In general, if you relocate to Spain for work purposes, you will become a resident tax payer in accordance with the Spanish personal income tax regulations (IRPF). However, there is a special regime for expats that was created thanks to the famous football player David Beckham and which is regulated by Royal Decree 687/2005 (on the application of the Personal Income Tax regulations in relation to article 9.5). This “Beckham Law” allows inpatriates to opt, as an exception to the regular system, to be taxed as non-resident taxpayers in Spain following the rules of the “Spanish Act on Non-Resident Income Tax”.
This unique scheme provides a huge incentive in terms of reducing your taxes. If you fulfil the right conditions, you can pay less in Spain for both income tax and wealth tax.
Generally speaking, when you relocate to Spain for work purposes, you become a resident for tax purposes in Spain and therefore liable to pay the Spanish resident income tax rate of 19% to 45% on all your worldwide income. But if you meet certain criteria, you can access the so-called Beckham law, which offers a flat reduced rate of 24% on the first EUR 600,000 of your net income.
If you are wondering whether the Beckham law applies to you, keep in mind that it is only valid for the first six years of your residence in Spain and that after this period, the tax rate rises to 47%. In addition, it only applies to individuals that have relocated to Spain for professional reasons. If you want to find out more about this special dispensation, we recommend contacting an expert in Spain who can advise you on the best options for your situation.
The Beckham law applies to European and non-European citizens who meet the specific requirements to qualify. These include having a contract of employment that has been signed within the country and not before, as well as not having been a resident in Spain in the previous 10 years prior to the relocation. You also need to be working as a highly qualified worker in a company based in Spain and have a minimum of 40% of your employment duties performed in the field of R&D or services for start-ups or emerging companies.
It is worth mentioning that capital gains obtained outside of Spain must still be paid to the corresponding country in accordance with its own tax regulations and that wealth tax will only be levied on property held in Spain. However, it is an excellent way for highly qualified workers to significantly reduce their taxes. In fact, it is estimated that this special tax exemption can save an individual in excess of EUR 170,000 per year. For this reason, many high-earners are considering relocating to Spain in order to take advantage of this new tax law. Nevertheless, it is important to consult with an expert before taking any action as the details of this scheme are complex and may vary depending on your circumstances. spain beckham law