Client Alert #11/2022: Tax Regime for impatriates in Spain

In Spain, the Personal Income Tax Law establishes a regime for foreigners who are in Spain because their work obligations are carried out in the country. The law considers these individuals as "Impatriates". This regime is also known as the "Beckham Law".

Among the advantages of this regime are that of being taxed at the rate of 24% on income obtained in Spain up to the limit of 600,000 € and the most important, being taxed exclusively on income obtained in Spain (not being taxed in Spain on income obtained abroad), but being considered a tax resident in Spain, which allows obtaining the corresponding tax residence certificate.

However, this regime is not applied automatically; the applicant must previously comply with a series of mandatory requirements:

1. Not having been a Spanish tax resident during the 10 tax years prior to his application.
2. The applicant's transfer to Spain must be based on:

• An agreement with a Spanish employer followed by the signing of an employment contract, or the transfer as an employee of a foreign company to Spain.
• The applicant's appointment as a director of a company, in which the transferee owns less than 25% of the shares.

The applicant must submit his request to the Tax Administration within 6 months of the start of the activity appearing in the Spanish Social Security Register. To do so, the applicant must file a tax form and submit it to the Tax Authority.

Once the Impatriate has complied with the above conditions, he/she will be taxed as follows:

a) Regarding your ordinary income (e.g. salaries), the tax rates are:

• a) 24% up to 600.000 €.
• b) 47% from €600,000.01 onwards.

b) Dividends, interest and capital gains are taxed on a progressive scale of 19%, 21%, 23% and 26%.

As regards assets and securities located in Spain, the Impatriate, in accordance with the aforementioned regime, will be subject in Spain to Wealth Tax, being taxed as if he/she were a non-resident.

This regime applies if the Impatriate resides in the country for more than 183 days, in a calendar year. As long as the applicant meets these criteria, he/she will obtain Spanish tax residence and the regime will be applicable in the year of travel plus the following 5 years.