Spain offers a particularly attractive tax regime for foreign professionals and executives who relocate to the country. This regime, commonly known as the “Beckham Law”, allows individuals to be taxed differently from the general Personal Income Tax (IRPF) system during the first years of tax residence in Spain.
Although it was originally designed for employees posted to Spain, the current legislation also allows individuals who move to Spain to assume the position of director of a Spanish company to benefit from this regime, making it a very interesting tool for international investors and executives who decide to carry out their business activity in Spain.
Why is it called the “Beckham Law”?
The name “Beckham Law” does not appear in the legislation, but it became popular in the media when footballer David Beckham joined Real Madrid in 2003. At that time it became public that the player benefited from a special tax regime for foreign workers relocating to Spain.
Since then, the regime has been popularly associated with his name, although its actual legal designation is the “special regime applicable to workers posted to Spanish territory”, regulated in Article 93 of the Spanish Personal Income Tax Law.
What the regime consists of
Individuals who opt for this regime remain tax residents in Spain, but they are taxed under rules similar to those of the Non-Resident Income Tax.
This mainly implies two characteristics:
- They are only taxed in Spain on income obtained in Spanish territory.
• Employment income is taxed at a flat rate of 24% up to €600,000 and 47% on the excess.
The regime applies during the year in which tax residence is acquired in Spain and the following five years, that is, for a maximum of six tax years.
When is it really advantageous?
This regime is often presented as a general tax advantage, but in reality it is only particularly beneficial in certain situations.
The reason is that the flat 24% rate may be lower than the marginal rate of Spanish personal income tax, which in some autonomous communities can exceed 45–50% for high income levels.
However, for lower income levels the regime may not be advantageous, as the ordinary IRPF applies progressive rates that are considerably lower than 24% in the initial brackets.
Even so, it may still be interesting when the taxpayer maintains assets or investments abroad, since during the application of the regime only income obtained in Spain is taxed.
Application to company directors
Following the legislative reform introduced in 2023, the regime can also apply to individuals who relocate to Spain as a consequence of acquiring the status of director of an entity, regardless of their percentage of shareholding in its capital.
This has significantly expanded its usefulness for foreign investors who create companies in Spain, partners who move their residence to manage a Spanish company, and international executives appointed as directors of Spanish subsidiaries.
Main requirements
One of the essential requirements is that the taxpayer must not have been a tax resident in Spain during the five years prior to the relocation.
In addition, the relocation must occur as a direct consequence of the appointment as a director or the start of an employment relationship in Spain.
Another important requirement is that the taxpayer must not obtain income through a permanent establishment in Spain, except in certain specific cases provided for by the regulations.
The case of holding or asset-holding companies
When the relocation takes place in order to assume the position of director of a Spanish company, it is important to analyse the nature of the company.
The legislation requires that the company should not be considered an asset-holding entity or, if it is, that the director’s shareholding does not create a relevant related-party relationship.
A company is generally considered an asset-holding entity when more than half of its assets consist of securities or assets not assigned to an economic activity.
Furthermore, a related-party relationship exists when the situations provided for in Article 18 of the Spanish Corporate Income Tax Law apply. In particular, a relationship is considered to exist between an individual and a company when the individual holds a participation equal to or greater than 25% of the share capital or voting rights. This aspect becomes especially relevant when the company qualifies as an asset-holding entity, since if the director holds a participation that creates such a related-party relationship with the company, the special expatriate regime may not be applicable.
Tax planning that must be analysed case by case
Although the Beckham regime can offer very significant advantages, its application requires careful prior analysis.
Factors such as the corporate structure, the nature of the company, the level of income, international assets or investment planning may decisively influence whether it is truly beneficial to apply this regime.
For this reason, it is essential to carry out proper tax planning before relocating to Spain. The application of the special regime requires strict compliance with a series of legal and formal requirements, and an inadequate structuring of the investment, the company or the relationship with the entity may prevent its application. In such a case, the taxpayer would be taxed as an ordinary tax resident in Spain, which entails the obligation to declare and pay tax on worldwide income under the progressive IRPF rates.
In addition, it should be noted that the Spanish Tax Authorities may subsequently review the application of the regime. If they conclude that the requirements were not met, they may regularise the tax situation, require payment of the corresponding tax differences and, where appropriate, impose surcharges, late-payment interest and even penalties.
Specialised advice
At Templecambria we have lawyers specialised in international taxation, executive mobility and foreign investment in Spain.
Our team regularly advises entrepreneurs, investors and executives relocating to Spain, analysing each situation individually in order to structure the most efficient option from both a tax and legal perspective.
If you are considering relocating to Spain or assuming the position of director of a Spanish company, we would be pleased to assist you in planning your tax structure in a secure and efficient manner.
At Templecambria you will find some of the best lawyers specialised in international taxation and planning for investors in Spain.
ÁLVARO MORALES SOUSA
PARTNER – LAWYER
CUSTOM PRESENTATIVE
tax@templecambria.com