Beckham law: special taxation for expats
The special tax regime for people with high salary who move to Spain for work was nicknamed as “Beckham Law”, because this tax regime was set up at the time football player David Beckham was contracted by Real Madrid football team in 2003. He “miraculously” saved around 50% of the income tax he should have normally paid, thanks to this new law. The aim of this regime was not just to attract football players, but in general highly valued employees, for example scientist, researchers, directors, etc. Actually, the sportsmen are currently excluded completely from the application of this law.
The essence of the law is that when you move to Spain to work here, you have the option of being taxed as non-tax resident in the tax year you acquire the tax residency and the following five years. Without the Beckham law, you become always tax resident if you live in Spain for more than 6 months in a tax year.
If you opt for the Beckham regime, instead of being taxed as the locals with a tax rate between 19 and 45 percent for the worldwide income, you will be taxed in Spain under the Non-Resident Income Tax with a reduced tax rate. This rate is 25% for net-income up to 600.000 euros; and 45% for net income over 600.000 euros.
To summarize, the Beckham regime will be favourable in case your net salary is between 60.000 and 600.000 euros per year.
Another advantage of the Beckham regime is that any wealth tax that may still exist in some parts of Spain would not be applied to any wealth you have outside of Spain. The Beckham regime also liberates you from the obligation of filling in the infamous form 720, that all the tax residents in Spain need to fill in to inform the authorities regarding the assets they have outside of Spain.
The main three requirements to obtain the Beckham regime and stay non-resident are the following:
- You have not been resident in Spain during the past 10 years.
- You come to Spain to work in a Spanish company, where you or your family members do not own for more than 25% in total.
- You apply for the regime at the latest 6 months after your work contract is officially registered.