Beckham Law Eligibility for Company Directors and Executives: The Full Guide

The Beckham Law is arguably one of Spain’s most attractive tax regimes for foreign talent, allowing eligible individuals to be taxed as Non-Residents for up to six years, primarily applying a flat 24% tax rate on Spanish income (up to $600,000) instead of the higher progressive rates of the IRPF (Spanish Personal Income Tax).

However, for company directors and high-level executives, the application of this regime is complex and fraught with risks. The very nature of a director’s role often conflicts with specific exclusion rules, particularly concerning company ownership and the nature of the entity they manage. A minor mistake can lead to the outright denial or, worse, the loss of the benefit years later, resulting in significant back taxes.

Basic Eligibility: The Director’s Checklist

Before delving into the specific director exclusions, every applicant must meet the standard, fundamental criteria established in Article 93 of the Spanish IRPF Law:

• Non-Residency: Not having been a tax resident in Spain during the five tax periods prior to the relocation.

• Relocation for Work: The move must be due to a genuine employment contract or an appointment as a director in a Spanish entity.

• Work in Spain: The work must be performed principally in Spain.

While these are the starting point, the following sections detail the crucial limitations specific to the executive profile.

The Critical Director Requirement: Non-Participation

This is the most frequent cause of exclusion for executives and entrepreneurs. The law explicitly bars individuals who hold the position of director and simultaneously possess significant ownership in the Spanish entity that hires them.

Navigating the 25% Rule (Capital vs. Voting Rights)

The core rule for exclusion states that a director is ineligible for the Beckham Law if they own, directly or indirectly, more than 25% of the share capital (Capital) of the entity paying their compensation.

• Calculation: The 25% limit refers to the share capital of the company. It must be checked on the date of the application.

• Direct vs. Indirect: The law is stringent. Indirect ownership (e.g., through an intermediary holding company or a family member’s stake) must also be aggregated to determine if the 25% threshold is crossed. This is critical for those coming from family-owned businesses.

• Voting Rights: While the limit focuses on share capital, it is prudent to also consider the voting rights, as having control can be an additional signal of ineligibility, although the explicit threshold is tied to capital.

Exclusion: Directors of Patrimonial Entities (Holding Companies)

(Beckham Law Patrimonial entity)

This is a crucial, often misunderstood, point. The Law explicitly excludes directors of an entity classified as a “patrimonial entity” (Entidad Patrimonial in Spanish tax terms).

A patrimonial entity is generally defined as one where more than half of its assets are not used for a business or professional activity. In practice, this primarily includes holding companies, family investment vehicles, or companies whose main purpose is the mere administration of assets (like real estate or financial holdings).

Impact: If an executive is appointed director of a Spanish holding company that manages family assets, even if their compensation is high and they meet the basic residency requirements, they will be excluded from the Beckham Law, regardless of their ownership percentage (even if it’s 0%). This is a key Beckham Law exclusion for directors.

If your company has complex international structures, learn How to Optimize International Taxation in Holding Companies and Business Structures to ensure compliance.

Specific Scenarios for Executives

The Foreign Company Scenario (Secondment)

This is the ideal scenario. An executive transferred (seconded) from a foreign parent company (non-resident entity) to its Spanish subsidiary (resident entity) under a service contract.

• Key Advantage: In this case, the individual is working for the Spanish entity but is compensated (partially or fully) by the foreign entity. The 25% ownership rule only applies to the Spanish entity that is considered their employer. If the foreign executive has no ownership (or less than 25%) in the Spanish subsidiary, and the foreign parent is not a patrimonial entity, they are generally eligible.

New Spanish Company Setup (The Startup Founder)

Founders or entrepreneurs setting up a new Spanish company need to be extremely careful:

• Minority Stake is Key: A founder can be eligible only if their ownership stake in the new Spanish company remains 25% or less of the share capital.

• Initial Planning: It is vital for co-founders to structure the shareholding agreement before relocation to ensure the applying executive remains within the 25% limit. If a founder starts with 30% and tries to apply, they will be rejected.

Legal Pitfalls: Losing Eligibility After Application

The benefit is not permanent for the six-year duration. An executive must maintain compliance with the eligibility rules.

The most common way an executive loses the benefit after being approved is by:

1. Acquiring an additional stake in the Spanish company, pushing their total direct or indirect ownership above the 25% limit.

2. The Spanish company changing its nature to become a “patrimonial entity” during the period of application (e.g., selling all its operating business and becoming a holding company).

In these cases, the law requires the executive to notify the Tax Agency (AEAT), and they will be subject to the general IRPF rules from the year the condition was breached.

Planning Beyond Eligibility: Director Compensation Tax

While the flat 24% rate is the main draw, directors must consider how specific elements of their compensation are taxed under the Beckham Law:

• Stock Options and Bonuses: Unlike general IRPF, specific “work income” generated in the tax period (like yearly bonuses) is generally taxed at the 24% rate. However, capital gains derived from the exercise of stock options (which are often considered savings income in general IRPF) are typically taxed under the Non-Resident Income Tax (IRNR) rules, which can vary. Proper structuring and reporting of these complex items are essential to ensure compliance and avoid penalties.

Beyond salary and options, ensure your assets are compliant. Read our guide on Navigating Crypto Taxes in Spain: Your Complete Expert Guide.

Protecting Your Expat Status as an Executive

The Beckham Law offers an unparalleled opportunity for high-earning executives moving to Spain, providing significant tax savings. However, the strict rules regarding directorships, company ownership, and patrimonial entities make it one of the most legally complex applications.

For company directors and executives, the application is not merely a paperwork process; it is a structural tax and corporate compliance exercise.

Are you an executive planning a move to Spain? Don’t risk losing the 24% tax benefit due to a hidden ownership clause or an incorrect company classification. At Benavides Asociados, we specialize in international fiscal planning for high-level expatriates. Our expert consultants are proficient in structuring the relocation and compensation packages for directors to ensure maximum compliance and full eligibility under the complex rules of the Beckham Law.

Contact Benavides Asociados today to secure your six years of tax benefits.