Beckham Law: Requirements and Practical Information

The attraction of international talent and foreign investment have led Spain to consolidate a highly competitive tax framework. The main instrument for this is the Special Tax Regime for Displaced Workers in Spanish Territory, popularly known as the "Beckham Law".

This mechanism allows foreign professionals moving to Spain to optimise their tax burden during their first years of residence. Below, we analyse its legal framework, eligibility requirements, and its tax advantages.

📋 Requirements

With the entry into force of the Start-Up Act, the applicant profile has been considerably expanded. This option is aimed at:

Employees: Professionals with an employment contract in Spain or who are transferred by their foreign employer to a Spanish subsidiary.

Digital Nomads (Remote Workers): Individuals working remotely from Spain for foreign companies.

Company Directors: Professionals in charge of managing a company in Spain, regardless of their shareholding percentage in the company (except in asset holding entities).

Highly Qualified Professionals: Those who provide services to emerging companies (start-ups) or carry out training, research, or innovation activities.

The golden requirement: not to have been a tax resident in Spain during the 5 tax periods prior to displacement (before 2023, the requirement was 10 years).

⚖️ How Is It Regulated?

The Beckham Law is legally regulated in Art. 93 of the Law 35/2006, of 28 November, on Personal Income Tax (LIRPF), under Section 5 entitled “Special regime for displaced workers” and whose article is entitled “Special tax regime applicable to professional workers, entrepreneurs and investors displaced to Spanish territory”.

It was introduced by the approval of Law 62/2003, of 31 December, on fiscal, administrative and social order measures, with effect from 1 January 2004. However, the new Law 18/2022, of 21 December, on the promotion of the ecosystem of emerging companies, also known as the Start-Up Act, modified and updated the regulation.

Before the existence of this Law, any foreign worker who moved to Spain and spent more than half a year here automatically became an ordinary tax resident. That is, they had to pay general Personal Income Tax (IRPF) and pay Wealth Tax declaring all their global assets. The new regime represented a paradigm shift to, in principle, attract talent.

⚽ Why Is It Called "Beckham Law"?

The nickname comes from the famous English footballer David Beckham. Coincidentally, the entry into force of this law coincided with his signing for Real Madrid in 2003.

Beckham was one of the first high-profile foreigners to benefit from this regulation, which allowed him to pay tax on his millionaire earnings in Spain at a much lower flat rate than what he would have had to pay under the normal regime. Since then, the name has stuck in popular culture.

💰 What Does It Imply at a Tax Level?

As a general rule, if you become a tax resident in Spain (meaning you live in the country for more than 183 days a year), you are obliged to pay IRPF on your worldwide income. This means that the Tax Agency will demand taxes on everything you earn, regardless of the country where it is generated. In addition, a progressive rate applies: the more you earn, the higher percentage you pay, which can reach up to 47% (or more, depending on the Autonomous Community in which you reside).

The Beckham Law is a "legal fiction". It implies that, although for practical purposes you are a tax resident in Spain, the Tax Agency allows you to pay tax under the rules of the Non-Resident Income Tax (IRNR) during the year you move and the following five years. Being treated as a "non-resident" for tax purposes brings huge financial benefits:

• A flat rate: Instead of climbing up the dreaded income tax brackets, your employment income will be taxed at a flat rate of 24% (applicable up to the first €600,000 annually; beyond that, the excess is taxed at 47%).

• Goodbye to worldwide income: Under the Beckham Law, you will only pay tax in Spain on income generated within Spanish territory (with the sole exception of your salary, or employment income, which is taxed entirely in Spain). The rest of your international returns, such as dividends from foreign companies, interest, or rental properties outside Spain, will be exempt from Spanish taxation.

• Wealth Tax and Solidarity Tax on Large Fortunes: The taxpayer must only pay tax on assets and rights that are strictly located in Spain, leaving their assets abroad exempt.

• Exemption from Form 720: There is no obligation to submit the informative declaration on assets and rights located abroad.

📂 Procedure

To apply for registration in this special tax regime and apply it, you must take into account three key aspects:

1. Strict deadline: You have a maximum of 6 months from the start date of your activity (the date shown on your Social Security registration or on the document justifying your arrival). 

2. Process: You must submit Form 149 to the Tax Agency, attaching the supporting documentation (employment contract, passport, etc.).

3. Resolution and annual declaration: If the Tax Agency approves it, they will issue you a certificate. From then on, when the tax return season arrives, instead of Form 100, you must submit Form 151 annually.

🚫 The Great Irony: Today Beckham Would Not Be Able to Use the "Beckham Law"

Although the law bears his name, the rules of the game changed after numerous modifications in recent years. Due to the controversy over the huge tax savings of big signings, the Government expressly and definitively excluded professional athletes since 2015.

How did the Tax Agency do it? By excluding from this tax benefit anyone who has a professional sports contract (whose employment relationship is regulated by Royal Decree 1006/1985). Therefore, today, elite athletes no longer have this "privilege" and must pay tax under the general regime.