When David Beckham (Becks) came to Spain to play for Real Madrid in 2003, a special Spanish tax system (Regimen especial para Trabajadores Desplazados) was set up for him so he did not have to pay tax on his worldwide image rights. This system has been extended to people moving to Spain, although in an ironic twist, professional footballers will be excluded from the scheme from 1st January 2015.
Tax rates in Spain are falling with plans to reduce the top rate of tax in Spain from 51% (56% in Catalunya) to 47%. The top rate is however still very high. However, in a bid to attract high earners to Spain the law is being improved.
|Annual Salary €||Beckham Tax Rule Saving €|
Why use the Beckham Law?
Well, the three benefits are as follows:
Flat rate income tax of 24% on Spanish earnings in Spain. If your income is derived from Spanish sources then the maximum rate you would pay will be 24% instead of normal rates up to 600,000€ pa. Above 600,000€ the tax rate is 45%. Here are some specific examples of the saving based on the 2015 Spanish Tax rates.
You are allowed to stay on the Becks rule for a maximum of 5 years. The total saving is therefore the figure above x 5. Your individual circumstances will dictate exactly how much saving you will acheive but the figures above are a good guide.
No capital gains tax to pay on any gains made outside Spain. This includes the sale of property, shares, etc. This point is especially important if you have a property to sell or a business to sell outside of Spain. As an example an owner of a technology company that sells the business for £20 Million whilst on the Beckham scheme will not pay Capital Gains tax in Spain nor in the UK if he/she does not return to the UK for 5 years.
The potential capital gains tax saving in this example could be £8 Million.
Only income obtained in Spain will be subject to Spanish taxation. As an example, bank interest earned from bank accounts outside Spain are not subject to Spanish Tax whilst you are on the this method of taxation. Rental income from property outside of Spain is another example.
Beckham tax scheme rules
If you meet the following conditions you can reduce your tax by requesting to be taxed on a non resident basis under the Beckham rule:
If you have not been resident in Spain in the last 10 years.
If you apply for the “New” Beckham law within 6 months of arriving.
You must be resident in Spain. The main condition being living in Spain for 183 days a year.
The requirement for work to be primarily conducted in Spain has been reformed.
The requirement to work solely for a Spanish company has been reformed.
The reduced rate of taxation will apply for a maximum period of 5 years.
If you meet these criteria, you should consider using this method of taxation.
If you would like to live in Spain and would like more information on the “Beckham Law”, Spanish tax and financial planning for international people, please contact us through the form below.