Popularly called “Beckham Law” was approved to allow non-residents who acquired tax residence in Spain to continue paying taxes under the non-resident income tax (IRNR) system, that is, by applying a lower fixed general rate at the marginal rate provided for in the regulations on Personal Income Tax (IRPF), in the tax period in which the change of residence takes place and the following five tax years. Thus, this tax incentive mainly benefits those taxpayers with high labour incomes.
In the initial regulation, although compliance with certain conditions was necessary, the incentive was applicable regardless of the amount of income obtained. This situation led to assumptions considered as abusive or undesirable, so the legislator modified the regulation with effects 1-1-2010 establishing a limit for its application: the labour income should not exceed the amount of 600,000 euros per year.
With effects 1-1-2015 the requirements for its application were modified again (art. 93 LIRPF), although in this case for its flexibility.
In short, what the new wording of Article 93 of the LIRPF indicates is that natural persons who acquire their fiscal residence in Spain as a result of their displacement to Spanish territory may opt to pay for the IRNR, maintaining the status of taxpayers by the IRPF, during the tax period in which the change of residence takes place and the following five tax periods, when the following conditions are met:
- That they have not resided in Spain during the ten tax periods prior to the one in which they are moving into Spanish territory.
- That the displacement to Spanish territory occurs as a result of any of the following circumstances:
- As a result of an employment contract. This condition shall be considered fulfilled when an employment relationship with an employer in Spain begins, or when the displacement is ordered by the employer and there is a letter of displacement from it.
- As a result of the acquisition of the status of administrator of an entity in whose capital does not participate or, in the contrary case, when the participation in the same does not determine the consideration of a linked entity in the terms foreseen in art. 18 of the Corporation Tax Law.
- That does not obtain income that would be qualified as obtained through a permanent establishment located in Spanish territory.