The income tax campaign is over but you can still file outside the deadline.
Thanks to the so-called ‘Beckham Law’ or ‘Impatriate Law’, foreigners who come to work in Spain pay less tax and do not have to declare their earnings in other countries. And so much for the summary in a single sentence. If you want to know more, we recommend you read on 😉.
What happened before the «Beckham Law»?
More or less until 2005, foreigners who came to Spain and spent more than 6 months here (i.e. more than 183 days a year) were considered tax residents.
In this context, there were different tax obligations for these persons. In particular, there were two somewhat controversial ones:
- The obligation to pay IRPF on the basis of their income obtained both in Spain… and in any other country!
- The progressive nature of personal income tax itself. As you know, it increases depending on the amount of income you have: from 19% to 47% when you earn more than 300,000 euros.
The fact is that many foreigners complained about the tax burden in Spain and for this reason the famous Beckham Law appeared ….!
Concept of the Beckham Law
Also known as the ‘impatriate law’, it is regulated in section 93 of the Spanish Income Tax Law and was published in 2004 (this information probably won’t give you much information, but it never hurts to know a little about the law).
As we have already mentioned, this law is a special IRPF regime designed for people who travel to Spain for work purposes, either to work or to look for work. In other words, for those who move their tax residence to Spain.
This group of people have the possibility of opting to pay tax under a tax regime very similar to that of Non-Residents, despite the fact that they are actually tax residents because they stay more than 183 days in Spanish territory.
As a result, they continue to be considered as IRPF taxpayers during the tax period in which the change of residence takes place and the following five (as indicated in article 93 of the LIRPF).
This legislation entails attractive tax benefits for both employees and employers, of which we highlight the following:
«Under the Beckham Law, it does not matter if you spend more than 183 days in the country, as you will pay less tax. In other words, it allows you to pay only on the income you earn in Spain, not worldwide. And with regard to the percentage, you pay a fixed rate of 24% up to 600,000 euros and if you exceed that amount, you will be charged a rate of 45%. »
Therefore, in principle, the aim was to provide facilities for entrepreneurship and to encourage the movement of qualified and talented workers to Spain, such as elite sportsmen and women. This is why it is known as the Beckham Law, as the famous footballer David Beckham was the first to benefit from it (as well as earning a lot of money, he paid less tax… some people are lucky).
However, after numerous modifications over the last few years, elite or professional sportsmen and women can no longer benefit from this tax regime as they have their own regulation in Royal Decree 1006/1985.
- The expatriate cannot have been resident in Spain for the last 5 years.
- Must have an employment contract. With the exception of professional sportsmen and women who are governed by their own regulations.
- This employment contract must be signed with a Spanish company.
- Regarding the administrators of an entity: they cannot own more than 24% of the company for the law to be applicable and thus be able to benefit from the tax saving.
- It does not apply to income obtained through a permanent establishment located in Spain.
- The core of the workers’ professional activity must be in Spain. However, it is possible to obtain work and income from abroad, as long as it does not represent more than 15% of the total income.
Who can apply for the application of this law?
Basically any foreigner who moves to Spain and who falls under the following situations:
- Foreign workers who have just moved to Spain.
- Expatriates with high incomes who hold executive or management positions.
- Administrators coming to work in a company.
In contrast, the following individuals are excluded:
- Self-employed workers.
- Professional sports athletes.
- Directors of business entities.
How to apply for the Beckham Law
Once it has been verified that the requirements have been met, the application must be submitted using form 149 within the first 6 months of registration as a worker in a Spanish company. That is to say, from the date of registration with the Social Security. Otherwise, if there is a delay, the application and its privileges may be rejected.
In addition, the Tax Agency must be informed by means of form 149, filling in the following data:
- Passport and NIE
- Social security number
- Employment contract with the Spanish company
From that moment on, the taxpayer will enjoy the benefits of this law for a period of 6 years during which he/she will have to formalise his/her non-resident tax returns annually by means of form 151.
With respect to the tax return
Taxpayers who apply this special regime are obliged to file and sign the personal income tax return on form 151 electronically, in general and within the period approved for each year for filing personal income tax returns.
Prior to this, they must be included in the Census of Taxpayers, and if not, they must first apply for registration in this Census by filing the corresponding census return (Form 036).
If the Beckham Law applies to me, do I have to file this tax return? No, if you have been granted this special regime, you have to file Form 151 and not the normal tax return that we all know.
At Taxdown we carry out all the necessary formalities in relation to the Beckham Law and we help all our users to save as much money and time as possible, that is our motto and main objective! We are waiting for you at email@example.com.
Frequently asked questions about the Beckham Law
Can the Beckham Law be waived?
Both the renunciation or exclusion from the special regime must be communicated to the tax authorities by filing form 149 within a maximum period of six months from the date of commencement of the activity as stated in the registration with the Social Security in Spain.
The taxpayer may opt for the national regime as long as this is done during the months of November and December and with application from January of the following year, with the consequence that it will no longer be possible to opt for it again.
Who is eligible to apply for the Beckham Law?
Essentially, any foreign person who moves to Spain and is in any of the following situations:
– Foreign workers recently arrived in Spain.
– Expatriates with a high income who occupy executive or management positions.
– Administrators coming to work in a company.
On the other hand, the following individuals are excluded from this law:
– Self-employed persons.
– Professional sportsmen and women.
– Company directors.