We would like to inform you of a recent interpretative change that affects taxpayers covered by the special tax regime for expatriates, commonly known as the Beckham Law, in relation to the treatment of their primary residence in Spain.
As is well known, this regime allows certain individuals who move to Spain to be taxed as if they were non-residents: in general terms, a fixed rate is applied to certain income obtained in Spain and they are not subject to income tax on their worldwide income. However, when it comes to its application, there have always been doubts as to the extent to which the rules of Non-Resident Income Tax (IRNR) or Personal Income Tax (IRPF) should be followed.
One of the aspects that had been causing the most uncertainty was the allocation of real estate income. In particular, there was a question as to whether the impatriated taxpayer should declare a presumed income for the property they own in Spain that is at their disposal, even when that property is their habitual residence and is not rented out.
Until recently, there were criteria that were more favorable to taxpayers. In particular, some court rulings had held that, applying the logic of personal income tax by analogy, the habitual residence of the impatriate should not generate income attribution, as is the case with the habitual residence of an “ordinary” resident taxpayer in Spain.
However, in a recent ruling, the Central Economic-Administrative Court (TEAC) has modified this approach and concluded that taxpayers covered by the Beckham Law must be taxed on the property they have at their disposal in Spain, even when it is their habitual residence. In practice, this means that the impatriate is treated, for these purposes, as a non-resident owner of an urban property for their own use.
From our firm’s perspective, this ruling reinforces the idea that:
Special regimes, such as those for impatriates, can be very attractive from a tax point of view, but they are also particularly exposed to changes in the interpretative criteria of the Administration and the courts.
This context increases the level of review and control over this profile of taxpayers and makes an individualized analysis of each specific case even more advisable.