Legal Advisors Barcelona

The Beckham Law, or special tax regime for workers relocated to Spain, allows certain taxpayers to be taxed only on their income earned in Spain, as if they were non-residents, for a maximum period of six years. This taxation is particularly beneficial for employees earning salaries over 60,000 euros, as in those first years, they are taxed at a fixed rate of 24% instead of a higher general rate. The difference can be between 10-15% for salaries exceeding 100,000 euros annually.

After this six-year period, the taxpayer becomes a fiscal resident in Spain, which involves several additional obligations. These are the key aspects that a person should consider at the end of this regime.

Income Tax Declaration (IRPF)
Once the taxpayer leaves the Beckham Law regime, they will be subject to the general IRPF regime. This means they will be taxed not only on income earned in Spain but also on income from all over the world. They must include in their tax return all sources of income: wages, rental income, financial returns, investments, among others. Additionally, the tax scale is progressive, meaning that the higher the income, the higher the tax rate, with a maximum around 47%-48%, depending on the region.

In practice, this results in a significant increase in taxation:

• Due to higher tax rates on wage income above 24%.
• Due to the inclusion of income, such as rental or capital gains, which previously did not need to be taxed in Spain if they were earned abroad.

These variations can be seen as early as the first payslip after the six-year period ends, where the net amount received will likely be lower due to increased withholdings. Additionally, when preparing the tax return in May or June of the following year, it is likely that an additional amount will have to be paid, especially in regions with higher taxation, such as Catalonia.

Form 720
Upon finishing the Beckham Law regime and becoming a fiscal resident in Spain, the taxpayer is required to declare assets and rights located abroad through Form 720. This form must be submitted if assets abroad (bank accounts, securities, life insurance policies, real estate) exceed 50,000 euros in any of the established categories. Failure to submit or incorrectly submitting Form 720 can result in significant penalties, although in recent years the regulations have been softened following European court rulings that forced Spain to modify its penalty regime.

Wealth Tax
Another aspect to consider is the Wealth Tax, which levies the net value of the taxpayer’s assets as of December 31 of each year. This tax varies by region and generally has an exempt minimum of around 700,000 euros, though there are exceptions. In Catalonia, for example, the exempt minimum is lower, and the tax rate can reach nearly 3%. It’s important to note that not only assets in Spain but all worldwide assets are included in the calculation.

Conclusion
When the Beckham Law regime ends, the taxpayer must adapt to Spain’s general tax obligations. This includes a more complex income tax return, the submission of Form 720 if there are assets abroad, and, if applicable, the Wealth Tax declaration. It is advisable to plan for this change in advance, both to anticipate the change in the net amount of future paychecks and to prepare for the tax burden, e.g., by anticipating capital gains (selling shares or properties abroad) in the year prior to the regime change.

AGL Asesoría García López specializes in providing personalized tax advice for expats in Barcelona. As experts in navigating the Beckham Law and its expiration, we help expatriates transition smoothly from the special tax regime to Spain’s general tax framework. From preparing complex income tax returns, advising on foreign asset declarations (Form 720), to Wealth Tax implications, we offer comprehensive solutions tailored to your needs. Contact us today for personalized tax planning and compliance support in Barcelona!