Why is it called the 'Beckham' Law

The Beckham rule is is a moniker or popular name used to refer to a Spanish ‘Non-dom’ tax regime officially known as the ‘Special Regime for Impatriates (Article 93 of the Personal Income Tax Law)’, also called the ‘Tax Regime Applicable to Workers Displaced to Spanish Territory’ or ‘Régimen Fiscal aplicable a los trabajadores desplazados a territorio español o Régimen especial de impatriados’ in Spanish.

The Beckham Law is informally named after the famous English footballer David Beckham, who played for Real Madrid from 2003 to 2007. When Beckham moved to Spain, he benefited from this tax regime, which allowed foreign workers relocating to Spain to be taxed at a reduced rate on their income.

The law was initially designed to attract highly skilled professionals and sports stars to Spain by providing them with favorable tax conditions. Under the regime, qualifying individuals could be taxed at a flat rate of 24% on income earned in Spain, instead of the progressive tax rates that could be significantly higher. This made it particularly appealing for athletes and high-earning professionals, leading to the law’s association with Beckham and similar international figures who took advantage of it.

Pros and cons of the Beckham Rule

Pros

1. Reduced Tax Rate: The most significant advantage is the reduced flat tax rate of 24% on income earned in Spain, which can result in substantial tax savings compared to the progressive tax rates that can exceed 47%.

2. Attractive to High Earners: The law is particularly beneficial for high-income professionals, such as athletes and executives, making Spain an appealing destination for those seeking favorable tax conditions.

3. Long Duration of Benefits: The potential to benefit from the reduced tax rate for up to six years provides a longer window for expatriates to enjoy financial advantages while they establish their careers in Spain.

4. Support for Lifestyle Changes: Moving to a new country can be challenging, and the financial benefits of the Beckham Law can ease the transition, allowing individuals to focus on their work and personal adjustments.

5. Access to a Vibrant Market: Spain offers a dynamic business environment and quality of life, making it an attractive location for professionals looking to expand their careers internationally.

Cons

1. Eligibility Criteria: The law has specific eligibility requirements, such as being a foreign national and not having been a tax resident in Spain for the previous ten years. This limits access to the benefits for some potential users.

2. Income Limitations: The flat tax rate applies only to income earned in Spain, meaning that other types of income (such as capital gains or income earned from abroad) may not be taxed at the reduced rate.

3. Duration Limitations: The six-year limit on the reduced tax rate can be seen as a downside for those looking for long-term residency or who plan to stay in Spain for an extended period.

4. Complexity of Taxation: Understanding and navigating the tax implications can be complex, especially for individuals with multiple income sources or investment portfolios.

5. Potential Changes in Legislation: Tax laws can change, and future alterations to the Beckham Law could affect the benefits or eligibility, creating uncertainty for potential users.

Conclusion

The Beckham Law offers significant advantages for eligible foreign professionals looking to work in Spain, particularly in terms of tax savings and the quality of life. However, potential users must also consider the eligibility criteria, limitations, and complexities involved in utilizing the law effectively.

Who is eligible for the Beckham Law in Spain

To be eligible for the Beckham Law (the Special Regime for Impatriates) in Spain, individuals must meet specific criteria. Here are the key eligibility requirements:

Eligibility Criteria

1. Foreign Nationality: The individual must be a foreign national, meaning they are not a tax resident in Spain for the previous ten years. While the Beckham Law initially catered mostly to EU nationals, it is open to all nationalities, including non-EU nationals, as long as the other eligibility requirements are fulfilled.

2. Employment Requirement: The individual must move to Spain to work for a Spanish employer or a foreign company with a presence in Spain. This employment should be for a high-level position or a specialized role.

3. Tax Residency: The individual must become a tax resident in Spain as a result of their work relocation. In general, this means residing in Spain for more than 183 days in a calendar year.

4. Application Timeline: The application for the regime must be made within six months of starting the employment in Spain.

5. Income Limitations: While there are no specific limits on the amount of income that can be earned under this regime, the flat tax rate applies only to the income earned in Spain. Other types of income, such as capital gains or income from outside Spain, may not qualify for the same tax rate.

Additional Considerations

• High-Level Professionals: The law primarily targets high-level professionals, including executives, athletes, researchers, and specialists in various fields.

• Restrictions on Duration: The favorable tax regime is available for up to six years from the start of the employment.

• Compliance with Local Laws: Eligible individuals must comply with all local labor and tax laws while working in Spain.

Conclusion

Overall, the Beckham Law is designed to attract skilled foreign workers to Spain, offering significant tax benefits for those who qualify. Understanding and meeting the eligibility requirements is crucial for individuals looking to take advantage of this tax regime.

Are family members covered by the Beckham Law

Family members and dependents can also benefit from the Beckham Law regime, provided certain conditions are met. Here are the key points regarding their eligibility:

Key Points

1. Dependent Status: Family members or dependents of the primary beneficiary (the individual taking advantage of the Beckham Law) may qualify for tax benefits if they meet specific criteria, such as being financially dependent on the main applicant.

2. Residency Requirement: For family members to benefit from the regime, they must also reside in Spain. This means they would typically need to apply for the appropriate residence permits.

3. Tax Treatment: While the primary beneficiary is taxed under the special regime, family members who earn income in Spain may be subject to standard Spanish tax rates unless they also qualify for some form of tax relief or special regime.

4. Documentation: Proper documentation must be provided to establish the relationship and dependent status, which may include marriage certificates, birth certificates, and proof of financial support.

5. Duration of Benefits: The benefits of the Beckham Law apply to the primary applicant for up to six years. Family members’ eligibility and the nature of their benefits might depend on their specific circumstances and tax obligations.

How does the application process work?

The application process for the Beckham Law (Special Regime for Impatriates) in Spain involves several steps. Here’s a detailed overview of the process:

Application Process

1. Check Eligibility: Before applying, ensure that you meet all the eligibility criteria, including being a foreign national, having not been a tax resident in Spain for the previous ten years, and securing employment with a Spanish employer or a foreign company with a presence in Spain.

2. Obtain a Work Contract: You must have a valid employment contract or job offer from a qualifying employer in Spain. This contract should specify your position, salary, and the duration of employment.

3. Apply for a Tax Identification Number (NIE):

   • You need to obtain a Número de Identificación de Extranjero (NIE), which is a foreigner identification number required for tax purposes and other legal activities in Spain.
   • This can be done at a police station or immigration office in Spain or through a Spanish consulate in your home country.

4. Register as a Tax Resident: Once in Spain, you need to register as a tax resident. This typically involves declaring your intention to reside in Spain and providing proof of residence.

5. Submit Application for the Beckham Law:

   • You must submit your application for the Special Regime for Impatriates to the Agencia Estatal de Administración Tributaria (AEAT), the Spanish tax agency.
   • The application must be submitted within six months of starting your employment in Spain. It’s crucial to adhere to this timeframe to ensure eligibility.

6. Provide Required Documentation: Your application will require supporting documentation, which may include:

   • A copy of your employment contract.
   • Evidence of your tax residency status (such as your NIE).
   • Proof of previous residency status (to show you were not a tax resident in Spain for the last ten years).
   • Any other documentation requested by the tax agency.

7. Await Approval: After submitting your application, you will need to wait for the AEAT to process it. This may take some time, so it’s advisable to follow up if necessary.

8. File Tax Returns: Once approved, you will need to file your tax returns in Spain under the special regime. Ensure that you comply with all tax obligations, including reporting income earned during the year.

9. Renewal and Compliance: Keep track of the duration of the benefits (up to six years) and any changes in your employment status or residency that may affect your eligibility.

Conclusion

Navigating the application process for the Beckham Law requires careful attention to eligibility criteria and timelines. By following these steps and ensuring that all documentation is correctly prepared and submitted, individuals can successfully take advantage of the tax benefits offered by this regime.

Can you get Spanish citizenship with the Beckham Law?

The Beckham Law itself does not directly lead to Spanish citizenship. However, it can indirectly facilitate the process of obtaining citizenship under certain circumstances. Here are the key points to consider:

1. Residency Requirement:

• The Beckham Law allows eligible foreign workers to live and work in Spain for up to six years under favorable tax conditions. During this time, individuals can establish residency in Spain.

2. Path to Citizenship:

• In general, to apply for Spanish citizenship, a person must have resided in Spain for a specific period. The standard residency requirement is typically 10 years. However, for certain nationalities (e.g., citizens of Ibero-American countries, Andorra, the Philippines, Equatorial Guinea, Portugal, and others), the required period is reduced to 2 years.

3. Legal Residency:

• Being a tax resident in Spain under the Beckham Law contributes to the overall residency duration needed for citizenship. However, you must maintain legal residency and comply with all local laws during your stay.

4. Application for Citizenship:

• Once the residency requirement is met, individuals can apply for Spanish citizenship through naturalisation. This process typically involves demonstrating good conduct, economic stability, and integration into Spanish society, including language proficiency.

5. Additional Factors:

• It’s essential to keep in mind that obtaining citizenship in Spain is a legal process that involves submitting various documents, and fulfilling specific criteria, and it is subject to approval by the Spanish authorities.

Conclusion

While the Beckham Law does not directly grant Spanish citizenship, it provides a pathway to residency that can eventually lead to citizenship, provided the necessary residency requirements are met. Individuals seeking citizenship should be aware of the legal processes and requirements involved.

Is the Beckham Law a type of 'Non-dom' tax regime?

Describing the Beckham Law as a non-domiciled (non-dom) tax regime is somewhat accurate, but it requires some clarification. Here are the key points to consider:

Similarities to Non-Dom Tax Regimes

1. Tax Advantages for Foreign Nationals: Like non-dom regimes in other countries, the Beckham Law offers significant tax benefits to foreign individuals relocating to Spain. It allows them to be taxed at a flat rate (24%) on income earned in Spain, rather than being subject to the country’s progressive tax rates.

2. Focus on Income Earned in Spain: The Beckham Law applies primarily to income generated within Spain. This is similar to some non-dom regimes, where individuals are only taxed on income sourced within the country, not on worldwide income.

3. Attracting Foreign Talent: Both the Beckham Law and non-dom regimes aim to attract skilled professionals and high earners by providing favorable tax conditions.

Differences from Non-Dom Tax Regimes

1. Temporary Duration: The Beckham Law is intended for a specific period (up to six years), while non-dom tax regimes can be more indefinite or long-term, depending on the jurisdiction.

2. Not a Full Non-Dom Status: In traditional non-dom tax regimes, individuals can maintain non-domiciled status indefinitely as long as they meet certain criteria. The Beckham Law does not confer non-dom status; it specifically provides a tax regime for impatriates.

3. Different Legal Framework: Non-dom tax regimes typically exist within specific tax laws that define residency and domicile differently than the Beckham Law, which focuses on expatriates working in Spain.

Conclusion

While the Beckham Law shares some characteristics with non-dom tax regimes, such as offering preferential tax treatment to foreign workers, it is not a non-dom regime in the traditional sense. Instead, it is a specific tax incentive aimed at attracting foreign professionals to Spain for a limited time. Thus, it’s fair to highlight similarities but also important to note the distinctions in purpose, duration, and application.

Tax Agency official guide to Beckham Law

Here is a copy of the official guide from the Spanish Tax Agency referring to what is popularly-known as the Beckham Law. You can see the original version at the Spanish Tax Agency website in English here. Check the official version for the most up-to-date information.

Special regime for expatriates art. 93 Personal Income Tax Law

Regulations: Article 93 and Transitional Provision 17 Law IRPF ; Articles 113 to 120 of the Personal Income Tax Regulations; Order HAP /2783/2015, of December 21, approving models 151 and 149 and Order HFP /1338/2023, of December 13, approving the new models 151 and 149.

(With effect from 1 January 2023, Article 93 of the Personal Income Tax Law, which regulates the special tax regime applicable to workers, professionals, entrepreneurs and investors relocated to Spanish territory, has been amended by the Third Final Provision of Law 28/2022, of 21 December, on the promotion of the start-up ecosystem (BOE of 22 December).The aforementioned amendment reduces the prior period of non-residence in Spain to five years and extends the possibility of opting for the special regime to new groups of people, teleworkers, entrepreneurs and professionals, as well as to members of their family unit, under certain conditions.  Consequently, in the new regulation of the special regime there will be two figures, a main taxpayer and other taxpayers associated with him, coming from his family nucleus, linked to the main taxpayer in terms of the periods of application of the regime)

Individuals who acquire tax residency in Spain as a result of moving to Spanish territory may choose to pay Non-Resident Income Tax, while maintaining their status as taxpayers of Personal Income Tax (IRPF), during the tax period in which the change of residence takes place and during the following five tax periods, when the following conditions are met:

• Until December 31, 2022:

  1. That they have not been residents in Spain for the ten tax periods prior to the period in which they transferred to Spain.

  2. That the transfer to Spain took place as a result of any of the following circumstances:

     1. As a result of an employment contract, with the exception of the special employment relationship of professional athletes regulated by Royal Decree 1006/1985, of June 26.

        This condition will be deemed to be met when an employment relationship, ordinary or special, other than the one indicated above, or statutory, is initiated with an employer in Spain, or when the transfer is ordered by the employer and there is a transfer letter from the employer.

     2. As a consequence of acquiring the status of director of an entity in whose capital he does not participate or, otherwise, when the participation in the same does not determine the consideration of a related entity in the terms provided for in article 18 of the Corporate Tax Law.

  3. That it does not obtain income that would be classified as obtained through a EP located in Spanish territory.

• From 1 January 2023 (the new regulation of the regime applies to taxpayers who acquire their tax residence in Spain from 2023 and includes taxpayers who acquire their tax residence in Spain in 2023 as a result of a move to Spanish territory in the second half of 2022):

  1. That they have not been residents in Spain during the five tax periods prior to the one in which they move to Spanish territory.

  2. That the transfer to Spanish territory occurs, either in the first year of application of the regime or in the previous year, as a result of any of the following circumstances:

     1. As a result of an employment contract, with the exception of the special employment relationship of professional athletes regulated by Royal Decree 1006/1985, of June 26, which regulates the special employment relationship of professional athletes.

        This condition will be deemed to be fulfilled when an employment relationship, ordinary or special, other than the one indicated above, or statutory, is initiated with an employer in Spain. Likewise, this condition will be deemed to be met when the transfer is ordered by the employer and there is a letter of transfer from the employer or when, without being ordered by the employer, the work activity is carried out remotely, through the exclusive use of computer, telematic and telecommunications means and systems. In particular, this circumstance will be deemed to be fulfilled in the case of employees who have the visa for international teleworking provided for in Law 14/2013, of September 27, on support for entrepreneurs and their internationalization.

     2. As a consequence of acquiring the status of administrator of an entity. In the event that the entity is considered a patrimonial entity in the terms provided for in article 5, section 2, of the Corporate Tax Law, the administrator may not have a stake in said entity that determines its consideration as a related entity in the terms provided for in article 18 of Law 27/2014, of November 27, on Corporate Tax.

     3. As a result of the realization in Spain of an economic activity qualified as entrepreneurial activity , in accordance with the procedure described in article 70 of Law 14/2013, of September 27.

     4. As a result of the performance in Spain of an economic activity by a highly qualified professional who provides services to emerging companies within the meaning of article 3 of Law 28/2022, of December 21, on the promotion of the ecosystem of emerging companies , or who carries out training, research, development and innovation activities, receiving for this purpose remuneration that represents in total more than 40% of all business, professional and personal work income.

  3. That he does not obtain income that would be classified as obtained through a permanent establishment located in Spanish territory, except in the case provided for in letter b).3.º and 4.º of this section.

     The spouse of the taxpayer referred to in the previous section and his or her children, under twenty-five years of age or whatever their age in the case of disability, or in the event of non-existence of a marital bond, the parent of these children, may also choose to pay the Non-Resident Income Tax, while maintaining the status of taxpayers for the Personal Income Tax, provided that the following conditions are met:

     1. That they travel to Spanish territory with the taxpayer referred to in the previous section or at a later time, provided that the first tax period in which the special regime applies to the taxpayer has not ended.

     2. That they acquire their tax residency in Spain.

     3. That they meet the conditions referred to in letters a) and c) of the previous section.

     4. That the sum of the taxable bases of the taxpayers in each of the tax periods in which this special regime applies to them is less than the taxable base of the taxpayer referred to in the previous section.

        The special regime will be applicable during the successive tax periods in which, if these conditions are met, it will also be applicable to the taxpayer provided for in the previous section.

Taxpayers who choose this option are not considered residents for the purposes of applying a Double Taxation Agreement, as they are subject to taxation only on income they obtain from sources located in Spain.

The option , waiver or exclusion from the special regime is carried out using form 149 . The communication of the option must be accompanied by the documentation provided for in article 119 of the Personal Income Tax Regulations.

As of December 16, 2023, the date of entry into force of Order HFP/1338/2023, of December 13, the new model 149, approved in the aforementioned Order, replaces the previous one approved in Order HAP/2783/2015, of December 21.

Taxpayers who opt for the Special Regime must submit a special IRPF declaration in form 151 , adapted to the content of the regime.

The new form 151 of “Personal Income Tax Return. Special regime applicable to workers, professionals, entrepreneurs and investors relocated to Spanish territory” approved in Order HPF/1338/2023, of December 13, will be used for the first time for the presentation of the declaration corresponding to the 2023 tax period to be submitted in 2024. Declarations corresponding to tax periods prior to 2023 will continue to use Form 151 approved in Order HAP/2783/2015, of December 21.

Withholdings and payment on account

Withholdings and payments on account for personal income tax will be made in accordance with the regulations on non-resident income tax.

However, the percentage of withholding or payment on account of work income will be 24%. When the remuneration paid by the same payer of employment income during the calendar year exceeds 600,000 euros, the withholding percentage applicable to the excess will be the one in force according to the year of accrual (see table).

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Disclaimer

This guide is intended to provide general information and is not legal advice. The author and publisher are not liable for any damages or losses resulting from actions taken based on the information provided in this guide. For specific legal advice, consult a qualified professional.