Beckham Law: the advantageous tax regime for digital nomads and expats

The “Beckham Law” refers to the special tax regime applicable to foreign workers posted to work or telework from Spain.

Under this law, foreign workers who meet certain criteria can choose to be taxed in Spain only on income generated within the country, rather than on their entire global income and at an advantageous tax rate of 24%.

What requirements must be met to benefit from the Beckham Law?

Key conditions of the Beckham Law include:

Beneficiaries: foreign workers who move to Spain for work reasons and who have not been residents during the five tax periods prior to moving can benefit from this special regime.

Furthermore, the transfer must take place in the first year of application of the regime or in the previous year, due to:

1. An employment contract, whether signed by a Spanish company or with a foreign company with whom a posting letter has been signed.
2. Digital nomads, that is, when you have an employment contract with a foreign company that allows remote work through telematic means.
3. The acquisition of the status of administrator of an entity. If it is a property entity, the administrator may not have a participation equal to or greater than 25%.
4. Carrying out an economic activity in Spain, as a self-employed person, classified as an entrepreneurial activity.
5. The performance in Spain of an activity provided by a highly qualified professional who either provides services to emerging companies or carries out training or R&D activities, and these represent more than 40% of their income.

Family members: people in the family environment of foreign workers can also pay taxes under this system, such as spouses and children under 25 years of age or of any age in case of disability.

Reduced tax base: the worker can choose to pay taxes only on income generated in Spain, thus reducing his or her tax base.

Tax rate: the tax rate applicable to the tax base is fixed:

• 24% up to 600,000 euros.
• 47% from 600,000 euros.

Duration of the regime: those workers will be able to benefit from this regime during the first six months from the beginning of their employment relationship and, retroactively, all those who moved to Spain in 2022 or 2023. Once they are in the country, it applies for the year of arrival and the following five years.

In what situations is it not possible to benefit from this regime?

There are certain conditions that must be met to take advantage of the benefits of the Beckham Law, as there are specific cases in which it does not apply. Those who are not eligible include:

• Self-employed workers, unless they provide an economic activity classified as innovative or are highly qualified.

• Professional sportsmen.

What tax advantages and disadvantages does the Beckham Law have?

• Exclusive taxation of income in Spanish territory at a reduced rate of 24%, when generally taxation under the general regime would be higher. Furthermore, taxes will be paid in Spain exclusively on the income obtained in Spanish territory and not on their worldwide income, facilitating the taxation of new residents.
• Capital gains obtained abroad will be free of tax in Spain.
• Wealth Tax. Yes, said tax must be paid, but only for assets and rights located in Spain, such as non-tax residents in Spain.
• As the Beckham Law makes the taxpayer considered a tax non-resident in the eyes of the state, he or she does not have to submit Form 720 for the declaration of assets abroad.
• Inheritance and Donation Tax. The “inpatriates” under said Law must pay taxes on donations and inheritances by the Autonomous Community that corresponds to them, regardless of where the assets received are.
• Double taxation. Any foreign worker residing in Spain who takes advantage of this regime will not be able to apply most of the double taxation agreements.
• Expense deduction. The inpatriate will not be able to apply the tax benefits that other taxpayers can under a normal regime, such as the deduction of Social Security expenses.

For more information, do not hesitate to contact the Tax Department of CINC Advisory.