If you are considering relocating your tax residency to Madrid and wish to learn how to apply for Beckham Law or for the upcoming Mbappé Law, you have come to the right website. At Golden Partners, we aim to resolve all your queries regarding the opportunities available to you if you are thinking of investing in Madrid, whether in real estate companies or other types of businesses, or if you need assistance in helping your family members reside in Spain and move freely within the Schengen Area (which includes nearly thirty European countries).
In this post, we will explain what the Beckham Law and the Mbappé Law entail, the requirements and tax benefits of each, how to apply for Beckham Law, success stories from some of our clients, and the steps we can take to assist you with the application and declaration process.
We help you transfer your tax residence to Madrid.
What is the Beckham Law
Tax benefits of the Beckham Law for investors and expatriate workers
The Beckham Law is a special tax regime in Spain designed to attract highly qualified professionals and expatriate workers to the country. This regulation allows beneficiaries to be taxed only on income earned in Spain and offers significant financial and tax planning advantages, such as:
- Territorial Taxation: Beneficiaries are taxed only on income generated in Spain, except for salary, which is taxed worldwide (on salary earned worldwide). This allows for significant tax savings by not being taxed in Spain on income generated outside Spanish territory (i.e., interest from a bank account left open in the country of origin, rental income from properties in the country of origin, etc.).
- Reduced tax rate: A fixed rate of 24% on the first EUR 600,000 of annual income, with the excess taxed at a marginal rate of 47%. This significantly reduces the tax bill, similar to the taxation of non-tax residents in Spain, i.e., those who spend less than 183 days in Spanish territory, paying taxes in their country of origin. In their case, they would be considered non-tax residents in their country of origin, likely with very reduced tax rates as well.
- Exemption from declaration of foreign assets: There is no need to submit Form 720, an informational model that tax residents in Spain, including Spaniards themselves, must present to inform the Spanish Tax Agency about assets and rights held abroad above certain amounts.
- Benefits for Family Members: Your spouse and children can also benefit from the inbound tax regime as long as they accompany you to Spain.
- Simplicity and Tax Planning: It simplifies the management of tax obligations for expatriate workers by requiring fewer declaration forms (the application form and the annual submission form) compared to non-tax residents (who must submit as many declarations as they have different assets or rights, also with quarterly deadlines).
How to apply for Beckham Law in 2024
To know how to apply for Beckham Law, it is crucial to first meet a series of specific requirements detailed below:
- Previous tax residence: You must not have been a tax resident in Spain during the previous five years. Therefore, whether you are a foreigner or a Spaniard and meet this requirement, you can apply.
- Type of activity: You must not engage in activities as a self-employed or freelance worker. If you are an entrepreneur, it would be better to read further about the Mbappé Law.
- New employment: You must justify the move to Spain for a new job or responsibility within your company.
- Deadlines: You must comply with the deadlines for the move, application for the regime, and the start of the work activity in Spain.
How to Apply for the Beckham Law: Step-by-Step Guide
To apply for the Beckham Law and take advantage of tax benefits in Spain, it is recommended to follow these steps:
- Gather the necessary documentation: You will need an employment contract in Spain, a tax residency certificate, and other documents that prove your professional experience and employment situation.
Register as a tax resident: Ensure you meet the residency requirements in Spain. - Apply for the special tax regime: Submit your application to the Spanish Tax Agency, including all required documentation.
- Obtain legal advice: It is advisable to have the support of specialised lawyers to ensure that the entire process is carried out correctly and to maximise tax benefits. This will help avoid any issues with the Spanish Tax Agency, which could result in the denial of access to the special tax regime, potentially affecting your income and wealth.
In this way, you will benefit from a reduced tax rate on your income earned in Spain, facilitating your residence and work in the country, as well as lower taxation in your home country, where you will be considered a non-resident for tax purposes, also being taxed at a reduced rate.
What is Ayuso's Mbappé Law?
Introduction to the Mbappé Law: an incentive for major investors
The Mbappé Law offers an attractive 20% deduction in the regional portion of the Personal Income Tax (from Spanish, ‘IRPF’), designed to attract major investors to Madrid, and it could come into effect in the coming weeks. This regulation will benefit those who invest in financial products such as bonds, shares, and treasury bills, excluding the real estate sector.
It is also known as Ayuso’s Mbappé Law because its proponent has been the president of the Community of Madrid, Isabel Díaz Ayuso. In fact, the Madrid region is positioned as an attractive investment destination, with a solid and growing economy.
According to the National Statistics Institute, Madrid leads in job creation and attraction of foreign capital, which is why more and more Hispanic-Americans are looking to the capital of Spain as a destination to invest a significant part of their wealth.
The necessary requirements to benefit from the new Ayuso’s Mbappé Law are as follows:
- Previous tax residency: Not having been a tax resident in Spain during the last five years, similar to the Beckham Law.
- Tax residency in Madrid: Maintaining tax residency in Madrid for a minimum of six years.
- Investments not in tax havens: The investment cannot be in entities domiciled in tax havens. This means that your investment can be made in Madrid, Spain, or anywhere in the world as long as it is not a tax haven for Spanish Tax purposes.
- Limited participation: Participation in the investment must not exceed 40% of the capital nor involve real estate properties (a percentage considered together with the possible participation of the spouse or another direct relative up to the second degree of the interested party). Also, the investor cannot have executive or labour functions in the entity.
Exclusive Benefits of the Mbappé Law for Foreign Investors
The Mbappé Law, recently implemented in Madrid, offers a 20% deduction in the regional portion of the Personal Income Tax for investors who transfer their tax residence to the region. This provides a significant reduction in the taxable base, allowing investors to save on the remaining income that must be considered in their Income Tax return.
Comparison Between the Beckham Law and the Mbappé Law
Numerous foreign investors are aware of the impatriate tax regime, popularly known as the Beckham Law, in reference to the former Real Madrid player, David Beckham. However, not everyone knows about the benefits of the Mbappé Law. Therefore, it is essential to detail the differences between the Beckham Law and the Mbappé Law:
Beneficiaries: high-level executives versus investors
The Beckham Law, in effect for over 20 years with several modifications over time, is aimed at workers relocated to Spain, especially high-level executives with high salaries. In contrast, the Mbappé Law is designed for major investors who transfer their tax residence to Madrid, where they must make an investment that they must maintain for a period of 6 years, including the last fiscal year of residence in Madrid.
Special IRPF Model versus a Regional Deduction of Madrid
Both tax benefits differ in their presentation to the Spanish Tax Agency.
The Beckham Law requires a special application form and then a special annual tax return form. On the other hand, the Mbappé Law involves applying a deduction in the regional portion of the tax and is reflected in the standard Income Tax return form used by other tax residents in Spain, whether national or foreign, and is filed annually.
Application throughout the national territory versus only in Madrid
The Beckham Law is intended for foreigners who transfer their tax residence to any part of Spain, whether it be the Peninsula, the Balearic Islands, the Canary Islands, or the autonomous cities of Ceuta and Melilla. In contrast, the Mbappé Law applies only to those who transfer their tax residence to a city within the Community of Madrid, including the capital of Spain.
Different Application Requirements
Although both legislations require that the applicant has not had tax residence in Spanish territory for the past 5 years, the Beckham Law does not establish a minimum period of residence in Spain to benefit from the special tax regime. It can only be applied for 6 years (the fiscal year of granting and the following 5 years). In contrast, the Mbappé Law requires maintaining tax residence in a city within the Community of Madrid for a minimum of 6 years.
Additionally, the Beckham Law is aimed at high-level executives (employees of a company transferred to Spain), while the Mbappé Law targets investors who transfer their tax residence to the Community of Madrid, even if their investment is made in the same city or elsewhere in Spain or the world, as long as it is not in a tax haven.
Different Tax Benefits
The Beckham Law allows taxation in Spain only on income from Spanish sources, with the exception of salary, which is taxed globally at 24% for the first €600,000, and the excess at a marginal rate of 47%. This would provide significant tax savings for both work income (i.e., 24% up to the first €600,000) and other income generated during the individual’s stay in Spain.
On the other hand, the Mbappé Law allows for a 20% deduction on contributions made to obligations, bonds, treasury bills, shares of listed and unlisted companies, or contributions to limited companies, excluding real estate investments. This 20% deduction is applied within the Income Tax return filed as a tax resident in Madrid.
Testimonials from investors and professionals benefiting from Madrid's legislation
The Beckham Law has proven to be an exceptional tool for attracting high-level foreign talent to Spain. Golden Partners has successfully managed cases such as Ignacio Pérez, a Chilean who holds the position of commercial director at a tech startup, and James Green, a British engineer specialising in artificial intelligence.
Ignacio Pérez, with an annual salary of $250,000 (approximately €228,000), managed to reduce his tax burden from 47% to 24%, resulting in tax savings of €52,440 per year. “Golden Partners’ advice was crucial in understanding the tax benefits and optimising our expansion in Europe,” says Pérez.
On the other hand, James Green, with a salary of £80,000 (approximately €93,000), benefited from the same tax reduction, saving approximately €21,390 annually. “Golden Partners facilitated the entire process, making the transition smooth and advantageous,” notes Green.
Both cases reflect how the Beckham Law not only benefits professionals but also drives economic and technological growth in Spain. Meanwhile, the Mbappé Law is pending implementation, though it is expected to be well-received by Hispanic-American, European, and American investors and entrepreneurs considering transferring their tax residence to Madrid.
Madrid as an investment and residence destination: advantages and opportunities
Madrid stands out as an exceptional destination for both investment and residence, offering numerous advantages for its residents. in terms of quality of life, the community of madrid leads with a life expectancy of 84.64 years, the highest in spain, thanks to its efficient healthcare system and low mortality rates from serious illnesses.
the education system is another strong point of the capital, with a wide range of high-quality universities and educational institutions, attracting students from around the world. although the cost of living can be high, particularly in terms of rent, there are options for all budgets, and the public transport system is excellent, making getting around easy and reducing the need for a car. the abundance of green spaces, such as the retiro park, along with the wealth of cultural and leisure activities, make madrid a vibrant and attractive city to live in.
How Golden Partners can help you maximise the tax benefits of the Beckham law
For all the reasons mentioned above, at Golden Partners we are at your complete disposal to assist you with the tax planning of your assets, whether you are considering coming to work in Spain, investing in real estate or other business opportunities, as well as facilitating the relocation of your family to Spain so they can move freely throughout Europe. We have many years of experience advising and managing the assets of our clients.
We will be delighted to assist you through our contact form in Spanish, English, and French.
