Spain’s Beckham Law offers significant tax benefits for foreign professionals relocating to Spain. This special tax regime, designed to attract talent, provides unique opportunities for tax savings. In this article, we will explore the tax implications and potential savings under the Beckham Law.
Table of Content
Tax Rates and Calculations
Flat Tax Rate
One of the primary benefits of the Beckham Law is the flat tax rate:
- 24% Flat Rate: Income up to €600,000 is taxed at a flat rate of 24%, significantly lower than the progressive tax rates for residents, which can reach up to 47%.
- 47% for Higher Income: Any income above €600,000 is taxed at 47%.
Income Types and Treatment
- Employment Income: Only employment income earned in Spain is subject to the flat tax rate.
- Capital Gains: Profits from the sale of assets or dividends earned outside Spain are not taxed under this regime.
- Wealth Tax: The wealth tax is only applied to properties located in Spain, not on global assets.
Comparison with Regular Taxation
Resident Tax Rates
For residents, Spain uses a progressive tax rate system:
- Income up to €12,450: 19%
- Income from €12,451 to €20,200: 24%
- Income from €20,201 to €35,200: 30%
- Income from €35,201 to €60,000: 37%
- Income above €60,000: 45%
- Income above €300,000: 47%.
Significant Savings
Under the Beckham Law, expats benefit from:
- Lower Overall Tax Burden: A flat rate of 24% up to €600,000 offers significant savings compared to the progressive rates.
- Exemption from Global Income Tax: Only Spanish-source income is taxed, whereas residents must pay tax on worldwide income.
Impact on Different Types of Income
Employment Income
Employment income earned in Spain is subject to the flat 24% rate. This simplifies tax calculations and ensures predictability in tax payments.
Capital Gains and Dividends
- Outside Spain: Capital gains from assets sold outside Spain are not taxed under the Beckham Law.
- Inside Spain: Gains from Spanish assets are taxed at a flat rate of 19%.
Wealth Tax
The wealth tax applies only to assets located within Spain. Rates range from 0.2% to 2.5%, depending on the value of the property.
Filing Taxes under the Beckham Law
Annual Filing Requirements
- Form 151: Expats must file their annual tax return using Form 151.
- Submission Deadlines: Typically due by the end of June for the previous year’s income.
Documentation
Ensure you have:
- Employment contract.
- Proof of income.
- Any relevant documentation for assets within Spain.
Conclusion
The Beckham Law offers substantial tax savings and simplifies the tax obligations for expats in Spain. By understanding the tax rates, savings opportunities, and filing requirements, expats can maximize their benefits under this regime. For personalized advice and assistance, consider consulting with a tax professional familiar with Spanish tax laws.