in Spain, not just on income tax, but also on wealth tax. In this article, we explain all you need to know about the Beckham Law to pay less tax in Spain.
The Beckham Law in a Nutshell
Usually when you move to work in Spain you become a tax resident and as such, subject to resident income tax rate. However, a special tax regime allows foreigners to choose to be liable for Spanish non-resident income tax laws instead.
Under this regime, you are taxed at a flat rate of 24% (the non-resident tax rate; 45% for annual income in excess of €600,000) instead of the 19% to 45% sliding scale for residents. Furthermore, you are liable for tax in Spain only on income obtained in Spain, not worldwide.
Did you know? The tax regime is known as the Beckham Law because David Beckham was the first to use it when he moved to Spain to play for Real Madrid football team.
How does it work?
In normal circumstances, anyone who moves to Spain to work and/or spends more than 183 days a year in the country is considered tax resident. However, under the Beckham Law, you can choose to remain non-resident for tax purposes even though you spend over 183 days in the country a year.
Did you know? Costaluz Lawyers provide tax advice in Spain. Discover what our services include.
What are the conditions?
As you’d expect, the Beckham Law has certain qualifying requirements. These are:
- You must not have been tax resident in Spain for 10 tax periods (10 calendar years) prior to your employment placement.
- The placement in Spain is the result of an employment contract (or letter of assignment) – this condition does not apply to professional athletes. OR
- The placement in Spain is the result of becoming the administrator of a company. (Note that conditions apply to this aspect of the law such as you cannot own more than 25% of the company.)
- Income may not be earned through a permanent establishment located in Spanish territory.
Did you know? The Spanish government introduced the Beckham Law in 2004 to attract highly qualified foreigners to Spain.
Further tax benefits
Declaring yourself to be non-resident under the Beckham Law also helps you pay less tax in Spain in the following instances:
Capital gains tax
You will be liable for income tax on profit gained from the sale of assets (immovable such as property and movable, e.g. cars) and dividends located in Spain. But as a non-resident, you will not be liable for income tax in Spain on profit from capital gains abroad.
Did you know? Being non-resident for tax purposes in Spain does not free you from tax obligations in other countries. For example, if you work in Spain under the Beckham Law and sell a property in London, you would not be liable for capital gains tax in Spain, but you could be in the UK.
Wealth tax
This tax is only applied to assets and property located in Spain rather than your worldwide wealth. But again, the Beckham Law does not exempt you from tax obligations for wealth in other countries.
What’s the catch?
Before you opt to become non-resident under the Beckham Law and pay less tax in Spain, take professional advice. Let a tax advisor calculate your tax liability in Spain and other countries to work out if it’s financially profitable for you.
And best in mind that if you are non-tax resident in Spain, you cannot benefit from double taxation agreements.
Did you know? You can benefit from the Beckham Law for a maximum of six tax years in Spain. The tax year runs from January 1st January to December 31st.
How do you apply for the Beckham tax regime?
Once you know that your finances will benefit from becoming non-tax resident under this regime, you need to inform the Spanish tax authorities. To do this, you fill in application form 149 and present within six months of your company signing you up for Spanish social security. You also need to show your passport and job contract.
You must present annual tax returns using the non-resident form 151.
Did you know? Costaluz Lawyers offers comprehensive tax services in Spain to both residents and non-residents. Our expert team offers considered advice and services such as tax representation and filing of returns. Using these, you pay less tax in Spain and keep on the right side of the tax authorities.
Get in touch for a free consultation.
Maria Luisa Castro
Hi,
My family moved to Spain a little while ago and I am travelling back and forth.
I am a dual EU & Australian citizen.
Before becoming a resident I want to explore my options of working for either on a fixed contract for a company in Northern Europe, or, as a freelancer for clients in both Northern Europe and Australia.
I have been hesitant to register as a resident + autonomo as it’s very expensive (you even pay when you have no income for a period) and for a pension you have to contribute for a minimum of 15 years.
My initial thoughts is the dilemma which route to choose, or in other words the best option to get the 24% flat tax rate for 5 or 6 years:
1) to work remotely from Spain for a company in Northern Europe via a Spanish subsidiary (Beckham law) via my EU citizenship, or,
2) to work mainly remotely as a freelancer for one or more clients outside if Spain via my Australian citizenship (digital nomad law). Additional question here, where should my own autonomo structure/ company be based then (from where I invoice my clients)? I would guess outside Spain.
Many thanks in advance!
Dear Henke,
Thank you for contacting us.
In accordance with current legislation, the self-employed who obtain a digital nomad visa cannot opt for the special tax regime for workers posted to Spain with respect to the tax rate of 24% up to 600,000 euros.
However, depending on how much your annual income is, we could inform you of the general income tax rate for your personal situation.
Therefore, if you like, you can send us all the questions you would like us to answer you, and we will send you a quote.