Spain: Changes to the inbound expatriates system: Beckham clause attracts talent to Spain
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Spain: Changes to the inbound expatriates system: Beckham clause attracts talent to Spain

gomez.jpg

Eduardo Gómez de Salazar

The "Beckham clause" has been offered as an incentive for attracting talent in the Spanish Personal Income Tax Law since 2004. It involves a special tax system available for executives and other employees who, on being sent to Spain, meet the requirements to be treated as Spanish tax residents on the terms described in Article 9 of the Personal Income Tax Law, and satisfy the following conditions:

  • They must not have been resident in Spain in the 10 years preceding their assignment to Spain;

  • Their assignment to Spain must take place as a result of an employment contract;

  • Their work must actually be performed in Spain;

  • That work must be performed for a Spanish resident company or entity;

  • The salary income earned under that employment relationship must not be exempt from personal income tax; and

  • The expected compensation under the employment contract in each of the tax periods in which this special system is applied cannot exceed €600,000 ($766,000) per annum.

This system allows any taxpayers becoming tax resident in Spain to elect to be taxed, for the five fiscal years following the year they became tax resident, to apply the rules on determining the tax debt established in the Spanish law for non-tax residents.

The main effects secured by applying for this system are (i) being taxed only on Spanish source income, rather than on worldwide income; and (ii) being taxed at the tax rates provided for non-tax residents, which are significantly lower in Spain (for 2014, the highest marginal rate for a tax resident is 52%, although the rates depend on the autonomous community where the taxpayer has his residence, and the tax rate for a non-tax resident is a flat 24.75% rate, though these tax rates are set to change in 2015 to 47% for tax residents in Spain, and 24% for non-tax residents).

In practice, applying this system has posed various issues, notably related to assignments not originating from the execution of an employment contract or an assignment under an employment relationship (as occurs, for example, when a new general manager and chief executive officer is appointed at a Spanish subsidiary of a multinational group), and issues have also arisen with construing when the expected compensation may exceed €600,000 per annum, and thus determining that the system cannot be applied.

But the news is that the tax reform that is now before parliament changes both of these scenarios, (i) by including as a new requirement for applying the system that the assignments must take place as a result of the acquisition of director status at an enterprise in which the taxpayer does not hold an ownership interest and with which the taxpayer is not a related party, and (ii) by eliminating as a requirement for applying the system that the expected compensation must be higher than €600,000 per annum.

The reform also changes the applicable tax rate to the general component of net taxable income (which includes salary income). A rate scale containing two tax rates would be applied, and the marginal rate would be the same as that applying to tax residents in Spain where that component of net taxable income exceeds €600,000. It also includes a rate scale for the taxation of the savings component of taxable income (applying to interest, dividends and capital gains generated in Spain, among other items).

Although the approval of the reform now under consideration appears to offer a more favourable framework for incentives to attract talent to Spanish enterprises, the way in which it is applied gives rise to doubts and differences with respect to the special systems available in other countries (Portugal, Belgium or the UK), such as not allowing qualified investors or pensioners to benefit from the special system.

Eduardo Gómez de Salazar (eduardo.gomez.de.salazar@garrigues.com)

Garrigues Taxand, Madrid

Website: www.garrigues.com

more across site & bottom lb ros

More from across our site

KPMG Netherlands’ former head of assurance also received a permanent bar and $150,000 fine; in other news, asset management firm BlackRock lost a $13.5bn UK tax appeal
The new, fully integrated office will also offer M&A, dispute resolution, IP and corporate tax services
The new guidance concerns a recent 1% excise tax on the repurchases of corporate stock for both US and certain foreign companies
Interpath has hired a managing partner from rival accounting firm BDO to lead the new operation
Survey results of over 28,000 in-house lawyers reveal that American in-house counsel place a higher value on the reputation of external advisers than their peers elsewhere
In an exclusive interview with ITR, Andrew Leigh also endorsed new legislation designed to prevent multinationals using complex corporate structures to reduce taxes
Nick Crama and Parwesh Bissumbhar, senior director and manager respectively at Alvarez & Marsal, outline practical advice for real estate managers to comply with DAC6 regulations
The finalists for the 13th annual awards revealed
Survey results of over 25,000 in-house lawyers show competitive pricing and transparency in billing practices can help firms win clients
The new tech partnership will assist clients worldwide with pillar two; in other news, UK accountancy firm MHA completes a regional merger
Gift this article