Taxes, a commonly discussed matter and of everyone’s interest when it comes to optimizing your payments.
What is the Beckham Law Tax?
The Beckham law is well known as a special regime, where a better taxation method is applied, for those who are working and living in Spain but qualify to pay taxes as a non-resident. Its legal reference in Spain is the “Ley del IRPF” but it gained its commercial name, because of the football player David Beckham, benefiting from this regime.
Conditions
This regime can be enjoyed for a period of 6 years but, those who are interested in applying for it, several conditions must be fulfilled and complied:
Residency
You cannot have been a resident in Spain in the previous 5 tax periods.
Employment Contract
The reason you move to Spain is for work and for this you must have a working contract.
Administration of an entity
The reason you are moving to Spain is because you have acquired the status of Administrator of a company. In case the company is a Patrimonial entity (owner of Real State), this requirement is not fulfilled.
Entrepreneurial economic activity or activity carried out by a highly qualified professional.
These two options have been included in the amendments included in Law 28/2022, starting on 1 January 2023.
The Income
The income cannot be obtained through a permanent establishment in Spain.
Not have self-employed activity
The interested party cannot have a self-employed activity, such as free-lance for example.
Notification 149
Fill in the form 149 which consists of the notification to the Tax Office in Spain (Hacienda) that you opt for the special personal income tax regime under the non-resident income tax. It is very important to note that the notification via form 149, must be done within a maximum period of 6 months from the date which the working activity started or from the date on which he has been designated as a Administrator of the Company.
Possibility to opt for the special regime for the spouse or children.
The taxpayer’s spouse (who meets the above-mentioned requirements) and children under 25 years of age, or whatever their age in the case of disability, may also opt to apply the Beckham Law, if the following conditions are met:
- That they move to Spanish territory with the taxpayer, or if they do so at a later time, within the first year in which the regime is applicable.
- They acquire their tax residence in Spain.
- That they have not been resident in Spain in the last 5 years.
- Their income is lower than that of the main taxpayer.
Wealth Tax & Solidarity Tax on Large Fortunes.
Taxpayers under this regime will be obliged to file Wealth Tax (over €700,000 in assets in Spain), as well as the Solidarity Tax on Large Fortunes (over €3,000,000 in assets in Spain).
Benefits
Those who qualify can tax as non-residents even if working and living in Spain. This results in a considerable benefit as they will pay taxes on a flat rate of 24% up to 600.000€, instead of 47%, that faces a resident taxpayer in Spain that is not under this special regime.
Another great advantage of this law is that there is no need to file form 720.This is the form that all residents in Spain with assets outside the country worth more than 50,000€ must fill in once a year.
Disadvantages
This regimen can face certain disadvantages, being the most important ones:
- Doble taxation treaties are not applicable.
- The interested party will not be entitled to apply for the tax benefits provided for the rest of taxpayers under the normal tax regime, such as deduction of social security expenses.
- If the interested party is dismissed, he/she will not benefit from the compensation for dismissal.
Therefore, even though it is a very interesting option, each case needs to be studied with much detail so, contact your lawyer first and you will get the best fiscal planification and optimization for you.
Our tax department has a great understanding of how the process works and how to take care of the process in the most beneficial way always protecting your interests.
They will first contact you to schedule a first meeting where they will get to know the motifs of your application and advise you in the most successful possibilities for your case. From this initial meeting, they will request the necessary documentation to start the process which, among other, are: residency card, working contract and registration in the Spanish Social Security system.
They will then study thoroughly your case and inform you if it is feasible. If so, they will start by presenting al the documentation together with the application form 149.
The Spanish Tax Office can take several weeks to notify the interested party with the decision made, which is always based in the presented documentation and status of the interested.
Once they notify you with a favourable resolution to your demand, you can qualify under the Beckham Law regime and benefit to tax on a 24% flat tax rate for the following 6 years.
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