From January 2023 the reform of the special tax regime for workers posted to Spain came into force. This special tax regime is better known as the “Beckham Law”.
What is the Beckham Law?
Beckham law is a special tax regime that allow people who move from abroad to Spain and acquire the tax residence in Spain to opt to be taxed as if they were Non-Residents during the year in which the movement takes place and the following five years. That is, this regime allows them to be taxed at a fixed tax rate of 24%, instead of the general progressive tax rate (which can go up to 47%).
Main requirements for the Beckham Law
To qualify for this tax regime, the following requirements must be met:
a) That the displacement occurs due to any of the circumstances indicated in the Law.
b) Not to have been a tax resident in Spain in the five years prior to the movement to Spain.
Modifications of the Beckham Law
As new features of the reform are the following:
i. Possibility of applying the tax regime for the remote workers, commonly known as “digital nomads” (worker who works remotely, through the exclusive use of computer, telematic, and telecommunication means and systems).
ii. The suppression of the previous maximum percentage of 25% of the stake in the cases in which the displacement to Spain takes place due to the appointment as director of an Spanish entity that develops an economic activity.
iii. The extension of the application of the tax regime to the applicant’s family members.
When you can opt for the Beckham Law
Currently the situations that allow to opt for the special tax regime are the following:
1. Beginning of an employment relationship with a Spanish employer, or when the posting is authorized by the employer of origin by means of a transfer letter. This is the same situation that already existed before the reform.
2. Existence of an employment relationship by a remote worker. New assumption. We remind that non-EU citizens must previously obtain the new Digital Nomad Visa (DNV).
3. Appointment as director of a Spanish entity. Now is indifferent of the percentage of the stake (except for patrimonial entities -non -activity entities- in which they will not be able to have more than 25% of the stake).
4. Development in Spain of an economic activity qualified as entrepreneurial activity. New assumption.
5. Highly qualified professionals who carry out an economic activity in favor of a Spanish company qualified as an emerging company and/or, who carry out training, research, development or innovation activities that represent more than 40% of their income. New assumption.
Benefits for those who opt for this tax regime
The new situations introduced in this special tax regime make it an interesting incentive for those persons who, fulfilling the requirements, have recently moved to Spain or are planning to do so in the future.
The persons who apply for this special tax regime will be able to benefit from the following aspects:
1. Tax rates: They will be taxed at 24% for the income from work and business or professional activities obtained worldwide, with some particularities.
2. Only financial income and capital gains deemed to have been obtained in Spanish territory are taxed in Spain, excluding those from foreign sources.
3. Wealth tax: Only assets and rights located in Spain are taxed, not wealth located outside Spain.
4. Form 720: There will be no obligation to file the informative declaration for assets and rights held abroad.
5. Family unit: With effect from 2023, the extension of the special regime to the spouse and minor children of the taxpayer who travel with her is allowed, under the terms and with the requirements contained in the Law.
Due to the recent and novel nature of this Law there are certain points that require a detailed analysis. We recommend the assistance of tax professionals throughout this process.
At Spanish Lawyer NYC we have closely followed the legislative process of this Law, paying special attention to all those aspects that may be of interest to our US clients, and adapting the possible scenarios to provide them with individualized and quality advice.