Commonly known as the "Beckham law", the Spanish Special Expat Regime is regulated in the Spanish Personal Income Tax Law (hereinafter, SPITL). According to its article 93, natural people who acquire their tax residence in Spain as a result of being posted to Spanish territory may opt for assessment under Spanish Non-Residents Income Tax rules instead of under the PIT rules for resident individuals provided that certain conditions are met. One if its advantages is the application of a flat tax rate of 24% on employment income along with the benefit of being taxed only on Spanish sourced income.
- Employment income is subject to a 24% flat tax rate for the first EUR 600.000 and 45% for the excess, instead of the progressive tax scale for resident individuals (ranging from 19% up to 45%, depending on the region of Spain where the taxpayer has his/her residence).
- As of the arrival date, worldwide employment income would be considered Spanish sourced thus subject to tax in Spain. In order to avoid double taxation for employment income derived from days of work abroad, a tax credit may be applied.
- Dividends, interests and capital gains from Spanish sourced are subject to taxation following a scale ranging from 19% to 23%. Income from investments that are not of Spanish sourced are not subject to income tax in Spain.
- Individuals are subject to Wealth Tax only in relation to the assets they own that are located in Spain (while regular residents are liable for their worldwide assets).
- Taxpayers are not be required to file the declaration Form 720 on assets located outside Spanish territory (while regular tax residents are subject to this obligation).
The Special Expat Regime will be in force for 6 years (the first year in which the taxpayer becomes resident in Spain and the following 5 years).
Requirements of the individuals who apply:
- They must not have been residents in Spain during the 10 tax years preceding their arrival to Spain.
- The assignment to Spain must be due to the signing of an employment contract with a company located in Spain or, in any case, to an assignment from a company located outside of Spain.
- The company directors are eligible for the regime as long as they do not hold stock on the company, or in case they have, the shares held do not mean 25% or more of the equity.
- They must not obtain income through a Permanent Establishment located in the Spanish territory.
Procedure to apply:
The application of the regime must be done through a special Form (149 Form), which must be filed to the Spanish Tax Authorities along with certain documents that support the accomplishment of the previous requirements. The application should be done within the first 6 months from the date in which on worker has been registered as an employee in the Social Security in Spain (or from the starting date of the provision of services in Spain in accordance to the certificate issued by the Foreign Social Security that establishes that the worker maintains the contributions).
Once the application is filed, the Spanish Tax Office should answer to the application in a period of 10 days. If the requirements are accomplished a certificate will be issued granting the Special Expat Regime.
Individuals under the Special Expat Regime should file a Personal Income Tax Return (Form 151) before June 30th of the next year considered.
B Law & Tax
International Tax & Legal Advisors