Beckham's
stint in the Spanish Premier League is remembered for what he did on
the pitch just as much as for what he did off it. With regard to the
latter, his coming to Spain coincided with the approval of a special
tax regime for impatriates, which became popularly known
as the “Beckham Law”. Although we may not know what he made of
such an association, it proved to be a real game changer for Spain:
now expats could look forward not just to the usual lifestyle perks
(sea, sunshine, food, heritage...) but also make huge tax savings
during their stay.
Let
us walk you through this regime in four questions:
1.- Is
there a special tax regime for expats in Spain?
Yes,
expats may benefit from a special
flat rate of 24%
on their labour income pursuant to the “Impuesto
sobre los Rendimientos de No Residentes”
-
IRNR, Income Tax on Non-Residents.
2.- So
would I be a tax resident in Spain or a non tax resident?
While the name
may create some confusion, in order to benefit from IRNR you must
become a tax resident in Spain.
3.- How do
I become a tax resident in Spain?
According to
Spanish Law, individuals become tax residents in Spain in any of the
following circumstances:
a) The
individual stays in Spanish territory for more than 183 days in any
calendar year;
b) The
individual's main economic interest or activity lies in Spain,
whether directly or indirectly;
c) The
individual's spouse and under-age children live in Spain.
4.- How do
I benefit from the special regime?
Individuals
may qualify for the special regime if the following conditions
are met:
a)
The individual has been non-resident in Spain for the past 10
years before taking up tax residency (residency is
acquired during the first calendar year when the resident is
physically present in Spain for over 183 days);
b)
Residency occurs following a labour
agreement whenever:
- A new labour relationship is initiated with an employer in Spain;
- When the posting is ordered by the employer, a letter with the posting is in place and the taxpayer does not derive income through a permanent establishment in Spain.
c)
The work is performed as an employee or director;
d)
The work is performed for a Spanish company
or resident in Spain or for a
permanent establishment of a non-resident
entity;
e)
Income is not exempt from IRNR;
f)
Income in any tax year does not surpass €
600,000. (Income in excess will be levied according to
standard rates).
Qualifying
individuals will have their income levied at a flat rate of 24%
during the first tax period when residency is acquired and the next 5
tax periods.
So
that's the special Spanish tax regime for expats in a nutshell. Oh,
and by the way, the regime is no longer applicable to sports players
who are now taxed on their income at the standard rates.
