We advise all foreign workers posted to Spanish territory to get information and advice on the Beckham Law requirements and the tax benefits it provides. The best way to do this is through advisors specialised in national and international taxation such as JDV Asesores for Expats and Self-Employed.
We are going to detail what requirements we are talking about and how to make use of these succulent tax advantages that foreign residents in Spain can have in their tax returns.
Advantages of the Beckham Law
With the Beckham Law we are talking about the special regime applicable to workers, professionals, entrepreneurs and investors posted to Spanish territory.
Main advantage: Only income obtained in Spain is taxed, which can be a significant tax advantage for those with income generated outside the country, who will be exempt from taxation.
Another advantage: It is not necessary to file form 720, which is compulsory for all foreign residents in Spain with shares, securities, accounts or real estate abroad whose value exceeds 50,000 euros.
The last great tax advantage is that, as we will see below with regard to the requirements to benefit from the Beckham Law, the need to be resident in Spain will not prevent the beneficiaries of the Beckham Law from paying tax on income obtained in Spain at a rate very similar to that of non-residents. They would be taxed at a flat rate of 24% for the first 600,000 euros of income, and 47% for the excess.
Beckham Law requirements: Here they are
We have to refer to art. 93 of the IRPF, in force since last January 1st, to find the Beckham Law requirements that we need to know before proceeding to start the process and succeed. There are two main ones:
- Not having been a tax resident in Spanish territory in the last 5 tax years prior to the application of the Beckham Law.
- Obligation to transfer tax residence to Spanish territory as a result of 2 specific reasons:
Employment contract
As a consequence of an employment contract. This condition will be understood to be fulfilled when an ordinary or statutory employment relationship is initiated with an employer in Spain. Likewise, this condition will be understood to be fulfilled when the transfer is ordered by the employer and there is a letter of transfer from the employer (i.e. the transfer to national territory will have to be with a new employment contract with a Spanish employer; if it is not a new employer who orders us to move to national territory, a letter of transfer will be obligatory).
Administrator of an entity
As a consequence of acquiring the status of director of an entity. In the event that the entity is considered an asset-holding entity under the terms provided for in section 2 of article 5 of the Corporate Income Tax Act, the director may not hold a stake in said entity that determines its consideration as a related entity under the terms provided for in article 18 of Corporate Income Tax Act 27/2014, of 27 November.
In other words, the change of residence is due to obtaining the status of administrator of a company, where it is not necessary for it to be a third party company as long as it is not a patrimonial entity (a company where the assets are not assigned to any economic activity).
The change in the wording of the article of the Beckham Law at the beginning of 2023 allows us to benefit from this opportunity, as any person who wishes to carry out an economic activity, and does so through a company that holds the status of administrator, can obtain approval for the special regime.
Beckham Law requirements: Who can benefit
We have already learned that the Beckham Law targets profiles that have not been resident in Spanish territory during the last 5 tax years and wish to transfer their tax residence to Spain for a work-related reason. These professional profiles can be:
- Foreign workers posted to Spanish territory.
- Highly qualified professionals.
- Sportsmen/artists.
- Entrepreneurs/investors.
This Beckham Law also involves, if applicable, the spouse and children under the age of 25 of the taxpayer who obtains approval for the scheme.
Deadlines for joining the Beckham Law
In any legal proceeding, of whatever legal nature, the filing deadlines mark its viability for real purposes. At Sala Legal Boutique we have represented more than one and more than two clients who did not submit the documentation on time. It should be noted that most of the time the allegations to reverse the decision are not accepted, so always, always, know the deadlines to comply with the regulations.
Within the Beckham Law requirements, the first (and ultimately the most important) deadline concerns the application to exercise the option to pay tax under the aforementioned regime. Here, the most important thing is to make the application via declaration form number 149, and to provide the necessary documentation within 6 months of registration with the Social Security.
Then there is another 2nd deadline: the one related to the resolution of the file. The administration has 10 working days to do so from the submission of the application, but in practice the deadline is extended to 2 months.
Obligations after benefitting from the law
Two principally:
- The conditions that gave rise to its approval must be maintained.
- To declare the income obtained in national territory using tax return form 151. The deadline for filing it is from April to June.
Remember that form 151 is analogous to the general regime tax return.
Pay attention to the fact of failing to comply with any of the precise conditions that led to its application. If this occurs, the person will be excluded from the special regime during the tax period in which the non-compliance occurs.
Conclusions
JDV Asesores for Expats and Self-Employed are social partners of the Spanish Inland Revenue, which means that we receive updated communications and the corresponding tax documents to help our clients meet their tax obligations in terms of VAT and income tax filing.
We handle Beckham Act applications from €500 and information enquiries for as little as €50. If you have any queries and need advice, our team will be happy to help you.
Given the complexity of the tax regulations relating to the Beckham Law, we always suggest that you undertake the process with the advice of professionals with experience in this type of procedure.
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