If you’re a foreign worker who’s been temporarily posted to Spain, it’s a good idea to be aware of the special scheme for expatriated employees as regulated in Article 93 of the Personal Income Tax Law (known as the IRPF in Spanish). This article explains what this special scheme entails, what requirements need to be met and what steps to follow.
This scheme is also sometimes known as the Beckham Law, with footballer David Beckham being one of the first to take advantage of it.
Special Scheme for Employees Posted in Spain
The key feature of this scheme is that individuals who reside in Spain due to a posting can be subject to Non-Resident Income Tax (known as the IRNR in Spanish).
The requirements for eligibility are as follows:
- To not have been resident in Spain for the 10 tax periods prior to the posting.
- That the posting is due to one of the following reasons:
- For a contract of employment, except in the case of professional athletes.
- For becoming the director of a company and that you do not participate in the capital of the said company.
- That no income is earned that can be qualified as an income obtained through a permanent establishment in Spain.
What Forms Need to Be Filed?
To take advantage of this scheme and be eligible to pay IRNR, the taxpayer needs to file Form 149. This form is also used in the event of the special scheme for expatriated employees being withdrawn due to a failure to meet the requirements.
The tax return is submitted by using Form 151.
How Is tax Liability Determined Under the Special Scheme for Expatriated Employees?
In determining the taxpayer’s tax liability, the following is taken into account:
- Income from an activity carried out before the posting in Spain or after notification of the withdrawal of the scheme is not considered to have been obtained during the special scheme applicability period.
- The net taxable income is found after reducing the full taxable amount through:
- Deductions in tax liability referred to in Article 26 of the Non-Resident Income Tax Act (IRNR) (donations and withholdings and payments on account made with regard to the taxpayer’s income).
- Deduction for international double taxation.
Withdrawal of the Special Scheme
Taxpayers who have opted to take advantage of the special scheme for expatriated employees may waive it during the months of November and December prior to the year in which the waiver is to take effect.
The waiver procedure is as follows:
- Presentation of previous information to the withholder.
- Submission of Form 149 to the tax authorities.
Withdrawal generally occurs due to non-compliance with the legally stipulated requirements. Persons who withdraw from this scheme or are disqualified may not apply for it again.
If you’ve been posted to work in Spain for a period of time, it’s important to consult a tax expert to advise you regarding the use of the special scheme for expatriated employees.