Beckham Law: taxation of severance pay

Is the severance pay received by an employee covered by the tax regime of the Beckham Law exempt from Personal Income Tax? This is a common question among professionals relocated to Spain and international companies managing global talent.

In this article, we analyse how severance pay is taxed when the special regime for workers relocated to Spain —known as the Beckham Law— applies.

Beckham Law: tax regime for relocated workers

The special regime applicable to workers relocated to Spanish territory —popularly known as the Beckham Law— allows certain professionals who move to Spain to be taxed according to the rules of the Non-Resident Income Tax (IRNR) during the first six years of tax residence.

This regime can be advantageous because:

• It allows taxation at a flat rate of 24% on employment income.

• Only income obtained in Spain is taxed.

• It simplifies the taxation of relocated professionals and international executives.

However, it also implies limitations regarding certain tax benefits available under the standard Personal Income Tax regime.

 

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Beckham Law and severance pay

One of the most common questions is what happens to severance pay when the employee is covered by this special regime.

This issue was analysed by the Spanish Directorate General for Taxes (DGT) through a binding tax ruling:

Does the exemption established in Article 7(e) of the Personal Income Tax Law apply to severance pay received by an employee under the Beckham Law?

The DGT’s answer is clear.

Position of the Directorate General for Taxes

The DGT recalls that:

• Employees covered by the Beckham Law determine their taxation following the rules of the Non-Resident Income Tax (IRNR), even though the tax is formally Personal Income Tax.

• As a result, certain exemptions provided for under the Personal Income Tax regime do not apply.

In this specific case:

• Severance pay cannot benefit from the exemption provided in Article 7(e) of the Personal Income Tax Law, which does apply to employees taxed under the general regime.

• Therefore, the severance payment is taxed as employment income.

Applicable withholding tax rate

Under the special regime for relocated workers:

• The general withholding rate is 24%.

• When remuneration paid by the same employer exceeds €600,000 per year, the excess is taxed at 47%.

These withholdings are applied in accordance with the Non-Resident Income Tax (IRNR) regulations.

Each case must be analysed individually

The response from the Directorate General for Taxes refers to a specific case, even though it is a binding ruling.

In practice, it is advisable to analyse each situation on a case-by-case basis, especially in international mobility contexts where factors such as the following may be relevant:

• double taxation treaties

• international salary structures

• stock options or incentives

• contractually agreed severance payments

 

More information about the Beckham Law

 

Frequently asked questions about the Beckham Law and dismissal

Is severance pay exempt if the employee applies the Beckham Law?

No. The exemption established in Article 7 e) of the Personal Income Tax Law does not apply to employees covered by the special regime.

Why does the Personal Income Tax exemption not apply?

Because individuals taxed under the Beckham Law follow the rules of the Non-Resident Income Tax (IRNR), which does not include this exemption.

What tax rate applies to severance pay?

The severance payment is taxed as employment income at the general rate of 24%, unless remuneration exceeds €600,000, in which case the excess is taxed at 47%.

Can the taxation vary depending on the case?

Yes. In international mobility situations, other tax factors or double taxation treaties may apply, so it is advisable to analyse each case individually.

How Adlanter can help you

At Adlanter, we have a team specialised in international mobility and taxation for relocated workers, advising both companies and international professionals.

We can help you with:

• Application and management of the Beckham Law special regime

• Analysis of tax residence in Spain

• Tax planning for relocated workers and international executives

• Tax management in international mobility processes

If you want to know whether you can benefit from the Beckham Law or how it may impact your taxation, our team can help analyse your situation.

📞 Contact our international mobility specialists.