Spain's Beckham Law, officially known as the "Special Expatriate Tax Regime," was introduced in 2005. Named after footballer David Beckham, who was one of the first high-profile individuals to benefit from it, the law was designed to attract skilled foreign workers and high-income professionals to Spain. It offers significant tax advantages for qualifying individuals. Here’s an explanation of the benefits and eligibility:
Overview of the Beckham Law
Renting out properties as tourist houses or apartments (Viviendas de Uso Turístico, or VUTs) in Spain can be lucrative, but there can be significant legal and regulatory challenges. Individual investors can find themselves entangled in complex legal issues after deciding to rent out their property. While the prospect of additional income is attractive, the reality may involve navigating a maze of regulations and even potential conflicts between different authorities.
Complex Regulatory Landscape
Spain's regulatory environment is multifaceted, with three levels of government—national, regional (Autonomous Communities), and local—each playing a role in tourism and land use regulations.
Clients sometimes ask us whether they should raise money to finance a property purchase in their home country where they are familiar with the process or here in Spain. Before I briefly look at possible advantages or disadvantages, I want to stress that it is unlikely that you will be able to use the property you are buying as security. A lender based outside Spain is unlikely to want to have the asset that secures the loan in another country. You will most likely have to offer security in the country where the lender is based.
Benefits
Potentially Lower Interest Rates
Wealth Tax (Impuesto sobre el Patrimonio (IP)) is a national tax in Spain which has had an up-and-down ride in recent years. It is principally regulated by Law 19/1991. However, its collection is 100% devolved to the Autonomous Communities, which can exercise their own regulatory powers according to Law 22/2009. In Andalusia, control over the IP has been subject to a number of legislative changes but fundamentally, Andalucia has chosen to avoid collecting the tax as an incentive to high net worth individuals to base themselves in the autonomous region rather than in, for example, the capital Madrid.
The obligation to declare the IP was abolished in 2008, but temporarily reinstated in 2011 by Royal Decree-Law 13/2011. Since then, the obligation to file a tax return has been extended by various laws until 2021, when it was established that it would remain in force indefinitely.
US and Canadian citizens are increasingly interested in buying property here in Spain due to our favourable climate, beautiful landscapes, rich culture, and relatively affordable property market. We are frequently asked whether there are issues for US and Canadian citizens in buying property in Spain. In short, the answer is absolutely not. There is no difference between US and Spanish nationals in the actual purchase but there is in terms of being able to live full time in the country.
I’ll look at the residence restrictions and then recap the buying procedure.
Residence Restrictions
There has been considerable controversy in Spain in recent times with regard to tourist rentals in urban areas. As well as the popularity of “City Breaks” made possible by cheap flights, the rise of Airbnb creating a market for inexpensive rooms, apartments and houses, often in residential areas, has encouraged such travel and created a boom in urban tourism.
Whilst this has undoubted economic benefits, it is often not local businesses but international chains that benefit most. Increased tourist numbers also lead to overcrowding on public services and in the most popular streets, a change in the nature of shops with a tendency away from the need of locals to catering for tourists and, perhaps most significant a steep rise in rents, forcing residents further away from the centre. There are also environmental concerns, both with increased waste, higher carbon emissions and greater pressure on water and sewage resources.
What is it? How is it calculated? Who pays it and when?
The plusvalía tax, formally known as the "Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana" (IIVTNU), is a municipal tax. It is imposed on the increase in value of urban land when it is sold, transferred, or inherited. This tax is crucial for local governments as it provides a significant source of revenue. Here’s an overview of what it entails and how it is calculated.
Many clients ask us about the Catastro. They've heard of it in connection with property purchases, but don't know what it does and why it is important. I'll attempt to explain with some concrete examples:
Property Identification
The origins of the Catastro date back to the 18thC. The introduction of land use planning was a threat to the privileged classes because once ownership was attributed to each plot of land, the owner could no longer claim not to own it, nor to own less land than, in reality, in order to avoid taxes. The primary function of the Catastro is to identify all real estate properties in Spain. This includes both urban, rural, and industrial properties. Each property is assigned a unique catastral reference, which ensures clear identification and helps prevent disputes over ownership.
The Spanish Ministry of Housing and Urban Spaces has announced grants for house owners who wish to upgrade their property and reduce dependence on fossil fuels.
Comprehensive Residential Building and Housing Rehabilitation Aid Programme
The rehabilitation programme for economic and social recovery in residential environments, forms part of the Recovery, Transformation, and Resilience Plan (PRTR), which aims to promote the rehabilitation of apartment buildings, houses and neighbourhoods. The distribution of Next Generation EU funds to the eventual beneficiaries will be managed through the Autonomous Communities, such as Andalucia, based on agreements proportional to the number of households in each region.
Objectives and Targets
High-speed rail (HSR) is a critical component of modern transportation infrastructure, offering fast, efficient, and environmentally friendly travel. Various countries have developed extensive HSR networks, with notable differences in length, development plans, and operational characteristics. Spain is at the forefront of HSR development. Only one country in the world has a more extensive network: China.
Here’s a comparison between Spain and some other European countries:
Introduction
Recognising that the 2002 regulations governing urban planning (known as LOUA: la Ley de Ordenación Urbanística de Andalucía) were too restrictive and based on an outmoded way of thinking, the Junta de Andalucia set about creating a more flexible model and this was brought into effect in June 2022. The new regulations are known as the LISTA: la Ley de Impulso Para La Sostenabilidad del Territory de Andalucía.
What Are The Possibilities?
There are two possible ways to buy a property that has a loan outstanding attached to it:
Introduction
If you own a property in Spain but are not fiscally resident in the country, that is if you spend less than 183 days per year in Spain, you are considered to be non-resident. Non-residents will normally need to justify to which tax authority they pay their taxes. Governments don't like citizens to be non-resident everywhere! Your tax residence is important as it affects what type of taxes you pay and how much. These are the taxes to which non-residents are subject:
Income Tax
Non-residents in Spain are generally subject to a flat tax rate of 24% on income earned in the country. This applies to employment income, rental income, and other sources of income generated in Spain. Income generated outside Spain is taxed in the country in which you are fiscally resident.
What is the Spanish Digital Nomad Visa?
Recognising the significant rise in people's ability to work remotely, which was strengthened by the recent Covid pandemic, and a widespread desire to experience living in various locations, the Spanish government introduced at the end of 2022 a visa which would enable such people to reside temporarily in Spain. The government's motives were not altruistic. They were aware that such nomads are often highly paid professionals and Spain would benefit from both their spending power and their taxes. Spain is a very attractive location for people who are able to work remotely: the climate, excellent communications, fast internet speeds, low cost of living relative to most European countries, availability of coliving facilities and the friendliness of its people.
Who Is It Aimed At?
Photo: El Independiente de Granada
Last Saturday, I sat in the car for ten minutes trying to get to my garage, having entered the Albayzín via Calle Pagés. What the hell was going on? So much traffic leaving and trying to enter the barrio. It didn't help that the pilonas (bollards that restrict entry to residents only) had been removed at the end of August and should have been replaced by end-September by more efficient models. There was unrestricted vehicle access to the Albayzín. Crazy.
That area of the Albayzín was also thick with pedestrians, milling around and through the traffic, some of whom were in fancy dress and all of whom were noisily enjoying themselves. I had chanced on a procession I knew nothing about, despite living here for more than twenty years.
Each Autumn there is a fun gathering and procession for the little toe. Not just any toe. The severed little toe of a man named Chemi Márquez. Twenty-nine years ago he was in a traffic accident while riding his motor bike in the centre of Granada. His little toe was severed. With the compensation, he bought a house in the Albayzín (now named after the toe) and decided to preserve it in formaldehyde and keep it in a niche in the house. Each Autumn the 'uncorrupted little toe' is taken out of its crypt and paraded in its glass casket on the shoulders of four bearers, with music, song and banners. This year arorund 400 people helped celebrate showing the toe to the sky.
Wonderfully absurd. Just one of the reasons I love living here.
What is the Spanish Non-Lucrative Visa?
The Spanish Non-Lucrative Visa is a means for non-EU citizens to live legally in Spain. It is aimed principally at retired people who have income arising in their home country (or elsewhere) with which they can sustain themselves while living in Spain. Buying a property in Spain does not give an automatic right to a Non-Lucrative Visa. Holders of the Non-Lucrative Visa are required to live in Spain for a minimum of 183 days per calendar year.
Benefits of the Non-Lucrative Visa
What is the Spanish Golden Visa?
The Spanish Golden Visa is a residency-by-investment program that grants non-European Union (EU) citizens the right to reside in Spain by investing in the country's real estate market (or other qualifying assets). Established in 2013, this initiative has gained popularity among non-EU nationals looking to live permanently in Spain.
Investment Options
A new draft law states that civil servants can lose their positions if they fail an evaluation of their ability to work. A radical change from the existing system of jobs for life. One you've passed the competitive oposiciones exam and secured your first position, you have a job for life, regardless of your level of incompetence, something the current government is attempting to redress.
A Controversial New Law
The regional government in Andalusia has recently unveiled a €133m plan for eco-housing. Dubbed the “Ecovivienda Plan”, it will generate €133.5m for refurbishing homes and buildings, emphasising energy efficiency across the region.
More than 25,000 Andalusian families are expected to benefit, claiming aid of up to 80% for the total cost of improving energy efficiency. The plan aims to cut emissions within residential areas by 30%.
The Andalusian government has launched the so-called Ecovivienda Plan, which will mobilise €133.5 millions for the refurbishment of homes and buildings, with the emphasis on energy efficiency and sustainability. The programme, which includes funds from the European Next Generation programme aims to benefit more than 25,000 families in Andalucia with subsidies of up to 80% of the total cost of energy saving improvement. The higher the energy saving, the greater the percentage of subsidy. The overall aim is to reduce emissions in the Andalusian residential stock by 30%.
Various types of improvement will be covered by the scheme, for example: insulation in façades and roofs by installing new windows and doors, installing renewable energy systems such as photovoltaic panels, solar panels for hot water, aerothermal energy, biomass boilers or more efficient lighting systems.
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