Undoubtedly, qualification for the special tax regime for “impatriots”, which is otherwise known as the Beckham Law, is one of the things that overseas taxpayers are most concerned about when they are posted here for work purposes.
Because of this, and given the interest that this law engenders, we have decided to put together a guide to the law’s main points and who may best take advantage of it. We will also mention the most recent modifications to the law, which came into force following the 2015 tax reforms.
What is the Beckham Law and why was it passed?
It is a special system which was passed with the aim of boosting the Spanish economy and to attract a certain profile of professional workers, such as senior executives and highly qualified individuals, during the period in which the famous footballer was playing in Spain.
It allowed overseas workers posted here to pay a flat rate of 24% as if they were non-resident. They would not have to pay tax on their earnings outside Spain and would not be subject to the progressive rates.
This means that the regime was highly beneficial for football clubs, who often paid salaries net, and which were able to make considerable cost savings if the footballer were to apply for this tax system.
Who can now apply for this special scheme?
The people who can take advantage of the tax system are those individuals who take out tax residency in Spain and who fulfill the following requirements:
To have not been resident in Spain during the 10 years prior to their posting;
To have relocated to Spain because of a work contract (the exception is in the special scheme for professional sports people) or to have a letter of relocation;
To become an administrator of an entity in which the individual has no capital invested.
How is this system applied?
It allows you to pay tax on a non-resident basis whilst maintaining the status of a normal taxpayer under the IRPF (personal income tax) scheme;
The total amount of work-derived income of the taxpayer during the application of this special scheme will be understood to have been obtained in Spanish territory;
Income obtained in Spanish territories will be taxed on a cumulative basis during the calendar year.
For how long can the scheme apply?
It applies during the tax period in which Spanish tax residency is granted and in the 5 subsequent tax periods;
The possibility exists to drop out of the scheme or to be excluded from it.
How can I take up this option?
Through an application to the tax authorities within 6 months of signing on to the social security register in Spain (form 149);
Taxpayers shall present their tax return for personal income tax (form 151) under the self-assessment system during the applicable period.
What changes have been made to this system since its inception?
Changes began to be made in 2010 when it was decided that cost savings needed to be made. From then on, only taxpayers with incomes not exceeding €600,000 would be eligible for the scheme.
In the most recent tax reforms, professional sports people were excluded from the scheme and the limit of €600,000 disappeared, or rather 24% was paid up to that income limit, after which a 46% tax rate would apply (2015).
Apart from this, one of the most notable aspects of the reform was that it would be assumed that the taxpayer’s work-related earnings in their entirety were made within Spanish territories, which would leave the taxpayer open to dual payments of tax (in Spain and in the country in which the earnings were generated.)