Cuatrecasas lawyer mourns end of 'Beckham Law'

In its budget for 2010, the ruling Spanish Socialist Worker’s Party has said that it will repeal the Spanish tax decree - enacted in 2005 - which allowed foreign workers who earn over €600,000 a year and meet other criteria to pay a tax rate of just 24 per cent for five years, and only pay tax on their Spanish source of income and assets.

After 2010 those who formerly would have enjoyed the tax break will now have to pay the 43 per cent levy imposed on Spanish nationals earning the same amount.

“Changing the law one day to the next is not a good image for Spain,” said Sonia Velasco, a tax partner at Cuatrecasas Gonçalves Pereira, who still believes it is a good amendment: “They say it’s good money for tax purposes but it’s not that much. It’s more about [the government] telling people that they are changing things.

“Not so many football players that can apply this regime, only 150 or so, but for the big stars it’s very interesting because it [the tax break] was a big draw.

“And because of the financial sector trouble in the UK and other countries, a lot of people were thinking about moving to Spain. We’ve had a lot of private equity houses look to bring their headquarters here, but we’re getting questions from them now because the jurisdiction does not look as attractive anymore.”

The amendment is still to pass through parliament and may need some more work as, according to Velasco, there is ambiguity in the drafting.

“It’s not clear what happens if, in a given year, the salary is above €600,000. Whether you can’t apply the regime for that year, for that year and subsequent years or whether the regime can’t be applied at all.”

The law became known as the ‘Beckham Law’ after it was introduced around the same time that David Beckham, who was one of the first football players to utilise its

generous provisions, joined Real Madrid.