Special Regime for Employees who are being Relocated to Spain

Beckham Law: Special Regime for Employees who are being Relocated to Spain

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What is the Beckham Law and what are the requirements?

Are you planning to relocate to Spain for work reasons? Then you may be interested in the Beckham Law. Beckham Law states that employees who establish residence for tax purposes in Spain as a result of their relocation may opt to pay Non-Resident Income Tax.

This special taxation regime, which is only applied for a period of six years, has its requirements and is applicable to employees only, as a result of an employment contract with an employer in Spain, in accordance with articles 113 to 120 of the Personal Income Tax Regulation.

In Spain, there is a special tax regime available for individuals who become Spanish tax resident as a result of an assignment to Spain derived from either:

  • An employment contract (excluding professional sportspersons);
  • Acquiring a board of director position in an entity (with certain restrictions of ownership).

This special tax regime is not applicable to pensioners or self-employed individuals.

The applicable period of six years comprises the first calendar year in which the new resident stays in Spain for more than 183 days, therefore adopting the consideration of tax resident in Spain, including the following five years.

However, you can only benefit from the Beckham Law if you haven’t been a tax resident in Spain ten years prior to the relocation. Likewise, it wouldn’t apply if you were hired by a permanent establishment located in Spain.

How is the Beckham Law taxed?

Only your Spanish income and gains would be taxable in Spain for income tax purposes (apart from employment income, which is taxable on worldwide basis); and only your Spanish based assets would be liable to wealth tax.

This regime, known as the Beckham Law, involves taxation on income obtained in Spanish territory only, meaning from the date of arrival in Spain until the expected departure date, the rates being 24% on the first 600.000 euros and 47% on the remainder from that amount.

This table applies to:

  1. Dividends and other income derived from equity participation in an entity
  2. Interests and other income from the transfer of own capital to third parties.
  3. Capital gains arising on the transfer of assets.

This table applies to any other income that aren´t dividends, interests or capital gains.

On the other hand, it is possible to opt-out from this regime as long as you do so during the months of November and December, prior to the start of the following calendar year, but please bear in mind that, if you do, you won’t be able to revert to the Beckham Law.

Finally, you must know that this special regime is not compatible with the resident status for the purposes of double taxation agreements and the right to its benefits, meaning you won’t be able to apply the concept of tax resident in the country of origin of which you are no longer a resident in.

Please don’t hesitate to contact tax experts, since depending on the autonomous community you are being relocated to, tax reductions after the application of the Beckham Law could be up to 50%.

Please note that this information is for general use only. For accurate advice and guidance, we highly recommend you book an appointment with an independent lawyer. Additionally, please see the following link: Taxes in Spain.

For more information or assistance, do not hesitate to contact Pellicer & Heredia on + 34 965 480 737 or email us at info@pellicerheredia.com.

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