Beckham Law: expatriate regime under the scrutiny of the Tax Agency

The Beckham Law in Mallorca has become a very relevant tax tool for international professionals moving to Spain.

The special tax regime under Article 93 of the Spanish Personal Income Tax Law (LIRPF)—known as the Beckham Law—allows certain workers relocated to Spain to be taxed at a flat rate of 24% on Spanish-source income. In contrast, the general personal income tax system can have rates as high as 47%.

Furthermore, following the reform introduced by Law 28/2022 (the Startup Law), the scheme has been significantly expanded. Digital nomads, entrepreneurs, and highly qualified professionals. In addition, the required period of non-residence has been reduced from 10 to 5 years, making it easier to access the scheme.

However, this increased accessibility has also led to a significant rise in audits. Consequently, the Tax Agency has intensified its controls on the correct application of the system.

In particular, the Treasury pays special attention to profiles considered to be of higher risk, such as:

• Executives with international corporate structures
• Technology professionals who work remotely from Spain
• Taxpayers with assets in countries such as Germany, Switzerland, the United Kingdom, or the United States

Many of these professionals choose to settle in Mallorca, attracted by its quality of life and international environment. However, correctly implementing the Beckham tax regime requires rigorous tax planning.

You can learn more about our firm specializing in international taxation at
https://resitax.eu/

Main points of conflict in the application of the Beckham Law

Recent practice has revealed several recurring regularization scenarios. Therefore, understanding these risks is essential both for preventing tax problems and for defending oneself in the event of an audit.

Failure to meet the application deadline

Firstly, one of the most frequent problems is the failure to meet the deadline for applying for the scheme.

Form 149 must be submitted within six months of registering with Social Security as an employee in Spain. If this deadline is exceeded, it is generally no longer possible to qualify for the scheme.

However, in practice, complex situations arise. For example:

• administrative delays in the assignment of the NIE
• delays in processing registration with Social Security
• staggered work shifts

In these cases, case law has allowed some flexibility when the delay is not attributable to the taxpayer.

Previous residence in Spain

Another key point is prior tax residency.

To apply the Beckham Law, the taxpayer cannot have been a tax resident in Spain during the five years prior to the move.

However, the Tax Agency pays particular attention to certain border cases. For example:

• stays longer than 183 days
• existence of economic interests in Spain
• relevant family ties

In addition, the Administration cross-references information with various databases. These include the municipal register, entry and exit records for the Schengen Area, and financial data exchanged through the CRS system.

For this reason, the checks are becoming increasingly precise.

Permanent establishment in Spain

Undoubtedly, this is one of the most contentious points in current inspections.

Article 93.1.c) of the LIRPF excludes from the regime those who obtain income through a permanent establishment in Spain.

Currently, the Tax Agency applies this criterion with an increasingly strict interpretation. In some cases, it considers that a permanent establishment may exist if the taxpayer has a fixed location from which they regularly provide services.

This may include:

• a home office
• a private office
• a coworking space

As a result, two important effects may occur. On the one hand, the retroactive loss of the Beckham tax regime. On the other, the inclusion in Spain of income that the taxpayer considered to be foreign.

Simulation and intermediary entities

The Treasury also carefully analyzes certain corporate structures.

For example, when a professional creates a Spanish company with limited resources while the economic activity actually takes place abroad.

In these situations, the Administration may classify the transaction as a sham. This classification may be relative or absolute.

The consequences can be significant. Not only is the benefit lost from the outset, but penalties of between 50% and 150% of the regularized amount.

Non-compliance occurring during the term of the regime

Finally, it is important to remember that the Beckham regime has a maximum duration of six years.

However, certain changes may cause its loss during that period.

The Directorate General of Taxes, for example, has clarified in consultation V2248-24 that a worker who leaves their job to become self-employed is automatically excluded from the regime.

In addition, there are other problematic assumptions. These include:

• the acquisition of significant stakes in the employing company
• the transfer of the headquarters of effective management to Spain

Consequences of a regularization of the Beckham Law

When the Inspection concludes that the regime was not applicable, the consequences can accumulate.

Among the most relevant are:

• Regularization of ordinary Personal Income Tax, including the taxpayer's worldwide income.
• Regularization of Wealth Tax, including worldwide assets.
• Late payment interest from the end of the voluntary payment period.
• Penalty proceedings with penalties ranging from 50% to 150%.
• Potential international double taxation disputes.

The effect of Double Taxation Agreements

The interaction between the Beckham regime and Double Taxation Agreements (DTAs) is one of the most complex issues.

While the Beckham regime applies, the taxpayer is taxed in Spain as if he were a de facto non-resident.

However, if the regime is lost retroactively, the taxpayer becomes considered an ordinary tax resident in Spain from the beginning.

Consequently, the distribution of taxing powers between countries changes.

For example, Spain could claim jurisdiction over:

• dividends
• interests
• canons

that were previously attributed exclusively to the State of origin.

In some cases, the defense requires activating the friendly procedure (MAP) provided for in international conventions.

Defensive arguments against regularization

It is important to remember that receiving a regularization proposal does not equate to a final resolution.

There are several lines of defense that can reduce or even cancel the liquidation.

Legitimate expectation

If the Tax Agency itself initially accepted the communication of Form 149 and the taxpayer has submitted Form 151 for several years, there may be an argument of legitimate expectation.

In that case, the Administration should adequately justify any change of criteria.

Reasonable interpretation of the rule

Many concepts in article 93 of the LIRPF allow for different interpretations.

For example:

• permanent establishment
• limits of certain professional activities
• scope of certain incomes

If the taxpayer has followed a reasonable interpretation of the rule, the culpability necessary to impose penalties can be excluded.

Partial prescription

The general statute of limitations for tax purposes is four years.

For this reason, in regularizations that cover several fiscal years, some periods may have already expired.

Procedural defects

Beckham Law-related inspections are often complex and lengthy.

Consequently, procedural defects may appear, such as:

• exceeding the maximum inspection period
• lack of sufficient motivation
• lack of a hearing for the taxpayer

These defects may lead to the nullity of the procedure.

Resources against a tax regularization

The Spanish tax system allows for a regularization process to be carried out in several stages:

During the procedure, a suspension of the liquidation, avoiding paying large amounts while the appeal is resolved.

Expert advice with Resiax on Beckham Law in Mallorca

Applying the Beckham Law correctly in Mallorca can result in significant tax savings. However, it also requires meeting strict requirements and maintaining a consistent tax structure.

At Resitax, we specialize in international taxation. We advise executives, investors, and professionals relocating to Mallorca or other parts of Spain.

Our team can help you to:

• Confirm if you qualify for the Beckham scheme
• properly structure your tax residency
• avoid inspection risks
• optimize your international taxation

You can consult our tax advisory services in Mallorca

Or contact our team of tax experts in Mallorca