The Spanish Special Tax Regime for New Temporary Tax Residents, commonly known as the “Beckham Law” (hereinafter, and language defeat admitted, “Beckham”), as previously discussed in detail here, remains a powerful lure for, amongst others, and on whom we exclusively focus, wealthy individuals and entrepreneurs relocating to Spain as it allows them to shelter their existing global non-Spanish assets from the Spanish tax net for up to six years. This is owing to its core feature: the taxpayer is under a semi-territorial basis for taxation, meaning they are taxed only on Spanish-sourced income and wealth (except for income from employment, including director’s fees, which is taxed on a worldwide basis).

Yet, this favorable tax position, which can result in very limited tending-to-zero personal taxation, is complicated in practice by the uncertainty associated with meeting the conditions of eligibility. We expanded on this point in our aforementioned blog entry and only wish to stress here, again, the need for the investor/entrepreneur to manage the qualifying new or expanded business operation in a manner that unequivocally requires a substantial presence in Spain, such that the relocation is the undoubted consequence of taking up that management role (what we refer to as the “subjective test”).

Where we would like to focus in this entry, however, is on a point often overlooked and which must be duly considered in strategic planning—, namely the Spanish Tax Administration’s practice of not issuing tax residency certificates (“treaty certificates”) for the purpose of applying Double Tax Agreements (“Treaties”) to those who elect to apply the regime. In this entry we outline the practical implications of this restriction, we provide some legal arguments against the Spanish Tax Administration’s position based upon inconsistency with international tax treaty law and conclude with strategic takeaways for planning purposes.

The Cost of Lack of Treaty Protection

As a preamble, although one could argue entitlement to Treaty relief even without counting on the relevant certificate, in practice the other state’s authorities tend to deny the benefits. Thus, this practice of not issuing treaty certificates oftentimes translates into quantifiable exposure for the Beckham taxpayer.

Firstly, the taxpayer may be prevented from relying on the tie-breaker rules contained in Treaties to resolve any potential conflict of dual residence with their country of origin. Consequently, individuals opting for Beckham must ensure they have completely severed their personal and economic ties with their former jurisdiction to avoid an undesired situation of dual residence. This is especially relevant given that the regime is inherently designed to attract foreign individuals whose prior tax residency lies outside Spain.

Secondly, access to treaty relief on source taxation may be denied, thereby potentially resulting in higher withholding taxes that can significantly increase the overall tax burden.

Thirdly, the lack of access to Treaties limits the available measures for double taxation relief. For instance, the exemption clause available in some treaties might not be thus available what may result in higher taxation since the only available domestic relief is enjoying a limited foreign tax credit, capped at 30% of the Spanish headline tax liability (which is only relevant for income from employment and director fees, as it is the only category taxed on a worldwide basis under Beckham).This position contrasts sharply with that of other jurisdictions with similar regimes such as Italy, Switzerland and Portugal. In essence, a significant level of international treaty recognition for special tax regimes already exists, highlighting an approach that Spain has chosen not to extend to its own.

Is the Blanket Denial of DTA Benefits to Beckham Taxpayers Justified under Treaty Law?

Spain’s rejection of Treaty access for Beckham taxpayers, implemented unilaterally through Government-approved regulation, raises concerns about a potential treaty override. The Spanish Tax Administration justifies this rejection on the second sentence of Article 4(1) of the OECD Model Convention, which excludes certain individuals from the definition of “resident of a Contracting State” when they are liable to tax in that State “in respect only of income from sources in that State.”

This interpretation is legally questionable, as the regime expressly subjects employment income (including director fees) to worldwide taxation. Consequently, taxpayers under Beckham are not taxed exclusively on Spanish-source income. Furthermore, the exclusion in Article 4(1) was historically intended to address limited taxation arising from diplomatic or similar privileges, as recognized in the OECD Commentary; therefore, its application should be confined to exceptional cases. The rejection is even more debatable in relation to DTAs that do not include the second sentence of Article 4(1), such as the Treaty with Brazil, Netherlands or Canada, since those treaties define residency solely by reference to liability to tax, a condition that Beckham taxpayers meet.

The legal criticism is reinforced by treaty precedent. The Spain–Germany Treaty includes a specific provision expressly excluding Beckham taxpayers. The very inclusion of this clause implies that, without such an explicit provision, the denial of Treaty benefits would not arise automatically under a general treaty interpretation.

Moreover, the Treaty with Germany limits the exclusion exclusively to Articles 4 and 6 to 21, while Article 22 which expressly provides for the granting of a foreign tax credit remains applicable. The deliberate decision not to exclude this provision clearly indicates that the contracting states did not intend to deny relief from double taxation to Beckham taxpayers, even where other Treaty provisions are inapplicable.

Accordingly, a Beckham taxpayer deriving employment income subject to withholding tax in Germany may—and should—be entitled to a foreign tax credit in Spain, without the application of the 30% cap. Any contrary interpretation would run counter to the wording of that treaty.

While the OECD Commentary acknowledges that restricting treaty benefits may be justified in order to prevent situations of double non-taxation—particularly where the residence state does not effectively tax the relevant income (as in certain remittance-basis regimes)—it also makes clear that any such restriction “has to be dealt with in a special provision of the Convention.” However, if the objective is to prevent treaty abuse or unintended double non-taxation, the appropriate mechanism would be to rely on the anti-abuse clauses already built into the Treaties—such as the Principal Purpose Test —which require a case-by-case analysis. Admittedly, the underlying concern is primarily that of the source state, which may be granting a reduced withholding tax rate or exemption under the treaty when the corresponding income is not taxed in Spain.

The other side of the coin reveals a consistent pattern: the Tax Administration also tends to refuse recognizing treaty entitlement for foreign taxpayers benefiting from their own special regimes. Despite recent but well-established case law from the Spanish Supreme Court, confirming that the Tax Administration cannot disregard a residency certificate issued by another State, the Central Economic-Administrative Tribunal (“TEAC”) continues to challenge treaty entitlement in cases involving foreign special regimes, notably the Portuguese Non-Habitual Resident regime, even when treaty certificates have been duly issued by the Portuguese tax authority.

Strategic Foresight

For HNWIs and professionals contemplating a move, the denial of Treaty protection necessitates a thorough strategic analysis comparing the Beckham regime against the ordinary Spanish tax residency regime. This assessment must also take into account the jurisdictions from which the relevant income is derived, as—following the analysis in the preceding section—the legal position supporting the applicability of the relevant Double Taxation Treaty is particularly clear where income originates in jurisdictions such as Brazil, the Netherlands or Canada, as well as in Germany in relation to the elimination of double taxation.

In certain situations—particularly for high-earning cross-border professionals with significant foreign-sourced employment income—opting for ordinary residency may, in practice, prove more advantageous. Under ordinary residency, the Treaty network remains fully applicable, ensuring that the foreign tax credit or exemption method provided by the relevant treaty effectively eliminates double taxation on salaries.

Moreover, ordinary residency may become more attractive following the recently approved regional deduction in Madrid, popularly known as the “Mbappé Tax Credit.” This incentive grants a 20% deduction of the amount invested in a rather broad category of assets (mainly highly liquid), applied as a reduction against the portion of Spanish personal income tax corresponding to the Madrid region (which represents 50% of the total liability).

This deduction provides additional flexibility for wealth owners considering ordinary residency, potentially neutralizing the perceived benefit of the Beckham regime while remaining entirely objective, thereby removing the legal uncertainty and friction linked to Beckham’s subjective test.

In sum, a careful forward-looking projection is essential to determine which residency regime offers the most efficient overall Spanish tax position.

By José María Vargas-Machuca, senior associate, LLM Amsterdam; and Pedro Fernández, co-founder and Managing Partner of KINSHIP