Key takeaways
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Beckham law in Spain, also known as Special Ex-pats’ Tax Regime (SETR), is a special tax regime for expatriates and their families introduced as an incentive to attract talent and qualified workers to Spain.
The tax law gives foreign workers who move to Spain to work and become residents the option of paying a fixed reduced tax rate of 24% up to €600,000 (USD 644,000) only on income generated in Spain for the first six years.
Instead of paying progressive tax on their worldwide income (19-47%), those that qualify for Beckham’s law are considered a non-resident for tax purposes.
After €600,000, the tax rate goes up to 47%.
Fun fact: Beckham’s law gained its name after the football player David Beckham became one of the first ex-pats to take advantage of it. However, ironically, the regime is no longer available to sports professionals.
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’s law?
Usually, when someone becomes a tax resident in Spain, their income is subject to Spanish Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas (IRPF) in Spanish). This tax regime means ex-pats would pay taxes the same way as any other Spanish resident, and their income is subject to progressive tax rates of up to 48%.
How does Beckham’s law benefit ex-pats?
The Beckham law allows ex-pats to pay taxes on their Spanish-sourced income at a fixed flat rate, as non-resident taxpayers. This non-resident income tax is particularly advantageous to high-earning ex-pats.
The legislation extends to the spouse and children under 25 years of age (or of any age if they are people with disabilities) displaced with the taxpayer or later (if it occurs during the first year of residence of the taxpayer).
Ex-pats only pay tax on Spanish-sourced income
Because the special ex-pats tax regime only applies to income obtained in Spanish territory, i.e., only the income of Spanish origin is taxed, ex-pats do not have to pay taxes in Spain on other income generated abroad. For example, wealth tax does not apply to any income earned through rentals, dividends, interest, and capital gains made outside of Spain.
Learn more about how Beckham’s law impacts foreign sources of income and when Beckham’s law may not be worthwhile below.
Ex-pats will still need to pay tax on any foreign income earned through employment
The only exception to this last rule is employment income. Ex-pats considered a non-resident for tax purposes will still need to pay tax on any foreign income earned through employment.
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.
Beckahm’s law is only advantageous if ex-pats earn above the threshold
Ex-pats should ensure that Beckham’s 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’s 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 Beckahm’s law?
Ex-pats can apply for Beckahm’s law if they meet the following criteria:
- They have not been a tax resident in Spain in the past five years
- They are moving to Spain for work purposes. That is, they 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 the country in which they do not own more than 25% of its shares (unless they have a startup/entrepreneur visa)
- They will perform all their working responsibilities in Spain. If they perform part of their responsibilities abroad, it cannot represent more than 15% of their total activity (unless they have a digital nomad visa)
- They do not receive income that would qualify as obtained from a permanent establishment in Spain. Thus, the hiring company must be Spanish (unless they have a nomad/ or startup/entrepreneur visa)
- They must apply for the special regime within six months of registering with the local Spanish Social security system
Who cannot apply for Beckham’s law?
The following 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’s law (SETR)?
If ex-pats meet the above criteria, they can apply for SETR by taking the following steps:
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. This form is to register as a fiscal resident with the Spanish tax authorities and receive their 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.
Complete application form 149
Once they receive approval from the Spanish tax authorities, they must send another application form, form 149. Include their passport, NIE, employment contract, and social security number.
Hand the approved application certificate to the Spanish employer
The approval process can take anywhere between ten days to 2 months. If approved, the ex-pat will receive a certificate they must give their Spanish employer so they can apply for the tax rate deduction.
Attract and hire international employees with Deel
Beckham’s law is a huge advantage for Spanish companies hoping to attract and hire international talent, but the hiring process is complex to navigate alone.
With Deel, employers can make it easy for workers to relocate to Spain and benefit from Beckham’s law. Our in-house experts handle everything, from selecting the proper visa and forms to working with local governments and applying the Beckham tax exemption to payroll.
Learn how Deel makes immigration less complex by taking on visa mobility support for international hires.
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