Spain has become an attractive destination for digital nomads, not only for its vibrant culture and pleasant climate but also due to favourable tax policies like the Beckham Law. This legislation offers significant tax advantages to foreign professionals relocating to Spain. In this article, we’ll explore what the Beckham Law is, the benefits it offers, and how it can apply to expatriates.

Understanding the Beckham Law

Enacted in 2005, the Beckham Law—officially known as the Special Expatriate Tax Regime—was designed to attract foreign talent to Spain. It allows eligible individuals to be taxed as non-residents, applying a flat tax rate on Spanish-sourced income while exempting most foreign income from Spanish taxation.

Key Benefits of the Beckham Law

• Flat Tax Rate: Beneficiaries are taxed at a flat rate of 24% on Spanish-sourced income up to €600,000, with income above this threshold taxed at higher rates.
• Exemption on Foreign Income: Most foreign income, including dividends and interest from non-Spanish sources, is exempt from Spanish taxation under this regime.
• Wealth Tax Exemption: Expatriates are exempt from paying wealth tax on assets located outside of Spain during the first five years of residency.
• Simplified Tax Filing: The regime offers simplified tax filing procedures, making it easier to comply with Spanish tax regulations.

Eligibility Criteria

To qualify for the Beckham Law, individuals must:

• Relocate to Spain: Become a tax resident in Spain due to employment or professional reasons.
• Non-Residency in Previous Years: Not have been a tax resident in Spain during the five tax years prior to the move.
• Employment Relationship: Have an employment contract with a Spanish company or a foreign company with a permanent establishment in Spain.
• Application Deadline: Submit the application within six months from the start of the employment activity in Spain.

Duration of the Tax Benefits

The favourable tax treatment under the Beckham Law applies for a period of six years, including the year of arrival and the following five years.

Application Process

To apply for the Beckham Law regime:

1. Obtain a Spanish Tax Identification Number (NIE): Required for tax purposes in Spain.
2. Submit Form 149: Used to request inclusion in the special tax regime.
3. Provide Necessary Documentation: Proof of employment, confirmation of non-residency in Spain for the previous five years, and any other supporting documents.

Considerations for Digital Nomads

With the introduction of Spain’s Digital Nomad Visa in January 2023, remote workers have a pathway to reside in Spain while benefiting from the Beckham Law. This visa allows non-EU citizens to live in Spain for up to five years while working remotely for non-Spanish companies.

Key Points

• Income Requirements: Applicants must demonstrate a minimum gross income from foreign employment, typically around €31,752 annually.
• Physical Presence: Visa holders must reside in Spain for at least 183 days per year to maintain tax residency.
• Social Security Contributions: Arrangements can be made to continue paying social security contributions in the home country, allowing access to public healthcare in Spain without the need for private health insurance.

Conclusion

The Beckham Law offers substantial tax benefits for expatriates and digital nomads considering a move to Spain. By providing a flat tax rate on Spanish income and exemptions on foreign income and wealth tax, it creates a favourable financial environment for foreign professionals. However, navigating eligibility and the application process can be complex—so seeking professional advice is recommended to fully leverage these benefits.

Need Expert Tax Guidance?

At Cogency, we specialise in helping digital nomads, expatriates, and professionals navigate international tax complexities. If you’re considering the Beckham Law and need advice tailored to your situation, contact us today for a consultation.