Tax Obligations of Those Covered by the “Beckham Law”

The Special Regime for workers, professionals, entrepreneurs, and investors who relocate to Spanish territory, also known as the “Beckham Law,” is regulated under Article 93 of Law 35/2006, of November 28, on Personal Income Tax (hereinafter, LIRPF).

This special regime allows certain taxpayers who move to Spain to be taxed as non-residents, which may be advantageous from a tax perspective depending on the individual’s specific circumstances and income level.

Below is a summary of the requirements and tax obligations for taxpayers who fall under this special regime (“Beckham Law”):

Requirements:

• The relocation must be due to one of the following circumstances:
  1. Moving to Spain as an employee for work-related reasons.
  2. Being appointed as a director of a non-related company (or of a related company that is not considered a holding company).
  3. Carrying out an economic activity in Spain classified as an entrepreneurial activity[1].
  4. Carrying out an economic activity in Spain as a highly qualified professional^[2], in accordance with the requirements established by law.
• The individual must not have been a tax resident in Spain during the five previous tax years.
• The option to apply for this regime must be exercised within six months from the start of the activity in Spain.

Taxation:

• Taxpayers under this regime are taxed as non-residents, at a fixed rate of 24% on the first €600,000 of income earned in Spain, and at 47% on any amount exceeding that threshold.
• Only income earned in Spain is subject to taxation, not worldwide income, which is a significant advantage for this type of taxpayer. However, it is important to note that under this regime, all income from employment or officially recognized entrepreneurial activities is considered to be earned in Spain, regardless of its actual origin.

Income Tax:

• Employment income and other income obtained within Spanish territory are subject to this special regime.
• The progressive rate scale of the Personal Income Tax (IRPF), which can be significantly higher, does not apply; therefore, opting for this regime becomes beneficial above a certain income level.
• Taxpayers under the Beckham Law must file a Non-Resident Income Tax return using Form 151 of the Spanish Tax Agency.
• Filing deadlines are the same as those for the regular Personal Income Tax return for any tax resident.

Beyond Personal Income Tax itself, the tax treatment of taxpayers under this regime is also relevant in relation to other taxes, such as the Wealth Tax or the Solidarity Tax on Large Fortunes, as well as for informational declarations of assets and rights abroad—Forms 720 and 721 in the case of virtual currencies.

Wealth Tax:

• Taxpayers are subject to the Wealth Tax, under real obligation, only for assets located in Spain, not for their worldwide assets.

Solidarity Tax on Large Fortunes:

• Taxpayers are subject to the Solidarity Tax on Large Fortunes for the same assets located in Spain that must be declared under the Wealth Tax, but not for their global wealth.

Form 720:

• While under this regime, taxpayers are not required to file the informational declaration of assets and rights located abroad.

Form 721:

• While under this regime, taxpayers are not required to file the informational declaration of virtual currencies located abroad.

Duration of the Regime:

• This regime can be applied during the year of relocation to Spanish territory and the five following tax years, unless the taxpayer opts out or is excluded, making a total of six years.

It is important to plan the move to Spain in advance if intending to apply this regime, and to assess whether it is beneficial to do so. Sometimes it may not be advantageous in the first year, but it could be across the full six-year period, especially if the individual’s income is expected to increase in the years following the first.

[1] An Entrepreneurial Activity is defined as one that is innovative and/or of special economic interest to Spain, with a favorable report from the National Innovation Company (ENISA), in accordance with the procedure described in Article 70 of Law 14/2013, of September 27.

[2] A Highly Qualified Professional: is one who provides services to startup companies as defined in Article 3 of Law 28/2022, of December 21, on the promotion of the startup ecosystem, or who carries out training, research, development, and innovation activities, receiving compensation that represents, in total, more than 40 percent of all their business, professional, and personal employment income.