The “Beckham Act” is a special and very beneficial tax regime applicable to all those foreign workers, professionals, entrepreneursand investors displaced to Spanish territory.
It is known as “The Beckham Act” (Ley Beckham) afterthe footballer David Beckham, because he was among the first workers to benefit from it, but strictly speaking the Act is named “Royal Decree 687/2005 of June10th”. However, after the enactment of Act 28/2022, of December 21st,this special tax regime has extended its benefits to more tax payers, including entrepreneurs, which is great news for foreigners looking to develop economic activities in Spain.
Characteristics of the Regime
This tax regulation applies during the year in which the taxpayer gets the residence and the following five, this means, until the 6th year residing in Spain. The Beckham regime could apply as the result of anemployment contract, where the employer orders the posting in Spain directly. This excludes the special employment relationship of professional sportsmen (in other words, this act could not be applied to David anymore).
For reference; people living more than 183 days peryear aboard in Spain, without this regime applying, would become a tax residents.That means paying Income Tax for the earnings gotten around all over the world(not only in Spain), and to a progressive tax rate that can reach almost 50% athigher levels.
The beneficiaries of this regime, on the other hand are considered non-resident for tax purposes (even if the beneficiary stays more than 6 months per year in Spanish territory).
Recent modification to the Regime
Like previously stated, the Act 28/2022 of the 21 of December on the promotion of the start-up ecosystem, changed this system in order to make it more attractive to potential entrepreneurs or investors that are thinking about starting a business in Spain.
Because of this, the act may apply to taxpayers who have not been resident in Spain during the five tax periods prior to the displacement to Spanish territory, whereas before this period was ten years.
Other changes include extending the application of this regime to the following cases:
· As a result of an employment contract not ordered by the employer if the activityis provided at distance, through the exclusive use of telematic systems and with an international teleworking visa.
· As the consequence of the acquisition of the status of administrator in an entity.
· As the consequence of carrying out an economic activity in Spain qualified as an entrepreneurial activity.
· As the result of carrying out an economic activity in Spain by a highly qualified professional who provides services to emerging companies or to carry out training, research, development and innovation activities, thereby receiving a remuneration that together represents more than 40% of all business, professional and personal work income.
As mentioned above, before the enactment of this new law this special regime only included foreigners displaced for working reasons, nowadays professionals, entrepreneurs and investors can also benefit from it. It can even be extended to the spouse and children under 25 years old or parent in the absence of a marriage bond of the main beneficiary, also displaced undercertain conditions (like moving to Spanish territory with the taxpayer,acquiring a residence in Spain, not having been resident themselves in Spain the 5 years prior or that the sum of taxable bases corresponding to the income obtained in Spain is lower than the “main” taxpayer).
Advantages for entrepreneurs and investors
Reduction in Income Tax
The beneficiary would be taxed through income tax as a non-resident, applying a fixed reduced rate of 24% up to € 600,000 of net income, instead of the progressive one that reaches 48% in general cases.
Payment for capital earnings only in Spain
The sale of assets or dividends abroad will not be taxed in Spain, what is relevant because foreigners who do not benefit from the Beckham Act must pay through capital earnings tax. In addition, the profits derived from the sale of assets in the Spanish territory will be taxed at afixed rate of 19%.
The beneficiary would not have to submit form 720 (modelo720). This is the form that all residents in Spain with assets abroad for a higher value than € 50,000 must fill out once a year (and that involves large fines if it is not carried out).
Better conditions in the Spanish Wealth Tax
The Spanish Wealth Tax (Impuesto sobre el Patrimonio) will only apply to properties that the beneficiary maintains in Spanish territory, paying a tax rate that ranges from 0.2% to 2.5%.