The Beckham Law, officially known as Special Regime for Displaced Workers, allows expatriates to move to Spain for work and benefit from a preferential tax rate.

Beckham Law is a Spanish law which allows expatriates to move to Spain for work and benefit from a preferential tax rate. Under this law foreign workers are taxed at a flat rate of 24% on income up to €600,000 per year, for six years. This rate is considerably lower than the normal Spanish tax rate of up to 48%. The purpose of the law is to attract talent to Spain.

This law, officially known as Special Regime for Displaced Workers, was named after the English footballer David Beckham, as he was one of the first high-profile foreign nationals to take advantage of this tax benefit when he joined Real Madrid in 2003. 

How does it work?

From a tax perspective a successful applicant will be treated as a Spanish tax non-resident meaning that they will not be required to pay tax on non-Spanish sources of income. However, this also means that the individual cannot benefit from any tax relief which exists under the double tax treaty between the UK and Spain.

Issues that can arise

Two specific issues that our clients have experienced as a result of the Beckham Law are:

• Tax residency issues – If a Beckham Law beneficiary spends too many days in the UK, they will also become a UK tax resident based on the Statutory Residence Test (SRT) criteria. This could impact potential tax benefits that would normally fall under the double tax treaty between the UK and Spain, leaving them obliged to pay more UK tax than expected. 
• Impact on pensions - If an individual leaves the UK but continues to receive UK sources of income such as pension, then this income could still be taxed in the UK if it is not taxed in the new country of residence which would be the case if they were benefiting from the Beckham Law.

Eligibility

To benefit from the Beckham Law, individuals must meet a number of criteria. These include:

• No prior residency in Spain
• Relocation must be work-related
• Applicants cannot generate income through a permanent establishment in Spain
• Certain professions cannot apply (e.g. professional athletes) 
• Individuals must apply within six months of moving to Spain

If you are thinking of moving to Spain, or any other country with similar tax laws, or if you have moved to Spain in recent months and are thinking of being considered for this tax regime, then please contact us. With experience of the Beckham Law together with our expertise in UK taxation rules, we can clarify the implications of this Law for your circumstances both in Spain and the UK so that you are better informed before making any final decision.* 

*We only consider UK tax matters, and can work with Spanish tax experts to provide a joined-up service.

Contact LSR Partners today to speak with our expert team and pay the right tax, in the right place, at the right time.