Understanding Spain's Beckham Law: A Tax Advantage for Expats

T

he Beckham Law is a special tax regime in Spain designed to provide expatriates with significant tax advantages when they move to the country for work. Officially regulated under Decree 687/2005, this regime was initially introduced to attract international talent, inspired by the arrival of football star David Beckham at Real Madrid. Below, we’ll explain how this tax regime works, its requirements, and its benefits.

What Is the Beckham Law?

The Beckham Law offers expatriates relocating to Spain a favorable tax regime for the first six years of residence. It ensures that foreign professionals, including company directors and highly skilled workers, are taxed as non-residents on their income, leading to reduced tax rates and exemptions on foreign earnings.

Key Requirements to Apply

To qualify for the Beckham Law, you must meet the following criteria:

1. Work in Spain:

  • You must have a valid job offer in Spain, or  
  • Be appointed as a director of a Spanish company. However, if you are a director, you cannot hold more than 24% of the company’s shares.

2. Recent Residency:  

  • You must not have been a tax resident in Spain for the last 10 years.

3. Apply within Six Months:  

  • The application must be submitted within six months of obtaining Spanish residency.

Benefits of the Beckham Law

1. Reduced Income Tax:  

  • Earned income is taxed at a flat rate of 24% on earnings up to €600,000. Income beyond this threshold is taxed at the general rate.  

2. Non-Resident Status for Tax Purposes:

  • You are treated as a non-resident for tax purposes, meaning:
  • You are exempt from declaring foreign assets using the Form 720.
  • No taxes are owed on income or capital gains generated abroad.

3. Capital Gains Tax:  

  • Only capital gains earned within Spain are subject to taxation.

4. Five-Year Duration:

  • This regime applies for the year you apply, plus five additional years, providing long-term tax relief.

Application Process

The process to apply for the Beckham Law is straightforward and typically completed online.

Here’s how it works:

  1. Gather Required Documentation:  You need to gather all the necessary documents, including proof of employment and residency status.
  2. Submit the Application:  The application is submitted electronically to Spain’s tax agency.
  3. Receive Confirmation:  The tax agency typically processes applications within 20–30 days, issuing confirmation of eligibility for the Beckham Law.

Important Considerations

Limited Duration:

After the sixth year, you will transition to Spain’s general tax regime as a resident taxpayer.

Capital Gains Abroad:

Only gains earned within Spain are taxed, making the regime particularly advantageous for expatriates with significant foreign investments.

Why Choose the Beckham Law?

This regime offers expatriates significant tax savings, especially for high-income professionals or directors relocating to Spain. It simplifies tax obligations, particularly for those with substantial assets or income abroad.