Why Business Owners of Foreign Companies and The Self-Employed Cannot Benefit From Beckham Law

Moving to Spain as a self-employed professional or a business owner can be an exciting step toward a new chapter. However, understanding how Spain's tax regulations work—including the widely discussed Beckham Law—is crucial before making the move.

This tax scheme, designed to attract skilled expats, offers significant benefits, but it excludes self-employed individuals and business owners of companies located abroad. Knowing why this distinction exists and how it might affect your plans can help you avoid unexpected tax hurdles. Let’s break it down and explore what this means for your move to Spain.

What is the Beckham Law?

The Beckham Law, or Régimen Especial Impatriados Art. 93 Ley IRPF is designed to boost Spain’s global competitiveness by attracting skilled professionals, entrepreneurs, and investors from abroad.

It offers those eligible a flat tax rate of 24% on Spanish-sourced income up to €600,000, with income above this amount taxed at 47%. The reduced rate applies for six years, providing significant savings compared to Spain’s regular income tax rates, which can reach up to 47%. The law also simplifies tax obligations for expats by excluding foreign income (e.g. capital gains, dividends) from taxation.

What Are The Main Requirements? 

To qualify for the benefits of the Beckham Law, an individual must meet ALL of the following criteria:

• They establish tax residency in Spain (staying over 183 days during a calendar year). 
• They have not been tax residents in Spain for the previous five years.
• The relocation is due to one of the following reasons:
  1. An employment contract (excluding professional athletes), which can be for a Spanish company or a company located abroad if the work is done through telematic means. 
  2. Appointment as a director of a Spanish company. 
  3. Self-employment in an innovative entrepreneurial economic activity, requiring prior approval from ENISA.
  4. Self-employment as a highly qualified professional providing services to certified emerging companies. More than 40% of the individual’s income must derive from qualifying activities. 
  5. Self-employment in highly qualified training, research, investigation, development, or innovation activities. Again, more than 40% of income must come from qualifying activities.
• The individual must not generate income that qualifies as obtained through a permanent establishment in Spain, other than the exceptions listed above. 

The reason why owners of foreign companies and the self-employed who don't fall into above categories are ineligible lies in this final requirement. 

What Is Income Derived from A Permanent Establishment? 

A Permanent Establishment (PE) is a concept in international tax law that refers to a fixed place of business through which a company or individual carries out significant business activities. It is used to determine whether a business has a sufficient presence in a country to be subject to its tax laws.

Why self-employment Income is considered to be income derived from a permanent establishment 

According to Spanish law, a natural or legal person operates through a PE if they have, on a continuous or habitual basis, facilities or workplaces in Spain where they carry out all or part of their business activities.

In the era of digital nomads, where workplaces are fluid and no longer tied to a single location, one might wonder why self-employment income is still regarded as being derived from a permanent establishment. However, remember that after registering as self-employed in Spain, you are legally required to include a Spanish address on your invoices. This means that it's impossible to avoid creating a habitual workplace. 

The Beckham Law itself implies that self-employment income is considered to be income derived through a permanent establishment through it's wording: 

"Individuals [may opt for the Beckham regime] when the following conditions are met:

c. That [the individual] does not obtain income that would be classified as obtained through a permanent establishment located in Spanish territory, except in the case provided for in points b).3.º and 4.º of this section."

(Points b) 3 and 4 are the exceptions relating to the self-employed who work with innovative companies.)

Why Business Owners of Companies Located abroad are excluded 

There are two key reasons:

a) The mere Presence of a Director in Spain could create a permanent establishment

If a double taxation agreement exists between Spain and the country where the business owner's company is based, the definition of a Permanent Establishment (PE) outlined in the agreement takes precedence.

Taking the UK-Spain agreement as an example, it has a wider definition of a PE than Spanish domestic law, including the following provision applicable to directors:

A permanent establishment is at risk of being created: 

'...where a person habitually exercises an authority to conclude contracts on behalf of an enterprise..'

When a director is resident and physically working from Spain, this is a real risk. 

B) If A Company is being run from spain, it can be considered resident 

Under Spanish tax law (Article 8 of the LIS), entities that meet any of the following requirements will be considered resident in Spanish territory:

a) That they had been constituted in accordance with Spanish laws.

b) That they have their registered office in Spanish territory.

c) That their effective management headquarters are located in Spanish territory.

If a company is being run from Spain (e.g. if the 100% owner and director does all the work from their Spanish home), the foreign company is clearly at risk of being considered to be resident in Spain, and therefore subject to Spanish corporation taxes.

Furthermore, under Spanish law, when a shareholder owns over 50% of the shares of a company, they must register as self-employed. As we've seen above, self-employment income isn't compatible with the Beckham law regime. 

Relevant Beckham Law Rulings 

In Spain, a "binding consultation" is a formal request to the General Directorate of Taxes (DGT) for a binding interpretation of tax laws as they apply to a specific case. It provides legal certainty for taxpayers, as the DGT's response is binding on tax authorities (but not courts). 

• V0321-17: A sole shareholder and director was deemed ineligible as it was concluded that there is no employment relationship.
• V1756-19: A a 33% shareholder and director was deemed ineligible as, again, it could be concluded that no employment relationship exists.
• V2817-23: An employee who also has income though leasing real estate through a permanent establishment was deemed ineligible. 
• V0619-24: A director of a Spanish company who also provided professional services to the company was deemed  ineligible. 
• V2248-24: An employee who later became self-employed and provided general services to clients was deemed ineligible from the year they transitioned to self-employment.

Common Pitfalls and Mistakes

This issue is often exacerbated by misinformation in the media, where business owners are misled by claims of a 24% tax rate applying solely to their salary, with other income sources seemingly overlooked.

In our experience, many individuals are applying for the Beckham Law without fully understanding or meeting its eligibility criteria. This issue is being exacerbated by misinformation in the media, where business owners are misled by claims of a 24% tax rate applying solely to their salary, plus tax advisors who aren't taking the time to fully understand the business setup of their clients. 

As in many countries, Spain's tax system operates on self-declaration. By submitting the necessary documents for the Beckham regime and confirming your eligibility, chances are that you'll be approved. At this stage, the tax office does not conduct a thorough analysis to verify if you truly meet the requirements—they simply take you at your word.

The issue arises if you're unfortunate enough to face an inspection, often many years down the line. When that happens, the inspection team will conduct a thorough analysis of your records (just ask Shakira). If they determine you weren’t eligible at the time you applied, you could be on the hook for years of back taxes, fines, and interest.

The following circumstances typically result in ineligibility, unless an exception applies:

• Having additional freelance or consulting work alongside an employment/director role.
• Entrepreneurs providing services to their own companies (even if no formal payments are made, transfer pricing rules may attribute remuneration).
• Owners of tax-transparent entities (e.g., LLCs, LLPs, partnerships), as income is attributed directly to them, making them self-employed in the eyes of the law. 
• Being self-employed, as we've discussed above. 

Final Thoughts 

The Beckham Law is often misunderstood, particularly by business owners. Many assume they qualify because they are paid through PAYE in the UK or W-2 in the US, but this is not the case. Understanding the specific requirements and exclusions of the law is critical to avoiding misconceptions and ensuring compliance with Spanish tax regulations.

Are you unsure if you qualify for the Beckham regime? Schedule a tax consultation with us today and get the clarity you need!