SPAIN Law and Practice Contributed by: Álvaro Paniagua Rico and Borja López Pol, Anaford Abogados
ties; or (e) more than half of its assets are not linked to business activity (“non-qualifying assets”). Likewise, stakes in family companies or business assets may also benefit from a 95% to 99% tax relief under the inheritance and gift tax if they meet the Spain offers specific tax regimes that are attractive to non-resident individuals who become tax residents, as well as a participation exemption regime for quali - fying holdings. “Beckham Law” The Beckham Law – officially known as the “Special Expatriate Tax Regime” – was introduced in Spain in 2005 to attract skilled foreign workers, particularly high-earning professionals, by offering them favour - able tax treatment. Under this law, foreign nationals who move to Spain can choose to be taxed as non- residents for a period of six years, paying a flat tax rate of 24% on their Spanish income (except income from work that is taxed worldwide) up to EUR600,000, instead of the progressive tax rates applied to resi - dents. This regime significantly reduces the tax burden for expatriates, making Spain an attractive destination for talent from around the world, particularly as other countries adopt a restrictive interpretation of their own regimes (eg, the UK, Portugal, Italy). abovementioned requirements. 1.3 Income Tax Planning The benefits of the Beckham Law extend to family members of expatriates, allowing them to enjoy the favourable tax treatment as well. This inclusion makes the relocation process smoother and more appealing for foreign professionals with families, as it ensures that their overall tax liabilities remain low. The main effect of the Beckham Law is that foreign income – except for the specified income from work – is not taxed in Spain. This limits taxation to income and assets sourced only within Spain. Additionally, applying this regime means that the exit tax will not be triggered, nor will the Controlled Foreign Corporation (CFC) rules apply.
In addition, for wealth tax purposes, the Beckham Law provides that taxation applies only to assets and rights located in Spain. Lastly, it is crucial to demonstrate that the relocation to Spain is genuinely supported by real, economi - cally substantive professional reasons. Even where the formal statutory requirements are technically sat - isfied, the Spanish tax authorities may assess -from a substance-over-form and principal-purpose perspec - tive- whether the relocation to Spain is genuinely and predominantly employment-driven or whether it could be regarded as primarily tax-motivated (denying the application of the Beckham Regime). “Mbappé Law” In 2024, the Madrid regional government approved the so-called “Mbappé Law”, an autonomous PIT deduc - tion aimed at attracting foreign investors relocating to the Community of Madrid. The measure allows for a 20% deduction from the autonomous PIT tax base, calculated on the acquisition value – including related costs and taxes (excluding interest) – incurred by the taxpayer in connection with the following assets: • securities representing the transfer of capital to third parties, whether traded or not, in organised markets (public debt securities and private debt securities); and • securities representing an interest in the equity of any type of entity, whether traded or not, in organ - ised markets. The deduction will be available for individuals who, from 1 January 2024, will become PIT taxpayers in the Community of Madrid, as long as they meet the following conditions: • they have not been tax residents in Spain during the last • five years; and • they remain PIT taxpayers in the Community of Madrid throughout the investment period (ie, six years). Participation Exemption Regime The Corporate Income Tax (CIT) Law includes a par - ticipation exemption regime that may mitigate ineffi -
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