Beckham Law and Directors of Holding Companies: Practical Analysis of Binding Decision V1068-25

Alexandra Brik Contel Abogada & Tax Advisor [email protected] +34 93 487 58 94

Introduction

The special regime regulated under Article 93 of Spanish Law 35/2006 on Personal Income Tax (LIRPF) —commonly known as the “Beckham Law”— allows individuals relocating to Spain to be taxed as Spanish tax residents but under the rules of the Non-Resident Income Tax (“IRNR”), provided that certain conditions are met. In practice, this means they are subject to a flat tax rate of 24% on employment income up to EUR 600,000, among other special provisions.

However, its application to directors of Spanish holding companies raises particular issues, especially concerning the causal link between the relocation and the appointment, and whether the company qualifies as a “pure holding” (entidad patrimonial) under Article 5 of Spanish Law 27/2014 on Corporate Income Tax (“LIS”).

Binding Ruling V1068-25 issued by the Spanish Directorate-General for Taxation (DGT) addresses precisely this situation: the eligibility of a shareholder and director who relocates to Spain after acquiring a Spanish holding company in order to manage a significant part of his business activities from Spain.

1. General Requirements of the Inpatriate Regime

Article 93 LIRPF sets out the following conditions for the application of the special regime:

• The taxpayer must have acquired Spanish tax residence as a result of a relocation to Spanish territory.
• The taxpayer must not have been a Spanish tax resident during the five tax periods prior to the relocation.
• The relocation must occur for one of the reasons listed in Article 93.1(b):
• 1. An employment contract in Spain or a secondment letter.
  2. Appointment as a director of a company (provided it is not a pure holding).
  3. The pursuit in Spain of an entrepreneurial activity or highly-qualified professional work (Article 93.1.b) numbers 3 and 4).

• The taxpayer must not obtain income that would qualify as income generated through a permanent establishment in Spain (except in the specific cases allowed under the LIRPF).

2. Specific Issues for Directors of Holding Companies

In ruling V1068-25, the DGT examined how the regime applies to an individual who becomes the director of a Spanish holding company.

The ruling highlights two key aspects:

A. Causality of the Relocation

The DGT emphasizes that Article 93.1(b) requires a causal link between the taxpayer’s relocation to Spain and his appointment as company director.

As stated by the DGT: “In the absence of such a causal relationship, the taxpayer would not be entitled to opt for the special regime.”

This causal link must be demonstrated in each specific case.

In the facts of the ruling:

• The taxpayer had never been a Spanish tax resident and relocated to Spain on 26 August 2024.
• On 2 September 2024, he acquired a Spanish limited liability company, becoming its sole shareholder and sole director, and received remuneration for his position.
• The company’s corporate purpose consisted of holding activities (management and administration of equity interests in Spanish and foreign companies).
• The relocation was motivated by the intention to manage a substantial part of the group’s business from Spain.

According to the DGT, the causality requirement appears to be satisfied, provided that the appointment date, decision to relocate, and effective management activities performed from Spain can be duly documented.

B. Verification that the Company is not a “Pure Holding”

The DGT further notes that, for the Beckham Law to apply, the company must not qualify as a “pure holding entity” (entidad patrimonial) as defined in Article 5.2 LIS.

A company is deemed to be such a pure holding entity when more than 50% of its assets consist of securities or assets not related to an economic activity, subject to certain exceptions.

However, holdings of at least 5% in another company that are owned for at least one year with the purpose of managing and controlling that participation, and for which the company has adequate material and human resources, are not treated as securities for this purpose.

From the facts described in Ruling V1068-25:

• The Spanish company’s purpose was the management and administration of equity holdings, the purchase, holding, exchange and sale of securities, and the direction and management of subsidiaries and investee companies.
• Initially, the taxpayer was sole shareholder and sole director (100%).
• He later intended to acquire stakes of at least 5% in several start-ups.

Consequently, since the entity did not appear to be a pure holding, the regime of the Beckham Law would be applicable.

Accordingly, taxpayers in similar cases should:

• Review the company’s average balance sheet to verify that more than 50% of assets are not securities or non-business assets.
• Document the existence of material and human resources supporting an actual economic activity, as required under Article 5.1 LIS.
• Where appropriate, seek prior confirmation from the tax authorities through a binding ruling or technical opinion regarding the company’s classification.

3. Election and Duration of the Regime

To benefit from the inpatriate regime, the taxpayer must formally elect the option before the Spanish Tax Agency (AEAT) by filing the official form within six months of either:

• the date on which the activity in Spain begins,
• the date of registration with the Spanish Social Security system, or
• the date of submission of documentation allowing continuation under the social security legislation of the home country.

The regime applies for six tax years: the year of relocation and the five following years.

4. Practical Considerations

• A subsequent change in duties, stepping down as director, or alteration in the holding structure may lead to loss or revocation of the regime.
• The DGT recalls that the classification of the company as non-patrimonial is a factual assessment subject to ongoing verification. Therefore, periodic monitoring of the company’s assets and business substance is crucial to avoid exclusion.
• If the taxpayer, in addition to his directorship, carries out any personal business or professional activity in Spain —especially where he owns more than 25% of the company— it is advisable to assess whether such activities may constitute a permanent establishment and jeopardise eligibility under the special regime.