The Beckham Law, also known as the Special Regime for Displaced Workers, is a special tax regime applicable to all foreigners who begin to live in Spain for work reasons, and which brings great economic benefits as they can be considered non-resident for tax purposes, as long as certain requirements are met, this rule can be applied during the year in which residency is obtained and the following 5 (that is, until year 6 of residence in Spain).
This measure, regulated by Decree Law 687/2005, was developed thanks to the Real Madrid footballer David Beckham with the objective that his assets and wealth would remain (and be taxed) in the country, although at a much more favorable tax level, today it has become a great attraction to attract foreign talent and capital to Spain.
Tax benefits of the Special Regime for Displaced Workers
To understand the advantages of The Beckham Law, we must first understand what the situation would be without its application; As a foreigner who lives in Spain more than 183 days per year, you would become a tax resident. This means paying personal income tax for the income you earn around the world (and not just in Spain), and at a progressive tax rate that can reach 47%.
Thus, the first characteristic of this special regime for foreigners is to be considered non-resident for tax purposes despite residing for more than 6 months in Spanish territory. This means that they will be taxed through income tax as a non-resident, applying a reduced rate fixed 24% up to €600,000 of net income regardless of your income, instead of the progressive one that reaches up to 47% in the general case, what exceeds said amount will be taxed at the aforementioned 47%, in addition to no type of tax on regional level in Spain would apply to income or assets that you had outside of Spain.
The sale of assets or dividends out of Spain will not be taxed in Spain, without the application of said special regime foreigners must pay through capital gains tax. Profits derived from the sale of assets in Spanish territory will be paid at a fixed rate of 19%.
Another advantage of this tax regime is that there is no obligation to present form 720, a form that all residents in Spain with assets outside the country worth more than €50,000 must fill out once a year.
Finally, regarding the estate tax, it also has great advantages since it will only be applied to properties maintained in Spanish territory, paying a tax rate that ranges from 0.2% to 2.5.
If you need specialized assistance, do not hesitate to contact us, we will be happy to carry out a personalized study of your case.
Requirements to apply the Beckham Law
With the new Startup Law of 2023, the requirements have changed to accommodate other groups, such as digital nomads, in any case the requirements to apply the special regime are:
- Not having resided in Spain during the 5 years prior to the displacement occurring, the participation of the spouse and children under 25 years of age is permitted (or without age limit in case of disability), provided they meet the general requirements of the regime.
- Having come to Spain for work reasons. That is, having received a job offer from an employer in Spain (before entering the country), having been transferred from a foreign company or becoming the administrator of a company regardless of participation, except in the case of being considered a patrimonial entity in which case it will not have a participation greater than 25% of its shares.
For these purposes, a property entity that, therefore, does not carry out an economic activity, will be understood as one in which more than half of its assets are made up of securities or are not affected by an economic activity, taking into account the average of the quarterly balance sheets for the entity’s fiscal year.
- All responsibilities and tasks at the work level must be carried out in Spain, if part of these are carried out outside, they cannot represent more than 15% of the worker’s total activity and annual income.
- Not receive income that would be classified as obtained through a permanent establishment located in Spain, except in the cases of carrying out an entrepreneurial activity or an economic activity in Spain by highly qualified professionals that give the right to benefit from this special regime.
- Carrying out an entrepreneurial activity in Spain in accordance with the procedure described in article 70 of Law 14/2013:
- It has to be an innovative nature and/or special economic interest for Spain
- It has been qualified as such by a favorable report issued by ENISA (Empresa Nacional de Innovación, S.A.), in the terms provided for in the aforementioned article 70 of Law 14/2013.
- That the taxpayer who moves to Spanish territory to carry out said entrepreneurial activity has a residence permit prior to said move.
- When the displacement, without being ordered by the employer, is due to the fact that the work activity is provided remotely, through the exclusive use of computer, telematic and telecommunications means and systems, you must be the holder of a residence authorization for teleworking. international (known as a digital nomad visa) working for a company (you cannot be a freelancer).
- Request the application of this regime up to a maximum of 6 months after the start of the employment relationship that brought you to Spain
- Come to Spain to provide services to emerging or I+D+i companies as a highly qualified worker (as long as a minimum of 40% of the incomes comes from these activities)
Freelancers and professional athletes will NOT be able to request the application of this special regime
If you need specialized assistance, do not hesitate to contact us, we will be happy to carry out a personalized study of your case.
Main disadvantages of the Beckham Law
Double taxation
Taxpayers who take advantage of this regime will not be able to apply most double taxation agreements.
Expense deduction
Another of the most notable disadvantages is that the person will not have the right to apply the tax benefits provided for the rest of the taxpayers in the normal regime, such as the deduction of Social Security expenses.
Compensation Exemption
The person who takes advantage of this regime will also not have the right to exemption from dismissal compensation. Likewise, he will not be entitled to the minimum deduction for descendants or relatives.
Without a doubt, the application of this law entails interesting advantages and some disadvantages, so it must be analyzed on a case-by-case basis. This analysis will serve to determine, first, whether the requirements are met and second, to determine whether the advantages outweigh the disadvantages. If the requirements are accomplished and it has been concluded that it may be beneficial, the next step would be to prepare the application to apply the Beckham Law. This application requires the presentation of a series of documents, and these must be presented correctly for the Tax Agency to accept the application since, if it is rejected, it will not be possible to request it again.
