Key takeaways:

• Beckham's Law is a tax regulation in Spain that offers tax incentives to foreign workers in Spain, including self-employed independent contractors.
• The law provides a flat tax rate of 24% for foreign workers on income up to USD 644,000 on income generated in the first six years of residency, which can be significantly lower than the ordinary tax rate for Spanish residents.
• To use Beckham's Law, independent contractors must carry the required visa, and carefully consider the compliance requirements to ensure eligibility for the flat tax rate.

What is Beckham’s Law?

Beckham's Law is a tax regulation in Spain that was introduced in 2005 and named after the famous English footballer David Beckham. The law offers tax incentives to non-resident foreign workers in Spain, including self-employed independent contractors (only if they hold a digital nomad visa).

The purpose of Beckham's Law is to attract foreign talent to Spain and to encourage foreign investment. It provides a flat tax rate of 24% for foreign workers on income up to USD 644,000 on income generated in the first six years of residency, which can be significantly lower than the ordinary tax rate for Spanish residents. This flat tax rate applies to all income earned from Spanish sources, including salary, royalties, and dividends. These benefits also extend to spouses and children under 25 years of age (with some restrictions).

After this USD 644,000 the talent would then be subject to Spanish Personal Tax (PIT) and would be required to pay at an incremental tax rate of 47%.

How does Beckham’s Law affect independent contractors?

For independent contractors in Spain, Beckham's Law can be an attractive option (if they carry the required digital nomad visa), allowing them and their families to save significant amounts in taxes.

However, there are also some compliance considerations to be aware of when using Beckham's Law. For example, the worker must not be resident in Spain for tax purposes, and they must not have spent more than 183 days in Spain in the previous year. Additionally, the worker must have a tax residence in another country and must not have any significant economic ties to Spain. The ex-pat will also still be expected to pay foreign income tax on any compensation earned from non-Spanish sources, and apply for the special regime within 6 months of registering with the Social Security system in Spain.

Beckham's Law is especially useful to high earning ex-pats, those earning less than EUR 50,000 may find that the taxes owed under PIT would be lower. Particularly low earners may owe as little as 0%.

To apply for treatment under Beckham's Law, foreign talent will need to: complete form 030 to establish a tax identification number in Spain (NIE) and complete form 149. They must then submit their approved application to their Spanish employer. This process can take as long as 2 months.

Beckham's Law can be a useful tool if you’re working from Spain. However, it's important to carefully consider the compliance requirements and ensure that you meet the criteria for the flat tax rate.

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