The “special ruling for mobile workers”, popularly known as the Beckham Law for Expats, is a law specifically aimed at bringing talent to Spain. It has been in existence since 2005, but was updated in 2023 to make it even more attractive for foreigners to come and live and work in Spain. The latter as a result of the new phenomenon of ‘digital nomad’, people who are not location-bound to carry out their work.
If you are considering emigrating to Spain, or if you emigrated to Spain last year, the following may be interesting for you to consider.
The law provides certain tax benefits in income tax, or Impuesto sobre la Renta de las Personas Físicas (“IRPF”). The differences are mainly related to the applicable tax rates and the income that is taxed.
Advantages: favourable rate and certain income from abroad is not taxed
One of the advantages of the Beckham Law is that income up to € 600,000 is taxed at a flat rate of 24% and the excess above this amount at 47%. If the rule did not apply, it would be taxed at a progressive tax rate that could reach almost 53.50% (rate for residents of Valencia state on income 2023).
With this rate, it is especially interesting for people with high incomes. The reason it is not interesting for those with lower incomes is that regular tax rates can be even zero for low-income taxpayers. As income increases, so do tax rates.
It is not easy to say where the threshold lies. The complicated tax system in Spain offers a rate that depends on where you live. Overall, I would advise incomes above € 50,000 per year to have an analysis done to see if the Beckham Law is more advantageous.
Under this law, only income generated in Spain is taxed at the beneficial rate, with the exception of earned income. This means that income from abroad such as rental income, dividends, interest, capital gains, etc. are exempt from taxation in Spain.
Another advantage of the Beckham Law is that you only have to pay wealth tax on assets located in Spain, unlike the regular regulation under which wealth tax has to be paid on world assets. Depending on where you live, the tax rate can be up to 3.5% below the regular rates.
Another small advantage is that you have no obligation to declare your assets abroad (Model 720).
The law also applies to the married partner and to children under the age of 24, provided that these family members actually become domestic taxpayers (tax resident in the popular sense) and meet a number of other requirements.
Disadvantages: no deductions or other tax benefits
The advantage of the favorable rates has a disadvantage for those with lower incomes, as already mentioned.
Moreover, under the Beckham regime, you have no deduction of expenses or other benefits that are possible under the regular regime, including, for example, exemption from the housing benefit applicable to the main residence, benefits applicable to families with minor children or elderly people, benefit on rental income from a property located in Spain, or deduction of expenses related to disability.
Another disadvantage may be that some treaties between countries allow double taxation if this law is chosen.
Finally, and this applies to all taxes in Spain, the rules are strict and subject to varying interpretations, which creates legal insecurity, especially regarding the application of these types of regulations that are relatively complex. This makes the regular method of income tax declaration preferable if the differences in outcome are not significant.
Roeland van Passel