What kind of income is eligible for special treatment under the Beckham Law?

Income eligible for special treatment under the Beckham Law includes earnings from image rights exploitation, allowing qualifying individuals to benefit from favorable tax rates.

The Beckham Law provides special tax treatment for certain types of income earned by expatriates in Spain. Here’s an overview of the income types that are eligible for favorable tax treatment under this regime:

1. Spanish-Sourced Employment Income

  • Salary and Wages: The primary type of income eligible for special treatment under the Beckham Law is employment income earned from a Spanish source. This includes salaries, wages, and other forms of compensation received from employment with a Spanish company or a Spanish branch of a foreign company. This income is taxed at a flat rate of 24% up to €600,000 per year, with any income above this threshold taxed at 47%​.

  • Bonuses and Stock Options: Employment-related bonuses and stock options that are part of the compensation package are also eligible for the favorable flat tax rate, provided they are tied to the individual’s work in Spain. These forms of compensation are treated as part of the employment income under the Beckham Law.

2. Income from Professional Activities

  • Income from Independent Professional Services: In some cases, income earned from independent professional services provided in Spain may also qualify for special treatment under the Beckham Law. However, the application of this benefit to independent contractors or freelancers is more limited and typically requires that the services be closely tied to the individual’s employment contract or professional activities within Spain​.

3. Capital Gains from Employment-Related Income

  • Capital Gains Related to Employment: Capital gains derived from the sale of stock options or shares that are part of an individual’s compensation package are also eligible for the favorable tax rate, as long as these gains are linked to the individual’s employment in Spain. The Beckham Law allows these gains to be taxed under the special expatriate tax regime, providing a significant tax advantage​.

4. Exclusions and Limitations

  • Foreign-Sourced Income: It is important to note that the Beckham Law applies only to income earned from Spanish sources. Foreign-sourced income, such as income from investments, businesses, or employment outside of Spain, is generally not subject to Spanish taxation under the Beckham Law. This exclusion of foreign income is one of the key advantages of the regime, as it allows expatriates to avoid double taxation​.

  • Non-Employment Income: Other types of non-employment income, such as rental income, dividends, interest, and royalties, are not eligible for the special treatment under the Beckham Law and are taxed according to the standard Spanish tax regime. These forms of income are subject to regular Spanish income tax rates, which are progressive and can be higher than the flat rate applied to employment income under the Beckham Law.

Summary

The Beckham Law provides special tax treatment primarily for Spanish-sourced employment income, including salaries, bonuses, and stock options. It also applies to capital gains related to employment. However, foreign-sourced income and non-employment income are excluded from this favorable treatment and are taxed under the regular Spanish tax regime. This structure offers significant tax advantages to expatriates working in Spain, particularly those with high employment income from Spanish sources.