By reducing the percentage of income tax due from 45-47% to 24% the Beckham Law has managed to attract many highly skilled professionals to work in Spain. As a result, Spanish tax contributions are estimated to have grown by over €2,000,000.
During the time he played for Real Madrid, British football star David Beckham was one of the first foreign citizens to benefit from the so-called ‘tax inpatriate regime’, which currently treats foreign workers moving to Spain as non-resident tax payers.
As the purpose of the Beckham Law was to attract high-income earners, this tax rebate only applies to expats who earn a maximum of €600,000 per year. Earnings over this amount are taxed with 45% IRPF.
“Once approved, the Beckham Law is valid for 5 consecutive years starting on the year it was requested” – explains Rosana Tejada, tax advisor at Tejada Solicitors in Malaga. “For this reason, it is advisable to submit the 149 Form for Personal Income Tax during the first 6 months of employment in Spain”.
How to know if you can benefit from the Beckham Law
To be eligible for the Beckham rule, taxpayers should not have been residents in Spain during the 10 last years prior to moving. Furthermore, they must have moved to Spain on behalf of a work contract or after being appointed administrator of a business in Spain (but should not own more than 25% of the business assets).
To calculate the taxable income, besides the employment income we will need to consider any existing shares, stocks, savings, capital gains, surplus values (plusvalia) and earnings generated by real estate will need to be considered (with a 19-23% tax rate).
View a practical example of the Beckham law here
Downsides of the Beckham rule
However, the Beckham Law also has some disadvantages. Apart from paying tax on the income generated in Spain, workers also pay on their worldwide revenue. Besides, taxation in the country of origin will depend on each regional legislation. Likewise, the existence of treaties and double taxation agreements between Spain and the country of origin will also have a relevant impact on the tax burden.
For more information on how the Beckham Law can be applied to your specific case or for any other tax-related issues in Spain, such as property conveyancing, renting out a property for holiday purposes or inheritance tax, Tejada Solicitors will be pleased to offer personalised legal advice in English.