The Beckham Rule offers significant tax advantages for individuals relocating to Spain, making it an attractive option for entrepreneurs, digital nomads and highly skilled professionals.

With a flat 24% income tax rate on Spanish employment income up to €600,000 and exemptions on most foreign income and assets, the regime provides substantial opportunities for income and wealth tax optimisation.

The benefits are granted for the year of application, plus an additional five years all over Spain. However, the Basque Country has a similar program offering extended benefits for up to ten years, with stricter requirements.

Based on our experience with tax inspections, it is important to conduct a comprehensive tax and immigration review of all aspects related to the application and monitor compliance along the way. .

While the election to be taxed under the Beckham Rule can easily be granted, almost by default under a Digital Nomad Visa, the tax authorities are likely to conduct further inquiries to ensure full compliance.

The level of compliance needed to keep the Beckham rule is often underestimated.  While the application process for the Beckham Rule is relatively straightforward, the tax office’s authority to revoke the regime poses a significant risk for those who fail to adhere to the requirements during the application year or during the following five years in which the rule is applicable.

Concerns may arise when employment contracts lack the necessary economic substance to qualify as genuine employment or when the employer does not engage in real trading activities. Tax authorities may also challenge relocations if they are perceived to be motivated by reasons unrelated to employment or corporate needs. The resolution of such issues typically depends on the tax inspector’s evaluation of the case, supported by expert guidance in responding to the inquiry.

Ensuring compliance with the requirements is fundamental not only at the time of submission but throughout the entire period of residence in Spain under this regime, as the tax authorities may conduct additional reviews. This obligation applies to both the applicant and any family members benefiting from the regime. Particular attention should be given to monitoring the employment income levels of all family members to ensure ongoing compliance.

Another often underestimated aspect of the Beckham Rule is its exclusion of individuals earning income through a permanent establishment (PE) in Spain. A PE can be easily created by a foreign employer if, under Spanish tax rules and double tax treaty provisions, the company is deemed to be trading in Spain or is managed and controlled from Spain. To mitigate the risk of losing eligibility for the special tax regime, it is essential to carefully review the contractual arrangements and the extent of the main applicant’s capacity to manage and control the company.

Finally, digital nomads benefiting from this rule must ensure that their work in Spain is performed remotely, relying exclusively on computer, telematic, and telecommunications systems. Any involvement in meetings, client visits, or business development activities within Spanish territory should be carefully evaluated to maintain compliance.

The Spanish tax office has the authority to examine income and contractual relationships from previous years—up to ten or five years, depending on when the rule was implemented—to ensure full adherence to the regulations.

Resident or non-resident?

The Beckham Rule, established under Article 93 of the Spanish Personal Income Tax Act, allows eligible individuals to be taxed as non-residents for up to six years while maintaining their resident status in Spain. This dual status—being a resident but taxed under non-resident rules—raises complex legal and tax issues, which are still being clarified.

With limited case law available for guidance, reliance often falls on binding opinions issued by the tax office, which must be carefully assessed, as they may not directly apply to similar cases.

It is important to note that the Spanish Tax Office will not issue a tax certificate of residence based on Double Tax Treaty rules under this regime. This could significantly affect the tax exemptions intended by the rule, as other countries may still consider the income exempted in Spain to be taxable.

The regime is designed to attract international talent by offering favourable conditions to individuals relocating to Spain for employment, directorship positions, or entrepreneurial activities. However, the requirements must be observed carefully. 

If the regime is revoked, the consequences can be severe. Individuals may face backdated income and wealth tax liabilities, penalties, and fines, potentially erasing the financial benefits initially sought. Therefore, it is important to ensure compliance, proper documentation, and proactive management of all aspects of the application year by year.

Staying compliant with the Beckham Rule means keeping a close eye on your annual tax returns, meeting all the conditions, and considering how your home country’s tax rules might affect you. Getting expert advice every year is key to avoiding risks and making the most of the regime’s benefits.

Del Canto Chambers specialises in Beckham Rule applications, compliance, and resolving tax and immigration disputes. You can book a complimentary call at https://delcantochambers.com/contact-us/