Changes to Beckham's Law: what changes and what advantages does the new Startup Law confer on digital nomads?
With the entry into force of the Startups Law in Spain, in addition to encouraging foreign startups to come to Spain, it has further encouraged the arrival of skilled labor, especially digital nomads, to Spain.
This is because the Beckham Law - the most beneficial tax regime - has been amended as a result of the new Startups Law. These changes benefit self-employed digital nomads and those employed by foreign companies.
To better understand the changes, we should briefly mention Beckham's Law.
What is the Beckham Law?
The Beckham Law was introduced in Spain by Royal Decree No. 687/2005 with the aim of attracting skilled labor to Spain.
Those who fall under the Beckham Law will benefit from the flat tax rate of 24% (or 47% due to the changes) on income earned in Spain and the exemption of income earned abroad.
In other words, despite staying for more than 183 days, the beneficiaries of the Beckham Law will not be tax residents like other Spanish taxpayers.
However, it is important to mention that, despite falling under the Beckham Law, the individual will remain tax resident in their country of origin.
Therefore, the individual remains tax resident in their country of origin, maintaining their duty to declare their income annually and universally.
If you are interested in hiring professional legal services related to tax planning for a change of tax residence to Spain, we are a law firm specializing in the subject.
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What are the changes to the Beckham Law with the advent of the Startups Law?
The requirements to fall under the Beckham Law before the advent of the Startups Law were stricter, especially with regard to employees and the self-employed.
Before, it was only possible to fall under the Beckham Law if you had an employment contract with a Spanish company or a subsidiary in Spain.
The Startups Law has made it more flexible for those who have an employment contract with a foreign company, and it is not necessary for them to have a branch in Spain, as long as they work remotely - a great victory for many digital nomads.
Previously, freelancers could not fall under the Beckham Law. With the advent of the new law, it became possible for entrepreneurs, i.e. those who relocate to Spain in order to set up a business in the country, to qualify.
It also includes start-up managers and highly qualified professionals or those who carry out training, research and development activities for start-ups.
In addition, it wasn't possible to include dependents in the Beckham Law regime. As a result of the changes to the Startups Law, it was made possible to include spouses and children up to the age of 25 in the Beckham Law, benefiting the family as a whole.
Lastly, there was a change in the requirement for the length of time an individual cannot have been resident in Spain in order to qualify for the tax regime: from 10 years to 5 years.
Summary table of changes
Careers | Before | After |
Employee | Only those who had an employment contract with a Spanish company or a subsidiary in Spain. | This includes those who have an employment relationship with a foreign company, as long as they work remotely. |
Self-employed | It wasn't allowed. | This includes self-employed people who go to Spain to do business. |
Managers and Directors | Management position in a Spanish company, or managerial positions in a Spanish company. | This includes startup managers and highly qualified professionals who work for startups. |
Rate changes
In addition to the changes in professions, there have also been changes to the Beckham Law rates.
Previously, regardless of the amount earned, the rate was fixed at 24%. Now, depending on the amount earned, the flat rate will be 47%, as shown in the table below:
Turnover | Tax Rate |
Up to 600.000€ | 24% |
From 600.000€ | 47% |
Alert to Dual Tax Residency and its consequences for digital nomads
Even with the benefit granted by the Beckham Law, the individual will still be obliged to declare the income earned in Spain to their country of origin.
The mistake many people make, mainly because they are unfamiliar with tax legislation, is to declare only the income earned in their country of origin in their home country, and to declare only the income earned in Spain in their home country.
However, what many people don't know is that this is not just a mistake, it is a crime of tax evasion.
The big headache of having a criminal conviction is a criminal record. Anyone with a criminal record will have their passport automatically invalidated. In other words, they won't be able to leave the country, either to travel or for any other reason.
In addition, most countries require you to present a valid passport in order to obtain a digital nomad visa. In other words, no valid passport, no visa.
What's more, in addition to a possible criminal conviction, the Tax Authority could demand the amounts withheld retroactively, plus interest and monetary correction.
Therefore, it is extremely important to carry out tax planning. In addition to optimizing tax payments, it prevents taxpayers from being convicted of tax evasion.
If you are interested in hiring professional legal services to carry out tax planning to avoid tax evasion and double taxation, we are a law firm specializing in the subject.
To do so, please contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
