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The IBSA Podcasts
IBSA podcasts contain information from a global community of entrepreneurs and professional advisors dealing with international business structuring and regulatory compliance.
Hosted by Roy Saunders, who has over 50 years’ experience within the financial sector, these podcasts delve into enlightening conversations with a wide range of leading professionals aiming to demystify the complex world of business and provide invaluable insights to help listeners deal with various complex technical matters to best support their business and clients.
Disclaimer: We believe the information in this podcast to be correct at the time of recording. The information given is relevant at the time in line with governmental legislations. Competent counsel in the jurisdiction(s) whose laws are involved should be consulted. The podcast is made available by the IBSA for educational purposes only and to provide general information. The information should not be used or relied upon as a substitute for competent legal advice from a licensed professional in your jurisdiction.
The IBSA Podcasts
Understanding Spain's Beckham Rule and Golden Visa Programme
One of the original beneficial tax regimes in Europe was created out of the desire to have David Beckham sign for Real Madrid, an opportunity that relied on Spain ‘bending’ the tax rules much like David was able to bend his free kicks. Together with Roy Saunders, José Aguilar, an International Tax Lawyer from Squire Patton Boggs in Madrid, explores how the so-called Beckham rule has changed over the years to eliminate its appeal to sports personalities and how it can still lower your tax liability with a flat 24% rate on employment income up to €600,000, as well as understand the recent changes that allow professionals to own more than 25% of their employing company. They also dive into comparative insights with Portugal and Italy, revealing why Spain's strategy is uniquely crafted to attract top talent rather than just high-net-worth individuals.
In another enlightening segment, they break down Spain's golden visa programme and its recent shifts, especially in the context of changes in Portugal. Learn the various investment thresholds necessary to secure a golden visa and explore its benefits, including flexible tax residency and employment options. Roy and José examines the political motives behind proposed restrictions on real estate investments and analyses the potential impacts on the market. Get a comprehensive understanding of Spain's current political climate and its implications for future immigration and tax policies, making this episode a must-listen for UK emigrants eyeing a move to Spain.
This series of podcasts explores the beneficial tax regimes in Italy, Spain, Portugal, Malta, Cyprus, Switzerland, Singapore, Israel and Dubai in respect of where UK residents may wish to emigrate in light of the non-dom changes introduced by the Conservatives, and the likely tightening of these rules under the new Labour government.
Hello and welcome to this IBSA series of podcasts on considering countries to where UK residents may wish to emigrate, in light of the non-dom changes introduced by the Conservatives and the likely tightening of these rules under the new Labour government. My name is Roy Saunders, founder and chairman of the IBSA, the International Business Structuring Association, a multidisciplinary global association of entrepreneurs and their professional advisors, dedicated to sharing their expertise with each other within a great networking platform. Our current series, a 15-minute podcast, will review beneficial tax regimes in Italy, spain, portugal, malta, cyprus, switzerland, singapore, hong Kong, israel and Dubai. Today I'm joined by José Aguilar, an international tax lawyer with Squire Patent Bogs in Madrid. So, josé, we held a really interesting podcast yesterday with Ana Gonçalves in Lisbon, where we discussed the abolition of the Portuguese non-habitual residence regime. Now you and I have been talking many years now. We know that Spain has tinkered over those years with what we all know as the Beckham rule, so perhaps you can start by discussing the Beckham rule and where we are currently with this law.
Speaker 2:Good morning and thank you. Thank you a lot, roy, again, for the opportunity. It's always a pleasure to help out and collaborate with IBSA and with you. Personally's worth noting, and also for the future benefit of the regime, is that the intention of the special tax regime is not actually to attract high net worth individuals. It's always linked to an employment contract for business development, let's put it that way.
Speaker 2:So that's where and even though we've seen changes in Portugal and now in the UK, as you mentioned, in Spain it has actually, let's say, increased its capability of the special tech regime right. One of the opportunities that we find most interesting over the past years was the new offer for remote workers that it's a growing trend after COVID whereby any company that the employee decides to move to Spain can benefit from this special tax treaty. And the benefits of the regime are basically two that you're taxed on the employment income at a flat rate of 24 percent up to a maximum of 600,000 euros a year, and that you're only taxed on Spanish source income. Therefore, any capital income assets that a person owns worldwide would not be taxable at all.
Speaker 1:Now it's interesting because I've just held a conversation with Walter and Rioni in Italy and a completely different focus. They're focused on attracting high net worth individuals rather than business people. Ana, in Portugal, explained that they're more now, with an abolition of the non-habitual residence regime, attracting people who are in business, if you like, and who can help develop the economy. So you're saying that's what Spain has always wanted and it's continuing in the same way.
Speaker 2:Yes, and I mean I'm not going to lie to you, of course that the Beckham law is also a way that high net worth individuals could take advantage. Right, there's no limitation, there's no exclusion for the level of wealth, for the level of income. There's no. Like I remember some clients sometimes asking well, can I pay a little bit, or can I pay up to a third? And threshold there's no limitation, there just has to be a purpose of moving to Spain to work here, set up a business. Now I mean it has. Now you can own your own business, grow a company. It's just that you cannot become a self-employed, so-called self-employed. So that's where you have to set up a company and grow a business which, with the appropriate substance, or just be an employment under an employment contract, or direct a relationship with a company.
Speaker 1:Most countries have tinkered with their beneficial tax regime, disadvantageously for individuals, whereas I think Spain has been a bit more advantageous in terms of individuals could only own 25% or less than 25% of the companies in which they work. Now that's changed, is it?
Speaker 2:Correct and again, as I said, this is the focus of and I always like to stress that this is more of a political view of what you're trying to attract. Right Now, when tax rates go up to 50% across Europe and most of the developed countries, obviously it doesn't seem like politically appropriate that you want to help out the rich, not pay any taxes. Right, so that's where the government is always focused on. No, we're trying to attract qualified employees and that's how it was approved back in 2001,. Right, that we wanted to attract qualified individuals. Right, so that's where they have the restriction that you cannot come and become a director at a company that you or any related person has more than 25% ownership. Right, they were trying to avoid that. You come here, set up your company and become director. Since, again, we're attracting business professionals. What they came down and said no, if you're looking to set up your own company and develop your own business, that's also fine, you can become director, set up your own company.
Speaker 2:The caveat that I raised there, because sometimes they create some confusion and people could say, well, I'm just an independent consultant, I can just set up my own company and start invoicing from my own company and be director, and what I say is that that's not the intention of the law, because that's where they'll say no, the only purpose of setting up the company. There's no value in the company other than your own personal services, so that wouldn't work. So when we say you set up a company, it means that you have to have substance. You need an active business activity, you need to have an office, an employment or at least the intention of growing. As you know, this is a new development that was approved in 2023. So I always say that it doesn't need to be immediately, and no one starts a company with 30 people and 2 million in revenue. You can slowly be growing it, but you need to prove that that was the intention of setting up the company not for your own personal use, but to actually set up a business activity.
Speaker 1:And the law is that it's a maximum of six years. I think that you get the exemption, or was that changed to five years? I can't remember.
Speaker 2:Correct. I mean, there's always the thing that what the requirements that the regime had is that you had not been tax resident over the last 10 years and that you only apply the year you become resident, and five more right, so that means six. There was a proposal when these new discussions were brought into the table, like two years ago, that wanted to extend the regime for up to 11 years, 10 plus one, but at the end of the day, when these amendments were approved, it was again limited to the five plus one. So the six, six taxis.
Speaker 1:Interestingly, walter was saying that the Italians had a 15 year period because if you're moving, they want to make sure that you're actually moving for good, if you like, and that it's a life, a lifetime change. You know, moving residence is a big thing. In the UK we've only got a four-year exemption for foreign income under the Conservatives, or at least that was what was proposed. I don't know what's going to happen with the Labour Party, but six years is a fairly limited time for a wholesale move. So it sounds like it's more for people who are building their business and who are not necessarily planning to stay long term in Spain.
Speaker 2:That is correct. And, as you mentioned, again, think about what was the purpose of the regime. It's attracting qualified professionals which come and go, so they want to have. Ok, we want to build great companies, so we want to have high qualified professionals come and work for Spain. The high individual that the professionals come and go.
Speaker 2:So again, and Italy also has a regime where it kind of I think it gives you a 15%, 50% break on the employment income for a few years. I mean you, the Italy, does have that special regime, the one off 100,000. That's fine, but that's not the purpose of what the government is intending of doing. We want to kind of allow you to attract high qualified professionals to come to work for a few years and then, if they decide to stay in Spain, they have to be under the ordinary regime. If you started from scratch, six years might not be enough, right? Because this is not like when you're an employee you come into employment, you come and go, but now they're trying, they put in that you can set up your own business In six years. It might be that the company might not be profitable for three years, right, and then you end up only taking advantage of the regime for two years, right?
Speaker 1:That's interesting. What about visas to get into Spain and everything else, Because that's coupled with? You know, if a high net worth individual or if an employee or whatever, are the visas quite easy to get for employment? I suppose they probably are more easy than for high net worths.
Speaker 2:Yes, let me put it more Well actually, for high net worth, the easiest way has always been to do the what they call the non-lucrative visa, when you're not required to work. The problem is that visa doesn't allow you to work.
Speaker 2:You want to be under the Beckham law, you need to work. That's not doable, doable. So the most interesting visa that we have now access is the remote working visa, because that's straightforward and doesn't require any sophisticated approval by the immigration authorities Because, as you might be aware, spain does have a high unemployment rate. Historically it did. So. The immigration authorities do have a restrictive view of obtaining a simple employment visa. So sometimes, when you set up a salary of $30,000, $40,000, $50,000, they might deny that, because in those situations you have to prove that you're finding a unique qualification in that person that you cannot find in the country, person that you cannot find in the country. So the higher the salary is, the easier you can justify. Hey, I'm bringing to paying $200,000 to a high tech guy that I can't find in Spain, but for lower salaries that's very difficult. That's where the remote working visa has been approved specifically to, within this entrepreneur's law, which approved both the visa for remote workers and the access to the Beckham Law regime. So that's the most straightforward way to obtain them.
Speaker 1:Okay, Now, I guess, because of the concentration more on relatively short term employment, the effect on the property market might not be so significant as was, for example, the case in Portugal, where property prices rose significantly and the local people were really up in arms against the fact that they couldn't afford the prices In Spain. I don't think that's been the case, has it?
Speaker 2:We've also had, let's say, a political discussion around that.
Speaker 2:Let's say a political discussion around that because one of the main opportunities also to come to Spain under a legal visa would be with the famous golden visa right, which, with a minimum investment threshold, you would be able to obtain that visa, and of course I mean everyone in Portugal used to go to that, that Tascay zone, so which is not that long, let's put it that way right, spain is kind of surrounded by coast basically.
Speaker 2:So I mean we didn't have that much of a concern of the prices going up, but it did create some uncertainty around, well, whether we're pushing up the real estate market. So you might have heard that recently the government announced that it will repeal the golden visa for real estate investors, but again, as I mentioned, the golden visa for investment, it's for 500,000 euros on a real estate, or 1 million on a financial investment or 2 million in public bonds. So what the government announced is that it will restrict the golden visa for real estate investments, but eventually, as I said, if a high net worth individual is looking to come here, you can still put a million euros down in a bank account. That would allow you to already benefit from the golden visa. So I mean, our understanding is that this proposal was a mere political. I don't think it had that much of an impact on the real estate prices. But I guess we wanted to replicate that from the Portuguese and kind of take advantage politically, as I understand, from our government.
Speaker 1:But those people who come in under the golden visa wouldn't be entitled to any tax exemption for foreign income.
Speaker 2:So what I mentioned is, the golden visa has the benefit that it doesn't require you to live in Spain, but it allows you to become tax resident. You can choose whether to become tax resident or not, become tax resident, and then it allows you to work. So you are able to come to Spain under a golden visa, which is much more straightforward than getting an employment visa. So if you have a worker coming here buying a house or putting money in an event, you have the golden visa automatically and then you can set up your company easily. Right, and there's also visas for entrepreneurs, but it requires a much more development, proof of that. So the most straightforward way would be to buy a property until it's repealed, put money in a bank account you get the golden visa and then fall within the Beckham law, setting up your own company to develop the relationship right.
Speaker 1:Okay, that's interesting. You say until it's repealed. How do you think the government you know we're all in changes of government at the moment in lots of different countries how do you think the Spanish government is going to change laws, or do you think we are fairly well stabilized on what we've been talking about?
Speaker 2:Well, unfortunately, spain is currently not in a political stable situation and I'm not going to give you my personal views about the government, because that's not appropriate, of course.
Speaker 2:My personal view is about the government, because that's not appropriate, of course. But I would say that our government is pretty unstable now because it depends on certain minority political parties, which is a problem across Europe, so currently there's not a lot of laws coming out. I mean, if you ask me whether right now, we had elections last year, so in theory we have three more years of government, no-transcript law regime, because, again, right now we have a left party, two left parties. They're in the government and they're the ones who actually approved this development for the Beckham law, which the purpose, again, was to develop it. That's why people ask me well, is there a chance that they will take away the Beckham law, like they did in Italy, like they did in the UK or Portuguese? I would say definitely not. That's still going to be the opportunity and I don't see any other changes apart from that golden visa limitation that I mentioned.
Speaker 1:That's brilliant. Okay Well, thank you, jose, it's been fascinating. I'm trying to keep these podcasts to 15 minutes. We've done really well. Um, thank you for joining me today and thanks everybody for listening thanks a lot, roy, appreciate and happy to help where needed.