By Kurt Van Moos, Executive Director, Client Solutions, GoGlobal
In the fast-paced world of global business, companies are persistently searching for innovative strategies to attract and retain top-tier talent. To provide competitive advantages, many governments offer unique tax incentives designed to draw international talent to their shores.
One such provision is Spain’s Beckham Law. This law, introduced in 2005 and revamped in 2023, has been a critical component in shaping the country’s talent acquisition and retention proposition, helping foreign professionals optimize their income while enjoying the vibrant Spanish life.
In this blog post, we take a close look at the Beckham Law, explaining how it’s important for developing talent, discussing the rules companies need to follow and showing how experts can help businesses follow the law and make the most of international talent.’’
Understanding the Beckham Law
The Beckham Law, officially known as the Special Expats’ Tax Regime (SETR), provides a unique tax advantage for foreign professionals relocating to Spain to become Spanish tax residents. It allows qualifying individuals to pay a flat tax rate of 24% on their Spanish-sourced employment income up to €600,000. This special rate is available for the first six years of their residency, offering a significant advantage over the regular Spanish tax rates, which can reach as high as 48%.
This special tax regime’s application scope extends to the spouse of the relocated employee and includes children under 25 years of age or disabled (with no age limit in this case), or even their parents, provided they move to Spain no later than the first year of the special regime’s application to the relocated employee. It also provides a relaxed eligibility criterion: the number of years a person must not have been considered a tax resident before arriving in Spain is reduced from 10 to 5.
However, it’s worth noting that not everyone can avail themselves of the special tax regime provisions set by the Beckham Law. Self-employed individuals, professional athletes, directors of business entities and those owning more than 25% of business equity are among those excluded unless they possess specific visas like a digital nomad visa or visa intended for entrepreneurs and individuals associated with startups.
Overview of the Beckham Law
A game-changer for talent acquisition and retention
The Beckham Law is a game-changer in Spain’s quest for attracting global talent. Foreign professionals, executives, and even athletes are drawn to Spain by the prospect of reducing their tax burden significantly compared to their home countries or other global destinations.
Companies, through the provisions of the Beckham Law, can leverage the allure of a lower tax burden during salary negotiations, providing them a competitive edge in securing top talent. Furthermore, by offering employees the opportunity to optimize their income through reduced taxes, the Beckham Law enhances job satisfaction and loyalty, significantly contributing to talent retention.
It is important to note capital gains are not exempt, as profits obtained from dividends or the sale of real estate or personal property will be taxed at a flat rate of 19%. Interestingly, this tax scheme only applies to income earned within Spain, meaning foreign professionals are exempt from paying Spanish taxes on income generated abroad.
Maximize talent development with expert assistance
The Beckham Law undeniably stands as a compelling magnet for Spain, drawing international talent towards the vibrant Spanish landscape. For enterprises striving to attract and nurture top-tier professionals, this distinctive tax provision stands as an invaluable asset. By harnessing expert guidance to navigate its intricacies, organizations can fully unlock the potential of the Beckham Law, elevating their talent attraction strategies and positioning Spain as a strategic haven for eminent professionals.
For companies who have opted to use the Employer of Record model to employ staff globally, having a trusted partner such as GoGlobal can be a game-changer. With local teams on the ground, a partner such as GoGlobal will have localized expertise in Spanish employment and extensive experience with Spanish labor laws and can guide foreign companies and expatriate workers through the intricacies of the Beckham Law. They can ensure seamless compliance with local regulations, such as the Beckham Law, and facilitate talent acquisition and retention in Spain.
As a trailblazer in the realm of global employment and talent management, entities like GoGlobal empower enterprises to flourish in the expansive global talent arena, transcending geographical boundaries and ascending to unparalleled heights of achievement. The dividends of the Beckham Law, therefore, extend far beyond mere fiscal advantages, significantly bolstering Spain’s allure as a coveted destination for foreign professionals.
Find additional details on HR requirements in Spain or contact us to talk with an international HR expert about how our specialized solutions and expert assistance can help drive your cross-border talent strategy