Beckham Law Tax Calculator
How can you save taxes with the Beckham Law in Spain?
The Beckham Law in Spain has been the subject of interest and debate since its implementation.
It offers significant tax benefits for those foreigners who decide to settle in Spain.
In order to provide a clear view on the savings offered by this regulation we have developed the Beckham Law Calculator but we will also explore in detail what are its requirements, the tax benefits it provides and the applicable taxes in Spain for non residents.
Beckham Law Tax Calculator
Here are some of the factors you need to understand in order to save taxes in Spain with the Beckham Law
What is the Beckham Law?
The Beckham Law, officially known as the tax regime applicable to workers posted to Spanish territory, is a legislation that offers tax benefits to foreigners who move to Spain to work.
It was passed in 2005 to attract international talent and encourage foreign investment in the country.
What are the requirements to qualify for the Beckham Law?
- Not having resided in Spain during the last 5 years.
- Having traveled to Spain for work purposes, either through a job offer, a transfer from a foreign company or by becoming the director of a company in which you do not hold shares equal to or greater than 25%.
- Less than 15% of total revenues must come from Spanish companies.
- The request to apply for this regime must be made within a maximum period of 6 months from the beginning of the employment relationship.
However, there are two groups that cannot apply to be under this regime:
- Freelancers or self-employed workers.
- Sportsmen and professional athletes.
What is the tax regime applicable to foreigners in Spain?
Foreigners residing and working in Spain are subject to Spanish tax regulations. This involves the payment of income taxes and other local taxes.
For non-residents, there is the Non-Resident Income Tax (IRNR), which is levied on income generated in Spain.
The IRNR applies to income earned by foreigners in Spain, whether through salaries, professional activities, rents or other concepts.
The tax rate varies according to the type of income and can range from 19% to 24%.
How can you save taxes in Spain with the Beckham Law?
- Fixed rate taxation: Possibility of being taxed at a fixed rate of 24% on income obtained in Spain during the first six years of tax residence.
- Tax exemption on foreign income: Income generated from work performed outside Spain or from foreign sources is tax exempt, provided that it complies with the requirements established by Spanish law.
- Capital gains tax exemption: Capital gains generated abroad are not subject to taxation in Spain and must be taxed in the corresponding country of origin. Capital gains obtained in Spanish territory are subject to taxation in Spain, with tax rates varying between 19% and 28% depending on the amount of income.
- Modelo 720 exemption: By taking advantage of the Beckham Law, it is not necessary to file the Modelo 720 (Foreign Assets Declaration Form), since the taxpayer is treated as a non-resident taxpayer.
Case study:
Imagine a foreign professional, John, who moves to Spain and earns an annual salary of 150,000 euros. Without the Beckham Law, John would be subject to the general tax regime, where his overall income would be taxed in Spain.
Let’s assume that John meets the requirements and decides to take advantage of the Beckham Law. His tax liability would change significantly. Under this regime, John would only be taxed on income generated within Spain.
Let’s look at the detailed calculation:
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Income Tax Calculation without the Beckham Law:
- Total Annual Income: 150,000 euros
- Tax Base (Global): 150,000 euros
- Applicable Tax Rate (according to tax brackets): Let's assume an average tax rate of 35%.
- Tax to Pay: 150,000 euros x 35% = 52,500 euros
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Income Tax Calculation with the Beckham Law:
- Income Generated in Spain: 100,000 euros (portion assumed to be generated within Spain)
- Applicable Tax Rate under the Beckham Law: Let's assume an average tax rate of 24% for non-residents.
- Tax to Pay: 100,000 euros x 24% = 24,000 euros
It is important to note that these calculations are hypothetical examples and that tax rates may vary depending on current legislation and individual circumstances.
In conclusion, the Beckham Law in Spain is a regulation that offers significant tax benefits for those foreigners who comply with its requirements.
Remember that it is important to consult with a tax advisor to obtain a personalized and accurate analysis of your situation in relation to the Beckham Law.
Discover the advantages of the Beckham Law in Spain and optimize your tax situation!
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