How to save taxes in your company with the Beckham Law?

If you are moving to Spain for work purposes or you have a company and want to move a team to Spain, you need to be aware of the so-called Beckham Law to save on taxes. In this post we tell you what it consists of, what requirements must be met, who can apply for its application and how to apply for it.

What is the Beckham Law?

The Beckham Law is a law that regulates a special tax regime for foreigners moving to Spain as it establishes a fixed rate of 24% on income earned in Spain, instead of applying the progressive rates on income earned worldwide, which range from 19% to 45%.

As a result, it is possible to pay less tax provided that certain requirements are met with respect to workers who want to move to Spain.

Actually, this is not a law in the strict sense of the word, but a modification made to section 93 of the law on personal income tax in 2004. Its name comes from the footballer David Beckham, who was the first to benefit from its advantages.

Before this regulation existed, foreigners who came to live and work in Spain and resided in our country for more than 6 months a year, were considered tax residents, so they had to pay IRPF on the income they obtained worldwide and, in addition, a progressive percentage was applied depending on the amount of income.

Beckham Law requirements

In order for the Beckham Law to be applied, a series of requirements must be met, as follows:

• The person applying for this special regime must not have been fiscally resident in Spain for the last 10 years.
  • The move to Spain must be justified by a new job. The person must have an employment contract in Spain with a Spanish company. In case the employee receives a salary also abroad, it cannot exceed 15% of his total income.
• The person applying for the regime cannot obtain income through a permanent establishment in Spain. Basically, this person must not be self-employed or carry out a self-employed activity.
• The regulations establish a series of deadlines that must be met in terms of the start of work, the period of time to travel or to apply for the special regime.
• If these requirements are met, you can voluntarily choose to apply this special regime, in which case you will be subject to Spanish Wealth Tax in Spain. Despite being taxed as a non-resident, a deduction of the 300,000 euros of the main residence is allowed for wealth tax purposes.

Advantages of the Beckham Act special scheme

The main advantages of applying the special regime established by the Beckham Law are as follows:

• Application of a flat rate of 24% on a maximum of 600,000 euros. Amounts exceeding this amount will be taxed at 47%.
• Tax is only payable on income obtained in Spain; no tax is payable on income obtained in another country.
• In relation to wealth tax, you will only be taxed on the net value of the assets that are in Spain.
• You do not have to file a Form 720 or declaration of assets and rights abroad.
• For inheritance and gift tax, the foreign person will be considered a resident.
• In the event that he/she benefits from dividends or from the sale of assets, whether movable or immovable, the applicable tax rate is 19%, which will be fixed.

Who can apply for the special Beckham Law scheme?

The persons who may apply for the application of the special Beckham Law regime are the following:

• Foreign employees who have recently settled in Spain.
• Administrators of a company who move to Spain to work in a company. In this case, they may not own more than 24% of the company.
• Expatriates who have high incomes and executive or management positions.

However, self-employed workers, company directors and professional athletes are excluded from this regime.

How do I apply for the application of the Beckham Law in 2022?

To apply for the application of the Beckham Law in 2022, you must fill in form 030 for registration with the Tax Office as a foreigner, after requesting the NIE at the police station, and then present Form 149 at the Tax Office and the following documents and information must be attached: the employment contract with the Spanish company, the Social Security number, a copy of the passport and the foreigner’s identification number (NIE).

The deadline for applying for the scheme is 6 months from the moment the worker registers with the Social Security as an employee of a Spanish company.

If you are in any of the situations we have seen and you want to apply the benefits of the Beckham Law, it is better to seek advice from tax experts in Spain rather than using a calculator of the savings you can achieve with the Beckham Law or other online tools. At LEIALTA we will study your case, give you the best alternatives to comply with the law and save tax and do all the paperwork for you.