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Did you know there is a specialised tax regime for expats in Spain? Beckham’s Law was introduced in January 2004, with English footballer David Beckham being one of the first to use it, having moved to Spain to play for Real Madrid a year earlier.
Yet, what is Beckham’s Law, and how does it work? Could it be an option for your tax planning if you are a British national considering a move to Spain? Below, our financial advisers at Scottdale offer a short guide to this special tax regime in 2024.
We hope these insights are helpful. If you want to discuss your financial plan with a member of our team, please get in touch to arrange a no-obligation financial consultation, at our expense:
+34 966 460 407
info@scottsdale.eu
What is Beckham’s Law?
Beckham’s Law is a special tax regime which may be applied to certain foreign workers in Spain. Normally, a progressive tax regime applies to the incomes of Spanish residents. However, Beckham’s Law treats foreign workers (and, in some cases, their family members) as if they were non-resident for tax purposes.
For instance, those who are eligible for Beckham’s Law pay a flat rate of income tax on Spanish-sourced income at 24%. Normally, residents are subject to a progressive rate, which can escalate all the way up to 45% (i.e. on income between €60,000 – €300,000). As such, Beckham’s Law could make a huge difference to an expat’s tax bill!
The 24% flat rate applies to income up to €600,000. Once that threshold is crossed, a 47% income tax rate comes into effect. Therefore, expats do need to plan their finances carefully. If your income is likely to stay under this threshold for the foreseeable future, this could be a promising sign.
Who qualifies for Beckham’s Law?
Not every British expat in Spain is eligible for Beckham’s Law. In particular, you must have moved to Spain for work – e.g. as an employee of a Spanish company or due to an intra-company transfer from a foreign company. Therefore, if you are relocating to Spain for retirement, Beckham’s Law is unlikely to benefit you.
It is worth noting that remote workers (e.g. digital nomads) may not qualify for Beckham’s Law due to the above requirement. Certain freelance workers could be eligible if, for instance, they earn their income from working with emerging companies in Spain.
Other specific rules to be aware of are as follows: Director-level employees may not own more than 25% of their employer’s business. Applicants must not have lived in Spain for more than five years, and at least 85% of their work must occur within Spanish territory. Moreover, you must apply for the scheme within six months of registering for social security in Spain.
Other considerations
Not all income types fall under the special provisions of Beckham’s Law. Notably, gifts or inheritances sourced from Spain are not subject to the 24% flat rate. Instead, a rate of between 7.65% – 34% applies depending on the value.
Capital gains are also treated differently, taxed at a progressive rate between 19% to 26%. Moreover, if you earn income from outside of Spain, then the normal income tax rates for residents apply (i.e. 19% to 47%).
If your Spanish assets are over €167,129.45, then you will have to contend with the Spanish Wealth Tax, which is levied at 0.2% to 3.5% per year. Moreover, certain personal allowances & family deductions are no longer available for those who have successfully applied for Beckham’s Law.
Building an efficient tax plan
Living abroad brings many complex tax considerations that can be difficult to navigate. Tax rules and rates vary across jurisdictions and can change over time (e.g. due to differences in Double Taxation Agreements).
Beckhams’ Law may be suitable or inappropriate for you, depending on your unique financial goals and circumstances. For example, if most of your assets are based outside of Spain, then the Spanish Wealth Tax may be less of a concern (it only applies to domestic assets). The special regime can also be more appealing if you have just moved to Spain for work, your income is primarily from Spain and falls below €600,000.
However, Beckham’s Law could be a poor/awkward fit for others. In particular, those who have lived in Spain for a while may not benefit due to the 5-year rule. Individuals with internationally-sourced income could find themselves with higher tax bills since double taxation treaties no longer apply (income earned outside of Spain is not subject to the flat 24% rate and could face a higher rate in the individual’s home country).
Invitation
To explore your options fully, consider talking to a specialist financial adviser with experience in expat financial planning.
If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
+34 966 460 407
info@scottsdale.eu