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"Beckham Law" requirements
Beckham Act" (Special Tax Regime for Posted Workers) Requirements
The regulations of the "Beckham Law" or Special Tax Regime for workers posted to Spanish territory ("SETR"), establish that certain requirements must be met in order to be able to apply the special tax regime.
The first and most important is to acquire the status of tax resident in Spain. Once it is clear that one is or will be a tax resident in Spain, there are a number of other requirements that must be met.
In addition to these requirements of the Beckham Law, in order to apply the special tax regime it is also necessary to make a formal application in which you must provide a series of documents.
The regulations are not always clear enough to know for sure whether the requirements are met, so the Spanish tax authorities periodically publish "binding consultations" clarifying how the regulations should be interpreted.
The requirement of tax residence in Spain
The first aspect to analyse is whether you are or will be considered tax resident in Spain. Why is this important? Because the Beckham Law is an optional regime available only to those who move to Spain to work and become tax resident in Spain. Therefore, it only makes sense to talk about the Beckham Law if you are or will be considered tax resident in Spain.
The subsequent question is, what determines whether someone can be considered a tax resident in Spain?
The 3 ways to become a tax resident
Each country establishes its own ways of becoming a tax resident. In the case of Spain, this is regulated by the Personal Income Tax Law ("LIRPF"). This law establishes that there are three different ways in which an individual can become a tax resident in Spain:
a) The 183-day rule
One way of acquiring tax residence in Spain is to stay more than 183 days in Spanish territory during the calendar year. Sporadic absences are included in determining residence in Spanish territory, unless the taxpayer proves his tax residence in another country by means of a tax residence certificate.
In the case of countries or territories classified as tax havens, the Spanish Tax Administration may require proof of residence in such tax haven for a period of 183 days during the calendar year;
b) The centre of economic interests rule
Another way of acquiring tax residence in Spain is for the taxpayer to have in Spain the main core or base of his activities or economic interests, directly or indirectly.
This should be interpreted as a comparison between Spain and other countries. The position of the Spanish Economic-Administrative Tribunal has been that the comparison should be country by country. That is, not Spain versus the sum of the rest of the world.
On the other hand, the DGT (Dirección General de Tributos) seems to have suggested through a binding consultation that not only income but also the location of assets or expenses can be taken into account.
c) The centre of vital interests rule
The last way to acquire tax residence in Spain is to have a non-legally separated spouse and/or dependent minor children residing in Spain. This situation admits proof to the contrary.
It should be borne in mind that an individual can be considered tax resident in Spain if any of the three situations mentioned above are met (it is sufficient if one of the above is met).
The speciality of Beckham Law
The rules in the previous section are the general rules for acquiring tax residence in Spain. However, the Special Regime for workers posted to Spanish territory is only applicable if tax residence is acquired by the first route, i.e. by staying more than 183 days in Spanish territory. The reason for this requirement is that this Special Tax Regime is intended for those who actually move to Spain. For this reason, the legislator included this requirement to try to avoid its abusive use.
The truth is that this can lead to absurd situations. For example, an individual who spends less than 183 days in Spanish territory during the calendar year, but who acquires Spanish tax resident status by any of the other means mentioned (b) and c), would not be entitled to apply for the Special Tax Regime.
Double taxation agreements
The previous sections have defined the Spanish domestic rules for determining whether someone can be considered a tax resident in Spain. But it could happen, for example, that, according to the domestic rules of another country, that person is also a tax resident in that country. In these cases, recourse is had to Double Taxation Conventions ("DTC"), which are international treaties between two countries in which, among other things, the so-called "tie-breaker rules" are established. These rules serve to define in which of the two countries you are considered a tax resident. These "tie-breaker rules" only come into play when you are considered tax resident in both countries according to the domestic rules of each country.
In addition to the above, the DTAs also provide a number of tax benefits for tax residents of one of the signatory countries who generate income in the other country.
The requirement to move to Spain to work
One of the requirements of the Special Regime is that the move to Spain is for work purposes.
This requirement may seem fairly straightforward at first glance, but it is often the most problematic of all. Essentially, there are two elements to be taken into account:
Possible types of work
The concept of "working" in the context of the Special Regime is specifically defined in the regulations, which establish 3 situations in which the person will be understood to have started working in Spain:
(a) New Spanish employment in an entity registered with the Spanish Tax Agency.
You would be in this situation if you move to Spain to start a new employment relationship with an employer in Spain. This applies to all types of employment relationships, including ordinary employment relationships, special employment relationships (company directors, artists, prisoners, dockers, etc.) or statutory employment relationships (mainly civil servants), except for the special employment relationships of professional sportsmen and women, which are expressly excluded from the SETR.
b) Transfer to a Spanish entity while maintaining the employment relationship of origin.
You would be in this situation if your employer in another country transferred you to Spain, without being hired by another company. In other words, you would keep the same employment contract you had (without prejudice to the corresponding modifications to take into account the circumstances of the transfer).
In this case, to meet the requirement, he would need a letter from his employer ordering the transfer to Spanish territory. Your employer must register with the Spanish Tax Agency.
c) Remote worker in Spain for a foreign entity (New 2023)
In principle, you could move to Spain and maintain your employment abroad. This would be the case if the work activity is carried out remotely, by telematic means.
Attention: This option still needs to be completed by the implementing regulation of the "Beckham Law", which is essentially a lower-ranking regulation in which all the details are regulated (it is like the small print of the law). Without the implementing regulation, this option is not yet applicable.
d) Acquisition of the status of director of an entity in Spain
You would be in this situation if you move to Spain because you have acquired the status of director of a Spanish company.
The administrative body of a company is ultimately responsible for the management and representation of the company, in accordance with the provisions of the Spanish Companies Act and the company's articles of association. This body may be formed by a single member (sole director) or by a group of members (board of directors). In both cases, you would become a director (it is not an employment relationship, although it is compatible with one).
As for the Spanish company, in order to meet the requirement, it cannot be considered an asset-holding entity under the terms of Article 5(2) of the Corporate Income Tax Act.
e) Starting a business (New 2023)
As for the option of self-employment, until recently it was totally incompatible with the Special Tax Regime, however, the Spanish Parliament approved amendments to the Personal Income Tax Law allowing certain cases of self-employment (those considered as entrepreneurial activity).
Entrepreneurial activity is understood to be that which is of an innovative nature with special economic interest for Spain and which for this purpose has a favourable report issued by the "Oficina Económica y Comercial" of the geographical demarcation or by the "Dirección General de Comercio Internacional e Inversiones" (Directorate General for International Trade and Investments).
Attention: This option still needs to be completed with the implementing regulation of the Beckham Law, which is essentially a lower-ranking regulation in which all the details are regulated (it is like the small print of the law). Without the implementing regulation, this option is not yet applicable.
f) Working as a highly qualified self-employed professional providing services to start-up companies (New 2023)
This option requires three things
- Work as self-employed ("freelance")
- Be considered as a highly qualified professional
- Provide services to start-up companies within the meaning of Article 3 of Law 28/2022 of 21 December.
Attention: This option still needs to be completed by the implementing regulation of the Beckham Act, which is essentially a lower-ranking regulation regulating all the details (it is like the small print of the law). Without the implementing regulation, this option is not yet applicable.
g) Working as a self-employed person carrying out training, research, development and innovation activities (New 2023).
In this case, the income derived from this activity must represent more than 40% of the total business, professional and employment income.
Attention: This option still needs to be completed with the implementing regulation of the Beckham Law, which is essentially a lower-ranking regulation regulating all the details (it is like the small print of the law). Without the implementing regulation, this option is not yet applicable.
The move to Spain
The Special Tax Regime rules require that the move to Spain is a consequence of the new work in Spain. However, the rules do not say when this causal link will be considered to exist, so evidence may be needed to convince the tax authorities.
For example, a long period of time between the two moments (moving to Spain and starting work) may be an indicator, among other factors to be considered, that there is no such causal link.
However, there are also different types of evidence to prove causality. For example, according to the binding consultation V1163/2017 of the Directorate General of Taxes, if the move to Spain was caused by the acceptance of a job offer from a Spanish company, and it can be shown that the job offer was received before the move to Spain, that would be sufficient to prove the causal link. Even without a job offer, if employment starts one or two weeks after the move to Spain, the chances of convincing the tax authorities are considerably high.
As mentioned above, this requirement is often the most problematic, as the reality is often more complex than what the regulation envisages. Therefore, the application of the rule sometimes requires interpreting concepts and entering into the realm of subjectivity.
This is why there is an official body (Dirección General de Tributos), which reports directly to the Agencia Estatal de Administración Tributaria, and whose main objective is to interpret the regulations where they are not sufficiently clear.