Understanding the Beckham Law in Spain: tax benefits for expats

If you are thinking of moving to Spain and benefiting from a special tax regime, the Beckham Law in Spain is your best option. Designed in 2005 to benefit sportsmen such as David Beckham, hence the name of this law, this regime allows foreigners who want to work in Spain or apply for a digital nomad visa to be taxed at a flat rate of 24% on income earned in the country.

In addition, Spain has a UK Spain double taxation convention, which further extends the financial benefits of relocating. But what are the other benefits of moving to the UK through this law?

What is the Beckham Law?

As we have already mentioned, this law came to Spain in 2005 thanks to the sportsman Beckham. However, in December 2022 the conditions of the special tax regime were extended and updated to attract foreign talent to Spain, especially in the field of teleworking and start-ups.

The Beckham Law is a tax regime in Spain designed to attract foreign talent to the country, offering tax advantages for those who apply for it. This law provides the opportunity to reduce their tax burden.

Origin and purpose of the Beckham Law

The Spanish government created this tax regime to attract foreign talent and high-income earners, especially in sectors such as finance, sports, technology and entertainment.

The aim of this law is to boost the economy and create a more competitive business environment.

Who can benefit from the Beckham Law?

However, not everyone can apply and benefit from it. This law is specifically designed for people who have not been tax resident in Spain for the last five years and who move to Spain for work purposes, including people who work remotely using computer, telematic and telecommunications means and systems.

Tax advantages under the Beckham Law

Since it was passed in 2005, the total number of people who have benefited from the Beckham Law in Spain is estimated at 12,000 expatriates. They have taken advantage of the following tax benefits:

Fixed tax rate for expats

The main advantage of this law is the flat tax rate. This means that expatriates who are eligible for this law are taxed at a flat rate of 24% on their income up to €600,000 and 47% on any income above this threshold.

This withholding tax is much lower than that applied to a Spanish citizen earning more than €300,000 per year. Therefore, it is highly advisable to consider this special regime.

Exemption of global income

Another benefit of the Beckham Law is the worldwide income exemption. Under normal Spanish tax rules, residents are taxed on their worldwide income, i.e. on all income generated inside and outside the country. However, expatriates benefiting from the Beckham Law are only taxed on income earned in Spain.

Requirements to qualify for the Beckham Law

In order to be eligible for the Beckham Law in Spain, the following requirements must be met:

·         Not having been a tax resident in Spain during the previous five tax periods.

·         The transfer to Spanish territory must take place in the first year of application for the regime or in the previous year.

·         The application for this Special Regime must be submitted within six months of obtaining residence in Spain.

In addition to meeting these requirements, for the application to be approved, it must be submitted within six months of commencing employment in Spain.

Once the application is approved, the person can benefit from this tax regime for a maximum of six years.

Comparison to other tax regimes

To understand the advantages of the Beckham Law a little better, we will compare it with other tax regimes, both in Spain and in other countries.

How it differs from regular taxation in Spain.

In Spain, its residents are subject to a flat tax rate: the more they earn, the more tax they pay (with a maximum rate of 47%). In addition, Spanish residents are taxed on their worldwide income.

In contrast, those who benefit from the Beckham Law are only taxed on their income generated in Spain and at a flat rate.

Other European expats tax schemes

Several other European countries offer similar tax regimes to attract foreign talent. For example:

·         Portugal’s Non-Habitual Resident (NHR) regime provides tax exemptions on foreign-source income for ten years, and a flat rate of 20% on income from high-value activities.

·         In Italy, a new tax regime allows expatriates to be taxed on only 30% of their income in Italy for the first five years.

The Beckham Law has become one of the best ways to move to Spain to live and significantly reduce tax obligations, for a maximum of six years, which has been a key attraction for those planning to work in the country in the medium term.