The Beckham regime or the ordinary regime

The 24 % is not the important part

The special regime for inbound workers under article 93 of the Personal Income Tax Act is always sold with the same headline: you pay a flat 24 %. That is true, and it matters least. What actually decides in nearly every case we see is not the rate but which income ends up inside the Spanish return.

Someone who elects into the regime is taxed as though they were a non-resident, with two peculiarities: their employment income is taxed here wherever it comes from, and the rest of their income is taxed in Spain only if it has a Spanish source. Dividends from a portfolio held abroad, interest on a foreign account, the gain on selling shares through a foreign broker: none of that comes in. Under the ordinary regime all of it does, because a Spanish tax resident is taxed on worldwide income.

That is why the regime pays handsomely for some people on a modest salary, and fails to pay for others on a large one. Salary is only one of the variables.

The two columns

	Article 93 regime	Ordinary regime
Employment income	24 % up to 600,000 € and 47 % on the excess, Spanish-source or foreign	The progressive state and regional scale
All other income	Only Spanish-source	Worldwide
Personal and family allowances	Not applied	Applied
Reliefs	Practically none; no joint filing either	The general ones and the regional ones
Work performed abroad	The exemption for work carried out abroad does not apply	Available if the conditions are met
Wealth tax	On Spanish-situs assets only	On worldwide net wealth
Reporting foreign assets	Not required while the regime lasts	Required once the thresholds are crossed
How long	The year of the move and the five following years	Indefinite

Where the flat rate starts to win

With employment income only and nothing else going on, the point at which the average rate under the general scale catches up with 24 % sits, to give an idea of the shape of the problem and not as a threshold applicable to anyone, somewhere around sixty thousand euros a year. Below that, the ordinary regime usually wins, because personal allowances and the first bands drag the average rate down. Above it, the special regime wins, and the gap widens quickly.

But that point moves, and it moves a long way, with very ordinary facts:

• Your autonomous region. Half the scale is set regionally and it is not the same in Madrid as in Cataluña or the Comunitat Valenciana. The crossing point moves with your address.
• Children and family situation. Each allowance for a dependent raises the crossing point, because those are euros that go untaxed under the ordinary regime and taxed under the special one.
• Housing. Anyone still carrying the old state relief for buying a main home, from purchases before 2013, loses it entirely on electing in.
• Assets outside Spain. Once there is a portfolio, property or shareholdings abroad, the calculation stops being a comparison of scales: wealth tax and the reporting obligations come into play, and there the special regime often settles the question on its own.

What nobody tells you about the option that looks better

• All employment income is taxed here. Including the part relating to days worked outside Spain. People who travel constantly and expected to split their salary between countries find the exact opposite.
• Double taxation is relieved badly. The credit for foreign tax paid is capped, and if the other country taxes the same employment income heavily, the combined result can be worse than under the ordinary regime.
• Multi-year income gets no reduction. A severance payment or a long-term bonus does not benefit from the reduction available in the ordinary regime.
• Losses are not offset across years the way they are in the ordinary regime, and that matters to anyone holding Spanish-source investments.
• Equity is taxed on vesting, not on sale. Shares delivered for work are employment income and go in at 24 %; the later gain, if the broker is foreign, does not come in at all. The border between those two things is where these cases are won and lost. We set it out in stock options or RSUs.

Selling a property while you are on the regime

One confusion is worth clearing up, because it costs money. Someone on the article 93 regime is a Spanish tax resident: a buyer does not withhold 3 % of the price from them. But they are taxed on their Spanish income under non-resident rules, which means the main-home reinvestment relief is not available to them. It is the point most often explained wrongly, and it sits alongside selling as a resident or a non-resident.

When the Beckham regime or the ordinary regime fits neither column

The first year, which is very often neither one thing nor the other. Someone who lands in Spain in October does not reach the number of days that establishes tax residence in that calendar year: for that year he remains a non-resident and is taxed under non-resident income tax, even though the election into the regime has already been made. The comparison between the two columns really begins the following year, and the year of arrival has rules of its own, withholding of its own and, in a fair number of cases, an exit return still owing in the country left behind. Planning a move without allowing for that hinge year is where half the saving disappears.

The second in-between case is the family. The regime is not elected as a couple: each person has a position of their own. The law allows a spouse and children below a set age to come in alongside the person who was posted, but on conditions of their own as to the timing of the move and the relative size of each one's income, and it is not automatic. What we usually find is a married couple where article 93 suits one of them and the ordinary regime suits the other, and at that point the decision stops being arithmetic: the two returns have to be looked at together, because the special regime rules out joint filing and closes off much of the family allowance.

And a third, increasingly common: the person who has lived here before. Somebody who left four years ago and comes back on a new contract usually assumes the door is shut. It depends. The condition looks at the tax years before the move during which you must not have been resident in Spain, and four years away and six years away do not give the same answer. It is a calculation of dates, done with your filing history in front of you and not from memory. For a United States citizen there is a further layer that no Spanish rule can switch off: the obligation to keep filing in the United States runs in parallel, and how the two systems fit together is a question for your American adviser, not for us.

What to look at before deciding on the Beckham regime or the ordinary regime

To answer with figures — and to avoid losing the deadline while the figures are being worked out — this is what is needed:

• The date of registration with Spanish social security or, if you stay under your home country's legislation, the document that proves it. That is where the six-month window for the modelo 149 starts running, and it governs everything else.
• Your tax residence history for recent years, country by country, to test the prior non-residence condition.
• The contract and the assignment letter: who employs you, who pays you, whether there is a group structure behind it, and whether you appear as a director with a shareholding in the company.
• The full remuneration for the year: base pay, variable pay, sign-on bonus, benefits in kind and any relocation payment.
• The equity calendar, with grant, vesting and exercise dates, and the country in which each tranche was earned.
• An inventory of what you own outside Spain: accounts, portfolios, property and shareholdings, with values, because that drives wealth tax and the reporting obligations.
• The region you are moving to and your family situation, which are the two variables that move the crossing point most.
• The treaty with your home country and what it says about the income you will carry on receiving from there.

How we handle the Beckham regime or the ordinary regime

We calculate both complete returns with your figures: salary, bonus, equity with its calendar, income from outside Spain, assets inside and outside the country, family situation and destination region. Out of that comes an annual difference and, more importantly, a cumulative difference over six years, which is the real horizon of the decision.

When the difference is small we say so, because the regime carries a rigidity cost that does not show up on a spreadsheet. And where there is doubt about whether you qualify at all — the type of contract, the nature of the move, the structure of the employer — we flag it as a doubt and explain the risk, without promising an outcome. The line is on the Beckham regime and the form asks for your registration date, which is the fact that governs everything.