The Royal Decree 687/2005 also known as the “Beckham Law” was passed by the Spanish government in 2005 to offer advantageous personal tax regime to non-resident individuals moving to Spain due to employment contract. The law gained its nickname after the football player David Beckham became one of the first foreigners to take advantage of it. Recently modified in 2015 by the introduction of the Law 26/2014 of 27 November 2014 and by the Royal Decree 633/2015 of 10th of July 2015, the requirements have been reformed and professional sports persons have been excluded from applying the regime.
Eligible impatriates, complying with the law requirements, will be taxed at a flat rate on personal income tax of 24% (till 600.000 €) instead of the progressive usual scale for Spanish residents.
Employees eligible for the Special Tax Regime will require the following:
• Must not have been resident in Spain in the last 10 years.
• The move to Spain must be on grounds of an employment contract.
• The regime can be applied to board of directors members of an entity provided that the director has no substantial holding (minimum 25%) in that company, which makes him related party to that entity according to the Spanish transfer pricing regulations.
• Must be resident in Spain, meaning being living in Spain for 183 days a year.
Recent modifications:
• The requirement for work to be primarily conducted in Spain has been reformed. According to the 2015 new rules, in order to avail of the regime the assignment does not need anymore to be physically carried out in Spain.
• The requirement to work solely for a Spanish company has been amended as well. From 1 January 2015, all employment income obtained by the taxpayer will be considered as Spanish source income, irrespective of the place it is generated.
The taxpayers under the Special Tax Regime will be subject to:
INCOME TAX
- A flat rate of 24% for incomes under € 600.000
- A flat rate of 45% for incomes above € 600.000
WEALTH TAX
• For assets and rights located or exercisable in Spanish territory, subject to the Spanish Wealth Tax.
• For assets and rights outside of Spain, do not have to declare.
DURATION
The exemption is applicable from the year of arrival and to the following 5 tax years, for a total of 6 years.
SAVINGS
A new tax scale is introduced for any savings income obtained under this regime. As of 1st January 2016, investment income will be taxed at 19% up to € 6.000, at 21% from € 6.000 up to € 50.000, and at 23% on the amounts exceeding € 50.000.
DM&A advises on every possible tax issues linked with the Special Tax Regime:
• Requirements analysis.
• Personal income tax: Optimizing personal income tax obtained working in Spain and/or abroad.
• Assets, liabilities and transactions abroad.
• Tax Compliance in Spain and abroad.
• Law modifications: Constantly updating the continuous changes in legislation, DM&A´s experts are able to provide to the impatriate all the legal and fiscal services always in accordance to the most recent regulations.
Special arrangements are available for those workers who opted for the regime before 1 January 2015 – a transitional regime might be applicable, contact us.
