Professionals relocated via employment contract may opt for the special tax regime

Access to the special taxation regime for relocated individuals, commonly known as the Beckham Law, requires strict compliance with residency and labor causality conditions. The Dirección General de Tributos (DGT) has specified the limits of this regime in a recent binding ruling.

What the DGT has resolved

For a taxpayer to benefit from the special regime provided for in Article 93 of the Personal Income Tax Law (LIRPF), three fundamental requirements must be met:

• Previous residency: The taxpayer must have maintained the status of a non-resident in Spain during the five years prior to the relocation.
• Labor causality: The transfer to Spanish territory must be a direct consequence of an employment contract signed with an employer in Spain.
• Absence of permanent establishment: The taxpayer must not obtain income that qualifies as being obtained through a permanent establishment in Spain.

Furthermore, the ruling addresses the treatment of carried interest. This type of income will not be taxed in Spain if it does not derive, directly or indirectly, from a personal activity carried out in Spanish territory, provided that such activity took place prior to the relocation.

What this means for you

If you are a professional relocating to Spain, the key to accessing this tax treatment lies in the nature of your contract. Residency alone is not enough; it is imperative that the relocation is the result of an employment relationship with a Spanish entity. If the transfer occurs for reasons other than employment contracting, access to the special regime is ruled out.

For profiles with complex compensation structures, such as carried interest, the distinction between the activity prior to the move and the activity developed in Spain will determine the taxation of such income.

What should be done

Given the importance of the causality between the employment contract and the relocation, it is necessary to verify that the contracting structure complies with the requirements of current regulations. Each international mobility situation presents particularities regarding previous residency and the nature of the income obtained; therefore, it is recommended to assess each case individually to ensure compliance with the provisions of the LIRPF and the RIRPF.