Beckham Law is a special tax regime for expatriates and their families, introduced as an incentive to attract talent and qualified workers to Spain. Also known as Special Ex-Pats’ Tax Regime (SETR), Beckham Law invites global workers to settle in Madrid, Barcelona, and beyond.
Global tax and compliance can be challenging, and calculating a tax return after relocating to a new country can cause a headache. We’ve put together a comprehensive guide to help highly qualified professionals navigate and better understand Beckham Law.
Disclaimer: This article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
How does tax work without Beckham Law?
When someone becomes a tax resident in Spain, their income is typically subject to Spanish Personal Income Tax, locally known as Impuesto sobre la Renta de las Personas Físicas (IRPF).
Based on this standard tax regime, ex-pats would pay taxes like any other Spanish resident, meaning their income is subject to progressive tax rates of up to 48%.
With Beckham Law, foreign workers who move to Spain and become residents can pay a fixed reduced tax rate of 24% for income up to €600,000 (USD 644,000). After €600,000, the tax rate goes up to 47%. The rate only applies to income generated in Spain for the first six years.
Essentially, those qualifying under Beckham Law are considered non-residents for tax purposes instead of paying progressive tax on their worldwide income (19-47%).
How does Beckham Law benefit ex-pats?
The Beckham Law allows ex-pats to pay taxes on their Spanish-sourced income as non-resident taxpayers at a fixed flat rate. Paying non-resident income tax benefits high-earning ex-pats who would otherwise carry a much heavier tax burden.
A few clusters of ex-pats benefit specifically from Beckham Law: ex-pats who only pay tax on Spanish-sourced income and those who earn above a specific threshold.
Spanish-sourced income vs. foreign-sourced income
The special ex-pats tax regime only applies to income obtained in Spanish territory, meaning that only Spanish income is taxed.
Ex-pats do not have to pay Spanish taxes on other income generated abroad. For example, wealth tax does not apply to any income earned through real estate, such as rentals, dividends, interest, and capital gains made outside of Spain.
However, foreign earned income through employment is an exception to this rule and is taxable at a normal rate. Ex-pats considered a non-resident for tax purposes will still need to pay tax on any foreign employment income.
However, this does not necessarily mean they will pay income tax twice (in the country where they generated the income and in Spain). There is a mechanism to avoid double taxation whereby, in certain circumstances, ex-pats can use the amount of taxes paid abroad as a tax credit in Spain.
Earning above the threshold
Ex-pats should ensure that Beckham Law is advantageous to their unique financial circumstances. For example, if employees are low-income earners, it may be more beneficial to pay the progressive tax rates, which could be as low as 0%.
The threshold between the two regimes differs depending on the region. As a general guide, if the ex-pat earns less than €50,000, it may be better to pay tax progressively.
In addition, those who apply for Beckham Law may not be eligible for other tax benefits such as tax relief for home rental income, deductions for disability, and benefits if they live with minor children or elderly parents.
Explore how you can attract top talent across borders with Deel.
What are the criteria to qualify for Beckham Law?
Before you relocate to Spain and take advantage of the tax regime, it’s important to understand the eligibility criteria.
Ex-pats can apply for Beckham Law if they meet the following criteria:
- You have not been a tax resident in Spain in the past five years
- You are moving to Spain for work reasons and have received an employment offer before entering the country (or have a Spanish digital nomad visa), transferring from a foreign company to Spain, or are the director of a company located in a country in which you do not own more than 25% of its shares (unless you have a startup/entrepreneur visa)
- You will perform all your working responsibilities in Spain, and responsibilities abroad cannot represent more than 15% of your total activity (unless you have a digital nomad visa)
- You do not receive income that would qualify as being obtained from a permanent establishment in Spain. Thus, the hiring company must be Spanish (unless they have a nomad/or startup/entrepreneur visa)
- You must apply for the special regime within six months of registering with the local Spanish Social security system
However, it’s not only the employment relationship to consider. The legislation also extends to the taxpayer’s spouse and children under 25.
In addition, it includes an elderly parent or a disabled individual of any age displaced with the taxpayer on the condition that they move to Spain within the first year of application (and there is no marital relationship with the employee seconded to Spain).
Who cannot apply for Beckham Law?
In addition to the above eligibility criteria, three groups of ex-pats cannot apply for this regime:
- Freelancers or self-employed workers (unless they are holders of a digital nomad visa)
- Sportspeople and professional athletes
- Directors of companies located in Spain of which they own more than 25% of the equity (unless they are holders of a startup/entrepreneur visa)
How can ex-pats apply for Beckham Law (SETR)?
If ex-pats meet the above criteria, they can apply for SETR by taking the following steps:
1. Complete form Modelo 030 and submit it to the Spanish tax agency online
The first form the ex-pat needs to complete is Modelo 030, which registers you as a fiscal resident with the Spanish tax authorities. It also allocates a tax identification number (NIE).Under Spanish tax law, individuals who spend 183 days or more during a tax year in Spain are typically deemed tax residents.
2. Complete application form 149
After receiving approval from the Spanish tax authorities, you must send form 149 to the Spanish Tax Agency (Agencia Tributaria). The form will include your passport, NIE, employment contract, and social security number.
Note: The form must be submitted within six months of starting your employment in Spain.
3. Hand the approved application certificate to the Spanish employer
The approval process can take anywhere between ten days to two months. If approved, you will receive a certificate to give to your Spanish employer so they can apply for the tax rate deduction.
Attract, hire, and support international talent with Deel
Beckham Law is a great incentive for expats living in Spain, but it is also a huge advantage for Spanish companies hoping to attract and hire international talent. Those unfamiliar with hiring internationally may need a helping hand to navigate the process — and that’s where Deel comes in.
With Deel, employers can make it easy for workers to relocate to Spain and benefit from Beckham Law. Our in-house experts handle everything, from selecting the proper visa and forms, providing sponsorship, working with local governments, and applying the Beckham tax exemption to payroll.
Select the immigration tab from your Deel dashboard, and select ‘Check Visa Eligibility’ to get started.
Companies and candidates can track their application status from their Deel dashboard.
Gain a comprehensive overview of your global workforce’s immigration status to clearly understand which visas are active, when they’re due to expire, and how much they’re costing per month.
Manage and automate worker payments, tax filing, payroll deductions, tax incentives, and more.
Sound like a great solution for your global team? Learn more about Deel’s HR platform for global teams, or book 30 minutes with a product expert to get your questions answered.
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