In order to attract more foreign expats, Spain and its Real Decreto 687/2005 created a favourable tax regime. This favourable regime is known as "Ley Beckham"/"Beckham Rule", after the footballer David Beckham. In times when "working from home" from Spain is becoming more and more common, it seems useful to take a closer look at this tax regime.
Read more about "working from home" in Spain and its possible impact on your taxes.
Who is the Beckham Rule for?
Normally, if you move to Spain to work, you will become a tax resident there. For Spanish domestic legislation, you are tax resident when:
- you stay in Spain for more than 183 days in a calendar year, regardless of your domicile;
- the centre of your economic interests is in Spain;
- your spouse or your minor (dependent) children live in Spain.
Based on the criteria in a double tax treaty, you may be able to prove that you are tax resident in another country.
The consequences of being tax resident in Spain are not minus. Firstly, Spanish personal income tax applies. As in Belgium, there are progressive rates. In Spain, these rates are from 19% - 45%. Thus, the highest rate is 45% from an income of EUR 60,000. In some autonomous regions, the rate can actually be higher than 50% due to all kinds of increases.
There is also the wealth tax and there are implications for inheritances & gifts.
So if you start working in Spain as a well-earning expat, you will pay a lot of taxes. The Beckham Rule tries to remedy this problem.
Read more about emigrating to Spain and its impact on your taxes.
What is the Ley Beckham / Beckham Rule?
This favourable tax regime means that you are taxed like a tax non-resident of Spain. All income outside Spain, except professional income, is not taxable.
Specifically, you paid for your professional income a flat rate of 24% up to €600,000 and 45% from €600,000 onwards. Your employer pays the tax due directly through withholding tax using modelo 216. As an expat, you do through modelo 151 in the April-June period. There are no tax deductions.
Note that there is talk of raising the rate to 47% from income above €300,000, with additional increases for Catalonia, for example.
Immovable income are taxable according to the non-resident tax provided your property income does not qualify as economic activity.
Dividends, interest and capital gains are taxable at rates of 19% - 35%.
For the wealth tax you are also viewed as a non-resident. This means that you will only be taxed on your assets located in Spain. Also, you will not have to file a wealth declaration (modelo 720).
For the inheritance and gift tax nothing changes. You will be taxed according to the rules of the autonomous region in which you reside.
The tax concession scheme is valid for a maximum of 6 years, i.e. the year from your first tax residency + 5 years.
What are the conditions?
The reason for your move to Spain - and therefore tax resident status - is to work under a employment contract or if driver for a Spanish company or a foreign company with a permanent establishment in Spain. Importantly, this company must not be your own (not > 25% shareholding).
In addition, you must effectively work in Spanish territory; work outside Spain may represent a maximum of 15% of your professional income.
Finally, you must not have been a tax resident in Spain for the past 10 years.
Within six months of starting your employment, you should apply for the favourable regime.
Note: Relaxations may be coming in 2023. Here is an overview in advance.
Applied to "work at home"
The physical move to Spain will not be an obstacle for many people. Quite the contrary. However, to meet the conditions, your Belgian employer must have at least one permanent establishment in Spain. Simply put, a Belgian employer must carry out an economic activity on Spanish territory. Merely working from home in Spain for a company operating exclusively in Belgium is therefore not sufficient.
Risk of double taxation
Under the Beckham Rule, all your professional income is taxable in Spain. However, if you have professional income outside Spain, this income will potentially be taxed in both Spain and the country of work. In other words, you risk double taxation for professional income you earn outside Spain.
