Spain’s Special Expat Regime: The Ultimate Guide

Want to move to Spain so you can bend your tax payments like Beckham? 

Well, the good news is you don’t have to be a superstar athlete to benefit from Spain’s special expat regime, but that is where this tax program got its start.

Known widely as the ‘Beckham Law’, this regime provides an enticing framework that significantly reduces tax liabilities for expats. 

Allowing a flat 24% tax rate on income earned within Spain eliminates any taxation on worldwide income, making it an attractive option for those seeking tax optimisation. 

This regulation is the cornerstone of Spain’s strategy to draw in international talent by offering a tax incentive to high-net-worth individuals, digital nomads and entrepreneurs. 

Spain’s special expat tax regime is just another compelling reason to consider a move to Spain.

Want to benefit from Spain’s expat regime to lower your taxes? Here, we explore how the law works and how you can benefit.

Looking for straight-talking tax advice? Become a Nomad Capitalist client and discover how you can legally reduce your taxes.

Understanding Spain’s Special Expat Regime

Most people refer to Beckham’s Law as Spain’s ‘special tax regime’. That’s because it is, well, special, and the term is in the official title of the program.

The Special Regime for Displaced Workers is a tax framework designed for foreigners relocating to Spain for employment. This regime bolsters the Spanish economy by attracting global talent while offering expats the benefit of reduced taxes. 

Although named after David Beckham, athletes are now excluded from this regime. Still, it enables expats to retain non-resident tax status for up to six years, allowing them to enjoy lower tax rates in Spain (24% versus up to 47%, to be specific).

How Spain’s Special Regime for Displaced Workers Works

Spain’s special tax regime allows those employed by a Spanish company or assigned to work in Spain by a foreign company to qualify for non-resident tax status while residing there.

We will explore eligibility requirements in-depth below, but, in general, they include that you must:

• Not have been a tax resident in Spain for the past five years
• Be moving to Spain due to an employment contract
• Perform at least 85% of your work duties in Spain

Freelancers are generally not eligible unless they possess a digital nomad visa. Even then, there are restrictions. 

Additionally, directors owning more than 25% of a company in Spain cannot apply for this regime.

The easiest way to qualify for Spain’s special expat regime is to be an employee of a foreign company, provided that the company has assigned you to Spain based on approved circumstances (e.g., new market, finding clients in Spain, expanding the business).

Who Qualifies for Spain’s Special Tax Regime?

To qualify, you must not have been a tax resident in Spain during the previous five years.

You must also relocate to Spain with a valid employment contract if you are not already there. 

This could be through a job offer from a Spanish company, a transfer from a foreign company to its Spanish branch or a directorial position with limited ownership in a Spanish entity (no more than 25% shares).

The majority of your work responsibilities should be carried out within Spain, and your income should predominantly come from Spanish sources. 

Do you meet the requirements? Great! Just remember that you must apply for this tax status within six months of starting your job in Spain.

To do that, you fill out Spanish Tax Form 149.

This allows you to pay less Spanish income tax on any employment income obtained if you’re a non-resident who has obtained a tax address in Spain due to a posting in Spanish territory.

It also means that, for the duration of the tax period corresponding to your change of residence and the following six tax periods, you, as a tax resident, pay non-resident income tax rates.

Benefits of Spain’s Special Expat Regime

Given that Spain is a high-tax country, perhaps the biggest benefit to the special tax regime for expats is that, if you qualify, you pay tax in Spain only on Spanish-sourced income. Everything else is exempt and not required to be reported in Spain.

For personal income, there is a flat rate of 24% on taxable income up to €600,000. Income over that amount is taxed at a 45% tax rate.

That’s a huge difference. 

Instead of being taxed at a rate of between 19% and 47% (as the Spanish are) on your worldwide income, you are subject to a reduced Spanish non-resident tax rate.

You are taxed only on Spanish source income and gains rather than your worldwide income. This includes investment income, such as dividends and interest from bank deposits.

Foreign salaries remitted to Spain are taxed in Spain. However, the Spanish tax system does not tax foreign dividends. 

So basically, under this special tax regime, dividends, capital gains and foreign income held outside Spain are tax-free in Spain.

Property rental income is included in general revenue and, therefore, is taxed at progressive rates.

Therefore, the sale of assets abroad, for example, the sale of a property or any income from capital gains abroad, is not subject to Spanish income tax.

Wealth taxes on worldwide assets are also not applied to an individual under this regime. Wealth tax is only related to Spanish-sourced assets.

While this is beneficial for most high-net-worth individuals, we still suggest you establish residence in a region that does not have a wealth tax, such as Madrid. 

Spain’s Special Expat Regime: The Fine Print

There’s another reason this is called a ‘special’ tax regime – you can only take advantage of it for a maximum of six tax years.

How does that work, though? Do you need to file Spanish taxes as normal? 

No, you won’t need to fill in the dreaded Form 720 that Spanish tax residents use to inform the authorities of their assets outside Spain. Instead, you will fill out Form 149.

Spain’s Special Tax Regime and Double Taxation

One downside of the special tax regime is that if you pay non-resident income tax in Spain, you won’t be able to benefit from double taxation agreements.

You won’t be able to benefit as you have become a non-resident for the purposes of a special tax regime, despite officially being a tax resident in Spain.

So, essentially, double taxation agreements won’t apply to you, meaning you won’t be able to take advantage of lower tax rates on dividends and investment interest.

Spain’s Special Tax Regime Taxable Income

For tax purposes, the Spanish Tax Agency considers you and your family non-residents in Spanish territory.

As you’re considered a non-resident in Spain, you only pay tax in Spain on Spanish income. This also includes potential rental income on Spanish property.

Something else to consider is that tax rates can vary between state and regional governments within Spain.

So, levels of capital gains tax, inheritance tax, and Spanish property tax can fluctuate for Spanish residents.

Spanish Tax Residence Forms for the Special Regime

As tax residents, you and your dependents will need to spend more than 183 days a year in Spanish territory. 

Ten business days after submitting Form 149, should you qualify and receive accreditation for exercising the special tax regime option.

All taxpayers subjected to this regime must submit a Spanish tax return for income tax using Form 151.

Eligible residents must file Spanish tax returns between April 6th and June 30th of the year following the tax year. There are no extensions on filing tax returns in Spain.

The special expat regime allows you to halve your personal income tax as a Spanish resident. There are no deductions or reductions on your taxable income, though, except donations.

Without the Beckham Law, you would be subject to the ordinary Spanish tax rate when you obtain income.

You can obtain a tax credit for foreign taxes paid up to a maximum limit of 30% of the Spanish tax due on total employment income for the tax year, courtesy of this special tax regime.

Special Tax Regime Submissions

The Spanish tax system accepts Form 149 special tax regime submissions online through:

• A recognised electronic certificate, which may be associated with the National Document of Electronic Identity (DNI-e) or any other recognised electronic certificate that is admissible by the Tax Agency
• A PIN code.

Applications are accepted from both taxpayers and their representatives.

As a Spanish resident taxpayer living in a Spanish property, you need to prove your inclusion in the Census of Taxpayers to qualify for the special tax regime. 

If you appoint a representative to accelerate your submission, they will need to present their address in the Spanish territory, along with the following:

• Foreign Identity Number (NIE), a Spanish identification number
• Surname, name or company name
• For natural persons, their first surname and, where appropriate, the second surname
• For legal persons and entities, their company name or full name of the entity, without acronyms

• Address and telephone number

Spain’s Special Expat Regime – Things to Know

This special expat regime doesn’t just apply to high-powered entrepreneurs or company leaders. It’s also available if you’re a worker sent to work for a company (whether your current one or a new employer) within Spanish territory. 

In that case, you must notify the Spanish tax authorities within six months of starting to pay taxes on your employment income in Spain. 

Displacement Due to an Employment Contract

You must share your employer’s NIF, first name, surname or business name.

If you receive employment income from a Spanish company, you need to attach supporting documents issued by the employer expressing:

• The recognition of the labour or statutory relationship with the taxpayer
• The start date of the activity that appears in the registration with Spanish social security authorities
• The work centre and its address
• The duration of the employment contract.

In the case of a displacement ordered by your employer, you need to attach a copy of the letter of posting from the employer, as well as a supporting document issued by this non-Spanish company. 

Exercising a Waiver of the Special Tax Regime

Taxpayers who have opted for this special tax regime are able to then waive their application. We suggest doing this with caution. If you choose to waive this tax regime, you will not be able to apply again. 

You need to communicate your resignation during November and December prior to the tax year you want to leave the special tax regime.

Exclusion from the Special Tax Regime

Taxpayers who have successfully applied for this tax regime and who fail to comply with any of the determining conditions will be excluded from the regime. The exclusion will take effect when the breach occurs. 

The notification of the exclusion will be issued within one month of non-compliance. 

Termination of Special Tax Regime

When your arrangement ends, you must notify the Spanish tax system within a month of the end of your transfer to Spanish territory.

Spain’s Other Special Tax Regime

The expat tax regime isn’t the only special tax regime for tax residents in Spain.

Foreign Securities Holding Entities (ETVE), also known as Spanish holding companies, can benefit from a special regime consisting of an exemption from dividends or capital gains obtained from holding shares or holdings in foreign companies.

These are, therefore, companies with the potential for foreign investors to funnel their capital through a holding company established in Spain without having to pay taxes on the income derived from them.

The ETVE tax regime has been regulated in Spain since 1995 and was created with the aim of eliminating international double taxation with respect to shares in non-resident entities that carry out business activities.

The ETVE provides a 95% tax break on dividends received and capital gains from shares in both foreign and local companies through the ‘participation exemption’ (PEX) regime, as long as certain conditions are met.

Non-resident investors in an ETVE can enjoy tax-free profits from overseas income without facing withholding tax in Spain, as long as these profits comply with anti-abuse rules and aren’t seen as earned in Spain.

Non-resident shareholders selling ETVE shares can also avoid Spanish capital gains tax if the gains come from foreign sources, like international investments.

To benefit from the PEX regime, an ETVE must hold at least a 5% stake in a subsidiary for one year, and the subsidiary should be taxed at a minimum rate of 10%.

ETVEs can take advantage of Spain’s extensive double tax treaty network as long as they are tax-residents in Spain.

One of the biggest benefits of the ETVE regime is being exempt from the Spanish Non-Resident Tax (IRNR) in the case of distribution of profits or profits from divestment obtained by foreign partners.

All in all, this makes it easier for the foreign investor to invest and disinvest in the ETVE without worrying about IRNR.

Who is this special regime best for?

The ETVE is ideal for companies that want to use Spanish territory as a platform for investment abroad and gain a tax exemption on dividends and capital gains obtained by holding shares in foreign companies.

Go Where You’re Treated Best

Given Spain’s high taxes, opting for the special expat regime is a great strategy for those who qualify. 

You’ll need to decide if Spain is the best place for you, as you’re required to live there and establish ties for six years.

Are there other places where you might be able to protect your assets and grow your wealth more effectively?

We advise wealthy expats on double taxation, permanent establishment, property tax, rental income tax rates and tax returns. 

Nomad Capitalist can help you find a favourable tax regime for you and your business.

Whatever your desired next step, we are here to guide you. 

We’re here to help ensure your capital gains don’t become losses, that you can make the most of your investment income, that you avoid any unnecessary tax liability, reduce your taxable income and qualify for every available tax credit. 

Let us help you go where you’re treated best, get in touch here.