As of January 1st, 2023, Law 28/2022, of 21 December, regarding the promotion of the start-up ecosystem, and Law 31/2022, of 23 December, regarding the General State Budget for the year 2023 have introduced relevant changes to the so-called Beckham Law, a special tax regime applicable to workers posted to Spanish territory, regulated in Article 93 of the Personal Income Tax Law (LIRPF).
These changes represent a 180º turnaround in this special regime.
The most important new feature is the extension of this regime to professionals, entrepreneurs and investors, as well as the possibility of the spouse and children under 25 or disabled children of the displaced person being able to benefit from it.
But these are not the only relevant changes. Specifically:
1. The period of non-residence in Spain prior to the transfer is reduced from 10 to 5 years. In other words, from 1 January 2023, persons wishing to take advantage of this special regime must not have been resident in Spain for the 5 years prior to the transfer. Until now, this time reference was set at 10 years.
2. Although this was already the case in practice, the legal text expressly states that the move to Spanish territory may also take place in the year prior to the first year of application of the special regime.
3. Until 31 December 2022, the posting had to take place as a consequence of an employment contract or the acquisition of the status of director of an entity.
In the first case (employment contract), an employment relationship had to be initiated with an employer in Spain or the posting had to be ordered by the employer and a posting letter had to exist. From 1 January 2023, another possibility is added: without the posting being ordered by the employer, the work activity can be carried out remotely (commonly known as teleworking), provided that the worker has the visa for international teleworking provided for in Law 14/2013, of 27 September, on support for entrepreneurs and their internationalisation.
In the second case (director of an entity), the displaced person could not have a shareholding in the entity equal to or greater than 25%. However, from 1 January 2023 this limitation is only for asset-holding entities. Asset-holding entities are considered to be those in which more than half of their assets are not assigned to one or more economic activities, or if they are securities, excluding those that grant at least 5% of the capital of another entity and are held for a minimum period of one year, provided that the corresponding organisation of material and personal resources is available and that the investee is not, in turn, an asset-holding entity.
In addition to these two cases, as of 1 January 2023, the special regime is also allowed when the posting is the result of carrying out in Spain:
An economic activity classified as an entrepreneurial activity. It must be an innovative activity of special economic interest for Spain and there must be a favourable report from the competent body of the Spanish Administration. The professional profile of the applicant, the business plan and the added value for the Spanish economy, innovation or investment opportunities will be taken into account.
An economic activity by a highly qualified professional providing services to start-up companies, i.e. Spanish technology-based companies that are newly created or have been set up in the last 5 years (7 in the case of biotechnology, energy, industrial and other strategic sectors or that have developed their own technology, designed entirely in Spain), that do not distribute dividends, that are not listed on the stock exchange, that have at least 60% of their workforce with employment contracts in Spain and that develop an innovative entrepreneurial project with a scalable business model.
An economic activity by a highly qualified professional who carries out training, research, development and innovation activities.
In the latter two cases, the remuneration received by the highly qualified professional for the economic activity must represent more than 40% of his/her total business, professional and personal work income.
Other regulations shall determine how to accredit the status of highly qualified professional, as well as the requirements for classifying activities as training, research, development and innovation.
4. With regard to the income that will be understood to have been obtained in Spanish territory, this will be the total income from economic activities classified as entrepreneurial activity or the income from work received by the taxpayer during the application of the special regime.
5. On the other hand, the rate applicable to dividends, interest and capital gains, as from 200,000 euros, is increased from 26 to 27% and a new rate of 28% is added for this income for the part exceeding 300,000 euros.
6. The last new feature, which is also very important, is that the special regime is extended to the spouse and children under 25 years of age or without age limit in case of disability - also to the children's father/mother, if the parents are not married - provided that the following conditions are met:
a) They move to Spanish territory with the person benefiting from the special scheme, before the end of the first year in which the special regime applies to that person.
b) They acquire their tax residence in Spain.
c) They have not been resident in Spain for the previous 5 years.
d) They do not obtain income that would qualify as income obtained through a permanent establishment located in Spanish territory.
e) The sum of the taxable income of the spouse and children, for income obtained in Spanish territory, has to be less than the taxable income of the taxpayer covered by the special regime.
To find out more about the practical application of these changes or if you would like to learn more about any of the new aspects, please contact our office.
Balagué-Sala Lawyers