Blog · 2024-05-20

Spain's Beckham Law: the pros and cons

What is the Beckham Law?

Royal Decree 687/2005, better known as the "Beckham Law," was introduced in 2005 for foreigners living in Spain. The country designed a special tax regime to attract talented people from around the world. David Beckham was the first to take advantage of the preferential arrangement, which is how the law came to bear his name.

How does the Beckham Law work?

The law allows foreigners to pay the standard tax rate only on income earned in Spain, rather than on their worldwide income. Individuals can benefit from the regime for up to six years from the date they become Spanish tax residents.

Who can use the Beckham Law?

To qualify as a beneficiary of this tax regime, you must meet the following requirements:

• you must not have been a Spanish resident during the five years before relocating to the country;
• you must be present in Spain in one of the following capacities:
  • employees hired by a Spanish company;
  • individuals holding management positions in a Spanish company;
  • entrepreneurs;
  • highly qualified professionals or researchers providing services to innovative companies and startups.

What is the application deadline?

The standard deadline for applying to the regime is six months from the date you obtain Spanish tax residency. For relatives of the main taxpayer, the deadline is six months from their arrival in Spain.

Advantages of the Beckham Law

• Tax is levied only on income earned in Spain. Under the ordinary regime, all worldwide income is taxable.
• The tax rate is 24% on income up to 600,000 euros. Anything above that threshold is taxed at 47%.
• Wealth tax applies only to assets located in Spain.
• There is no obligation to file a tax return declaring foreign assets.
• The applicant's spouse and children can also benefit from the regime.

Drawbacks of the Beckham Law

• Most double taxation treaties do not apply to taxpayers using this regime.
• The applicant cannot claim the tax reliefs available to other taxpayers under the ordinary regime.
• Anyone who opts for this regime forgoes the exemption on severance pay and the minimum family allowance deduction.

Applying the special tax regime for foreigners under the Beckham Law always depends on the applicant's personal circumstances. Every case should be assessed individually. It is essential to obtain sound advice before you begin, because your future tax planning depends on it.

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