Can You Bend it Like Beckham?

As an International Expat Moving to Spain the Answer Could be “Yes”

In 2005 Spain passed legislation that has come to be known as the “Beckham Law”. This is due to the fact that one of the first to take advantage of the ruling was the footballer David Beckham, when he moved from Manchester Utd. to Real Madrid. Officially entitled: “Ley Beckham” - Royal Decree 687/2005, the law allows high-net-worth individuals & foreign workers preferential taxation on non-Spanish income, which they can enjoy “tax-free”, as long as they pay tax on their Spanish income & assets.

Under Spanish tax law, individuals who spend 183 days or more of a tax year in Spain are deemed to be habitually tax resident. However, in an attempt to attract investment in to Spain, Royal Decree 687/2005 modified existing legislation and the definition of tax residency for wealthy foreign workers & Expats.

When an individual moves to Spain they effectively have the choice of being taxed as a Spanish Resident or as a Non-Spanish Resident. By electing to be non-resident, an individual can limit their tax liability to Spanish income and assets alone; beginning in the year of their arrival and continuing for a further 5 years. Thus, they may avoid tax on their worldwide income for a period of up to 6 years, providing that certain conditions are met; one being that they have not worked in Spain for any of the 10 years preceding their arrival.

Other conditions include, but are not limited to:

• Employment duties must be carried out in Spain. However, if duties must be carried out outside of Spain, the percentage of derived income from these activities must not exceed 15%.
• Work must be performed for a Spanish corporate entity or for a permanent Spanish establishment of a foreign company.
• The application for exemption under Royal Decree 687/2005 must be made within 6 months of commencing the employment contract.

Provided that conditions are met, and should an individual choose to be classified as non-resident, they will only be subject to Spanish taxes on their Spanish source income and on their assets located or exercisable within Spanish territory. Such taxation is calculated at a preferential flat rate of 24.75% of their salary instead of the normal progressive tax rate for residents of between 24% & 43%.

If you are moving to Spain, and are concerned about Spanish taxation issues, you can take steps to protect your wealth and income today by speaking with our resident Spanish Taxation Specialist Roger J. Brumwell. Providing professional taxation advice to Expats relocating to Spain since 1988, Roger is fluent in English, Catalan & Spanish. As Co-founder of both AI Wealth (with offices in Spain, Portugal, Andorra & across Europe) and Tax Barcelona (which has 60 offices across Spain), Roger's insight in to Spanish Tax Law is unparalleled.