In recent months, Spain’s Tax Agency (AEAT) has ramped up its scrutiny of high-income professionals leveraging the Beckham Law, a special tax regime that offers significant tax breaks to expatriates. The Beckham Law, named after the famous footballer David Beckham who took advantage of the law during his time in Spain, allows qualifying foreign professionals to pay a flat 24% income tax rate on their earnings in Spain, rather than the progressive tax rate that can reach up to 47%.
Increased Focus on Compliance
The AEAT’s attention is particularly drawn to sectors with a high concentration of expatriates using the Beckham Law. These audits are focused on ensuring that individuals meet the law’s key requirement: they must not have been Spanish tax residents in the five years prior to applying for the regime.
One area under investigation is whether some professionals are manipulating their residency status to unfairly benefit from the regime. Another concern for the AEAT is the potential underreporting of global income. While the Beckham Law only taxes income generated in Spain, the tax authorities are closely examining whether all relevant income sources have been correctly.
New Risks After the 2023 Expansion
The 2023 expansion of the Beckham Law, under the Startup Law, extended eligibility to include digital nomads, freelancers, and entrepreneurs who relocate to Spain for work. This change has led to a surge in applications but has also added complexity to the regime. While this expansion is intended to attract top international talent, it has also drawn more individuals into the AEAT’s investigative net.
In particular, the tax agency is scrutinizing cases where expatriates, after their initial employment in Spain has ended, continue to claim benefits under the Beckham Law without maintaining the required economic activity or fulfilling residency requirements.
Consequences of Non-Compliance
For those found in breach of the law, the consequences can be severe. The AEAT has indicated that it will impose heavy fines and demand retroactive tax payments from those who fail to comply. Additionally, those using the Beckham Law are being advised to ensure that their tax filings are fully compliant with Spanish regulations to avoid potential legal repercussions.
The Importance of Professional Guidance
Given the increasing scrutiny and the complexities of the tax regime, expatriates considering the Beckham Law must seek expert tax advice. While the law offers significant tax advantages—such as lower income tax rates and the ability to avoid taxation on foreign income—it is essential that applicants meet all the conditions set by the regime. Failure to do so could result in costly penalties and a revocation of the benefits.
In summary, the Beckham Law remains an attractive option for high-earning professionals looking to relocate to Spain, but the recent focus on compliance by the AEAT highlights the importance of careful planning and adherence to all regulatory requirements.
At Lullius Partners, we understand the complexities and potential risks involved in applying for the Beckham Law. Our team of tax experts is here to provide personalized guidance, ensuring that you fully comply with all regulatory requirements while maximizing the benefits of this attractive tax regime. If you are considering relocating to Spain under the Beckham Law or have any questions about your tax obligations as an expatriate, don’t hesitate to contact us.
