I.- Purpose of the Law.-
(i) In order to increase the competitiveness of the Spanish companies, the government enacted, several years ago a special tax regime (popularly known as “Beckham law”) which offered to foreigners moving (for labour reasons) to Spain a very attractive tax regime. Such measure was aimed to offer the Spanish companies the possibility to hire talented (foreign) individuals, offering them to move to Spain under a special tax regime.
(ii) With effects as of 1st January 2023, Law 28/2022 has amended the referred tax regime, offering additional tax advantages to individuals who may decide to move to Spain under the scope of a labour relationship or to work remotely (e.working) (or special activities below detailed), under certain requirements.
II.- Main tax advantages of the Beckham Scheme
Spain has an optional special tax regime for individuals moving to Spain for work purposes provided that certain requirements are met. This regime allows displaced workers who, although becoming tax residents in Spain (that is, they spend more than 183 within a calendar year in Spain), to be taxed as Non-Tax residents in Spain, which, in summary, entails the following tax advantages:
- Labour /employment Incomes. They´ll be taxed in Spain under Spanish Personal Income Tax (PIT) at the following tax rates during the tax exercise when they move to Spain and the following 5 tax exercises;
Tax base (€) Flat Tax rate under special tax regime Ordinary (approx.- máximum tax rate) Up to 600.000€ 24% 50% From 600.000€ 47% 50%
- Incomes (other than labour incomes and those arising from scenarios 5 & 6 below) obtained from non Spanish sources are not taxed in Spain.
- Spanish Wealth Tax will apply exclusively to assets located in Spain.
- Dividends, interest and Capital Gains are taxed in Spain only if received from a Spanish source.
III.- Requirements to be eligible for the Special Tax Regime
– The taxpayer must not have been tax resident in Spain during the 5 tax periods prior to relocation (before Law 28/2022 it was 10 tax periods).
– The relocation must be based on one of the following reasons:
- A new employment relationship with a Spanish employer.
- That the relocation is ordered by the current employer (a letter of displacement is required).
- That the taxpayer becomes director of an entity. In the event the individual will be appointed as Director in a “patrimonial entity” (company which activity is limited to the mere management of real estate assets without structure and/or minority stakes in companies), the taxpayer will only be able to opt for the regime if he/she holds directly or indirectly a stake lower than 25% of the referred company share capital.
- That, even if there is not a displacement order from the employer, the taxpayer moves to Spain to work remotely (homeworking visa required).
- To carry out in Spain an economic activity qualified as entrepreneurship activity.
- Highly qualified professionals who carry out in Spain an economic activity of rendering services to emerging companies or training, research, development, and innovation activities, with a remuneration that represents more than 40% of their total income.
– The taxpayer cannot obtain income in Spain through a Permanent Establishment (except scenarios 5 and 6 above mentioned). Incomes arising from scenarios 5 & 6 above will be taxed in Spain irrespectively to its source.
IV.- Spouse and children of the inpatriate worker
One of the main relevant innovations introduced by Law 28/2022, is that the spouse of the inpatriate worker and his/her children under 25 years of age (or disabled children of any age) may also opt to be taxed under the Special Regime provided that the following requirements are met:
- That they move to Spanish territory before the end of the first tax period in which the special regime is applicable to the inpatriate worker.
- That they acquire their tax residence in Spain.
- That must have not been resident in Spain during the 5 previous tax periods.
- That they do not obtain income in Spain through a Permanent Establishment (except in cases 5 and 6 above mentioned).
- That their income is lower than the one obtained by the inpatriate worker that allows the application of the special regime to the rest of the family unit.
This contribution was made by our Spanish member firm Area Legal.
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