Spain | Modification of the ‘Beckham Law’ in favor of Entrepreneurs and Managers

The so-called « Startup Law » in Spain (Law for the promotion of the emerging company’s ecosystem) after passing the corresponding filters, has been approved by the Spanish Parliament.

Among its various provisions on startups – which will be the subject of another article – the Startup Law also amended the « Beckham Law » (as this football player is the best known of those who benefited from this law), i.e. the special tax regime applicable to workers, professionals, entrepreneurs, and investors moving from abroad to Spain.

This regime grants enormous tax advantages to Spanish foreigners, who move their residence to Spain under certain circumstances which, in summary, are:

• relocation as a consequence of an employment contract.
• displacement that is ordered by the foreign employer with a letter of displacement to Spain.
• displacement without being ordered by the employer and the labor activity is provided remotely by means of the exclusive use of electronic means.
• acquisition of the condition of administrator of a company.
• for the realization in Spain of an economic activity qualified as entrepreneurial activity.
• highly qualified professional providing services to emerging companies.

The great novelty is that, until the entry into force of the new regulation, it was required that the interested party had been a non-resident for tax purposes in Spain for a period of more than 10 years so many managers were temporarily displaced outside Spain could not benefit from this regime because they had not been outside Spanish territory for more than 10 years (the displacements are not usually so long) and with the entry into force of the new legal text, the previous period of non-residence has been reduced to five (5) years.

The great advantage of this regime is that its beneficiaries (individuals) can opt to pay the Non-Resident Income Tax (IRNR), during the tax period in which the change of residence takes place and during the following five tax periods. This means that in the determination of the taxable income, part of the income that the interested party may obtain worldwide is not taxed and, in addition, that up to 600,000 euros of taxable income, the applicable tax rate would be 24% (all of which is undoubtedly an enormous tax advantage with respect to the applicable tax regime, in the same circumstances of income, to a tax resident in Spain without the coverage of this special regime).

In any case, it is important to emphasize that the application of this advantageous tax regime requires a previous and express request by the interested party, that is to say, first « knocking at the door » of the Treasury and, therefore, it is very important to make sure that all the requirements demanded by the Law are fulfilled very scrupulously, so it is always especially advisable to request in advance and with the due detail the appropriate legal advice in this respect.