The Spanish Treasury has declared that foreigners resident in Spain under the Beckham Rule tax regime should pay tax on their main residences, overruling a previous court ruling.
The decision taken by the treasury’s Central Economic-Administrative Court (TEAC) ruled that those benefiting from the specialist tax break should now be taxed on their main residence, contrary to a recent ruling of the Madrid High Court of Justice (TSJM) which exempted those covered by the Beckham Law from paying it.
In a ruling on 17 July the TEAC ruled that foreigners in Spain under the Beckham Rule regime must pay 2 percent of the cadastral value of the property in which they live or 1.1 percent if the value has been revised in recent years.
In Spain, personal income taxpayers (income tax is known as IRPF) are exempt from paying tax on their residential home because, as they live there, the property has no income-generating potential. However, they do have to pay tax on other properties as it is a potential asset for generating income.
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There has long been uncertainty in the case of foreigners covered by the Beckham Law, a tax regime that allows them to pay Non-Resident Income Tax (IRNR) at a fixed rate of 24 percent instead of the progressive IRPF scale, even if they live in Spain and only on the profits obtained in Spain, rather than on their worldwide fortune.
The IRNR law does not make any mention any tax exemption for the main residence. The TSJM, in its ruling in 2024, extended that exemption on main residence that Spanish citizens have to these foreigners by understanding that although it is reasonable that the IRNR regime does not exempt the main residence as it is a tax for foreigners, foreigners who are taxed under the Beckham Law “acquire tax residence in Spain.”
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The TEAC concluded, however, that the non-resident tax law is clear when, in Article 13, it states that taxpayers covered by this tax must pay it on the homes they have in Spain and that the regulation is only governed by the IRPF, which calculates the tax payment.
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These foreigners must pay tax “on the ownership of an urban property located in Spanish territory and regardless of whether it can be considered the owner’s habitual residence,” the treasury ruled.
The Beckham Law was first introduced in 2004 to attract talent and highly qualified workers to Spain with tax breaks. It was nicknamed after the footballer David Beckham because he was the first one to take advantage of it when he moved here to play for Real Madrid.
It essentially allows those who have not resided in Spain for at least the last five years to pay a flat rate of 24 percent on their income up to €600,000 per year.
In 2023, the Beckham Law was linked to Spain’s new Startups Law and modified to include some more favourable conditions for remote workers and entrepreneurs. This included exemption benefits of up to €50,000 for startups, a 50 percent bonus on carried interest, a 50 percent deduction for investing in new companies (up to €100,000), and exemption from wealth tax on assets located outside Spain for up to six years.
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