Since the reform of the Start-up Law (Law 28/2022, of December 21), the "Beckham Law" has broadened its scope. Previously, the definition of a company director was subject to certain restrictions, mainly related to the percentage of ownership in the company's share capital.
Requirements to qualify for the Beckham Act as an administrator
In order for an administrator of a Spanish subsidiary to be eligible for the Beckham Law, they must meet the following requirements:
- Not having been a tax resident in Spain in the 5 tax periods prior to the one in which the transfer to Spanish territory occurs.
- That the movement to Spanish territory occurs as a result of one of the following circumstances:
- As a result of an employment contract.
- As a consequence of acquiring the status of administrator of an entity in whose capital the taxpayer does not participate or, if participating, when the participation does not determine the consideration of a related entity in the terms of article 18 of the Corporate Income Tax Law.
- As a result of carrying out an entrepreneurial economic activity.
- For carrying out an activity that qualifies as research, development and innovation, or providing services as a highly qualified professional to emerging companies.
- That the income obtained by the taxpayer is not derived from a permanent establishment located in Spanish territory.
- The application must be submitted within 6 months from the start date of the activity that determines registration with the Spanish Social Security or the alternative mutual insurance company.
Pay attention to the latest regulations (no 25% participation requirement)
As mentioned, Law 28/2022 eliminated the 25% shareholding restriction for directors. Now, the key factor is that the entity is not considered "related" to the taxpayer. This makes it easier to apply the Beckham Law to directors in Mallorca with minority shareholdings.
Administrator Functions
- Management and representation of the company.
- Duty of diligence and loyalty.
- Convening and preparation of General Meetings.
- Preparation of annual accounts.
- Compliance with legal, tax and accounting regulations.
These functions must be performed effectively to meet the "economic substance" requirement.
Employment contract along with the status of Administrator
Combining both figures remains complex, but the new regulations allow for more flexibility in certain cases, provided that the legal requirements are met.
TEAC doctrine and binding consultations of the DGT
Both bodies have clarified aspects regarding the remuneration and tax classification of directors. Binding Ruling V1840-20 is particularly noteworthy.
Economic substance
The administrator's presence in Mallorca must be real and effective. This requires demonstrating actual responsibilities, physical presence, adequate material and human resources, management autonomy, and appropriate remuneration.
Conclusion
The Beckham Law now allows more directors to qualify for the special tax regime, provided they meet the legal and tax requirements. In Mallorca, our tax advisors can help you assess your situation.