EU countries have a favourable tax regime for workers coming from abroad, or returning to their home country after having been abroad for work. For foreign workers in Spain, and Spanish workers returning from abroad, the favourable tax regime is the Beckham Law.
The Beckham Law is so called because it originates from the English footballer David Beckham, who arrived in Spain to play for Real Madrid. In order to make him leave the millionaire income generated from his engagement contract in Spain, a special tax regime was devised that would make him less taxes for a certain period of time. Nowadays, the Beckham Law has undergone several changes and can no longer be used by professional athletes. It is however a fiscal tool that makes moving to Spain more attractive for foreign workers with employment contracts and employee income up to € 600,000. It is an ideal tax regime for highly-skilled workers employed by companies in Spain.
The Beckham special tax regime to pay less taxes in Spain. This is how it works
The Beckham tax law is a special tax scheme that compensates foreign employees living in Spain and Spanish employees returning from abroad. Said tax regime allows those who are entitled to it to pay taxes at a rate of 24%. The 24% rate is usually applied to non-residents, or to workers who produce an income in Spain up to 183 days per year. A person residing in Spain for more than 183 days is considered to be fiscally resident and is subject to a tax rate of up to 48% for any income produces in or out of Spain.
The Beckham regime is applicable to foreign employees arriving in Spain and not yet resident, and to Spanish workers returning from abroad after 10 years. The special tax regime can be applied to 6 consecutive fiscal years.
Main aspects of the Beckham special tax regime in Spain
Any foreigner arriving in Spain and staying for more than 183 days per year, i.e. circa 6 months, becomes a tax resident and is subject to the usual progressive tax rate from income produced in and out of Spain, which depending on the gross earnings per year, can reach almost 50%. Under the Beckham regime, a foreigner working in Spain, even after 183 days and for up to 6 years, is not subject to the ordinary tax rate. The same applies to Spaniards returning to their country after 10 years abroad. In summary – a foreigner or a person returning to Span after more than 10 years, are entitled to request within 183 days from their arrival:
- The ordinary tax regime provided for tax residents in Spain, and to be taxed for any income produced with the Spanish IRPF taxation, without prejudice to the rules on double taxation valid outside Spain;
- The Beckham taxation regime, and to be taxed as non-residents only for employee income produced in Spain (income generated abroad is exempt) at a rate of 24% up to a threshold of € 600,000.
Amount of the rates applied by the Beckham special tax regime
- With the favourable tax regime for foreign and Spanish workers, the non-resident income tax is fixed at 24% for the first 600,000 € of net income per year. The Spanish progressive taxation regime applies to foreign workers at 24% up to 600,000, and at 48% from € 600,000 upwards;
- No Spanish taxes apply to the income or assets of foreign employees or Spanish employees returning to Spain, if they are produced or owned outside of Spain;
- The sale of assets abroad (e.g. the sale of a property) or the income from capital gains abroad are not subject to taxation in Spain. Taxes on foreign capital gains only apply to foreigners who are not entitled to the Beckham regime;
- The sale of assets in Spanish territory is subject to a fixed taxation regime of 19%;
- The wealth tax on any real estate owned in Spain by foreign workers, non-resident for tax purposes, is 0.2 – 2.5%;
- The IRPF rates applicable to capital gains, dividends, interests originated in Spain amount to 19% up to € 6,000, 21% up to € 44,000, and 23% over € 44,000.
Lastly, exemption from the compulsory Model 720 applies for residents with incomes exceeding € 50,000 outside Spain.
Foreign workers entitled to the Beckham tax regime in Spain
The Beckham facilitated tax regime applies to foreign workers or wealthy expats in Spain who:
- Have not been resident in the 10 years prior to the request;
- Are in Spain for work reasons, having received a job offer before arriving to Spain;
- Were relocated to Spain to work for a foreign company;
- Are Managing Directors of Spanish companies where they do not own more than 25% of the shares;
- Carry out their duties and job responsibilities for the most part in Spain. To join the Beckham regime, only 15% of the total work activities carried out outside Spain is tolerated;
- Receive the income from a Spanish company or business. They do not receive income from permanent establishments on Spanish territory.
Application deadlines to the Beckham tax regime
The foreign or expat workers who meet all the requirements are entitled to apply to benefit from the Beckham tax regime within six months from the start of the employment contract in Spain.
Subjects not entitled to apply to the Beckham tax regime
Workers in Spain who are:
- Freelancers or self-employed workers;
- Sportsmen and professional athletes;
- Directors of Spanish companies where they hold more than 25% of the capital;
- Directors of non-Spanish companies.
How to apply for the Beckham tax regime in Spain
First of all, the employee must submit the Model 030 to the Spanish Tax Agency. Then they must submit the application form 149 within six months from the date of registration in the Social Security in Spain. The documents to attach to application form 149 are:
- Passport and NIE;
- Social security number;
- Work contract.
Within one or two months the foreign worker will know if their application to join the favourable tax regime has been accepted.
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