Spain’s “Beckham Law” (Article 93 LIRPF) remains one of the most attractive tax incentives in Europe for foreign professionals relocating to Spain. Named after the footballer who famously benefited from it, the regime allows qualifying individuals to pay a flat 24% tax rate on their worldwide income, while other foreign-sourced investment income and gains are not taxable in Spain.
For the employee, the benefits are clear. But for companies based in the United States or the United Kingdom hiring talent who relocates to Spain, the Beckham Law introduces a significant and often misunderstood administrative challenge: the withholding tax vacuum.
While the employee pays a flat 24%, the foreign employer often finds itself legally exempt from the obligation to register for and perform Spanish tax withholdings. This isn’t a matter of preference or tax planning, it’s a direct consequence of how Spanish law defines the “obligated payer.”
The Legal Cascade: Why the Non Resident Tax (IRNR) Rules Apply
Here’s where things get technical, but stay with us, this is the crux of the issue.
Under the Beckham Law, although the individual becomes a Spanish tax payer, their withholdings are governed by the Non-Resident Income Tax (IRNR) rules, not the standard resident income tax rules. Article 93.1.f of the LIRPF establishes this redirection explicitly:
“Las retenciones e ingresos a cuenta en concepto de pagos a cuenta del impuesto se practicarán, en los términos que se establezcan reglamentariamente, de acuerdo con la normativa del Impuesto sobre la Renta de no Residentes.”
In plain English: withholding obligations follow non-resident tax law. So to understand what the employer must do, we need to look solely at the IRNR Law (RD Legislativo 5/2004).
The “Taxpayer” Requirement: Articles 31 and 30
Article 31.c of the IRNR Law states that Taxpayers of this tax include those who operate through a permanent establishment, or without a permanent establishment, but in the latter case, only in respect of the income referred to in Article 30.
This leads us to Article 30, which further restricts the duty for non-residents without a permanent establishment (PE). It states that non-residents operating in Spain without a PE are only obliged to withhold on employment income if that income constitutes a deductible expense for obtaining income taxable under Article 24.2.
The Deadlock: Article 5
For a US or UK company to be “obliged” under Article 31, it must first be a “contribuyente” (taxpayer) as defined in Article 5:
“Son contribuyentes por este impuesto: a) Las personas físicas y entidades no residentes en territorio español… que obtengan rentas en él…”
Here’s the critical fact pattern: If a US or UK company has no sales, no clients, and no physical office in Spain, it does not obtain income in Spanish territory. Consequently, it is not a “taxpayer” under Article 5.
Without taxpayer status, the chain of obligation in Article 31.c is never triggered. The company cannot be legally required to withhold because it doesn’t meet the threshold definition of who must withhold.
The Treaty Perspective: US and UK Double Taxation Agreements
The Double Taxation Treaties (DTTs) between Spain and both the US and UK reinforce this analysis. These treaties confirm Spain’s right to tax the employee, while simultaneously limiting Spain’s jurisdiction over the foreign employer.
Employment Income: Article 16 (US) / Article 14 (UK)
Both treaties confirm that salaries derived by a resident (the employee in Spain) in respect of an employment “shall be taxable only in that State unless the employment is exercised in the other Contracting State.”
Since the work is physically performed in Spain, Spain has the treaty authority to tax the income. No dispute there.
Permanent Establishment Protection: Articles 5 and 7
However, for the employer to be pulled into the Spanish tax system, it must have a Permanent Establishment (PE) under Article 5 of the relevant treaty.
What typically creates a PE:
- A fixed place of business (office, branch, factory) at the disposal of the enterprise
- A dependent agent who habitually exercises authority to conclude contracts on behalf of the company
What typically doesn’t create a PE:
- An employee working remotely from their Spanish home (unless that home is “at the disposal” of the enterprise and used permanently for business activities)
- An employee who cannot bind the company contractually
In the absence of a PE, Article 7 of the Double Taxation Agreements allocates taxing rights over the employer’s business profits to the State where the company is a tax resident (eg. UK or US), “protecting” it prima facie from taxation under the Spanish authorities. However, this allocation of taxing powers does not necessarily exclude the employer from being considered a taxpayer in Spain (regardless of whether they ultimately have withholding tax obligations, as they may be exempt). As abovementioned, art. 5 IRNR states that non-resident employer may be regarded as a taxpayer when obtaining income in Spain.
Thus, article 5 of the IRNR defines taxpayers by reference to the obtention of income in Spanish territory, a concept further developed in Article 13, which treats income from economic activities carried out in Spain as Spanish-source income even where no permanent establishment exists. While work is traditionally deemed to be performed at the place of the workplace, current OECD and Spanish interpretations accept that, in remote working arrangements, the employee’s habitual place of work is their home. Where the employee’s functions are intrinsically linked to the employer’s economic activity, in the sense that they contribute to the value chain or the provision of services, part of that activity may be considered as being carried out in Spain.
In practice, such income is in the vast majority of cases either exempt under domestic law or not taxable due to the allocation of taxing rights under the applicable treaty. Nevertheless, the absence of taxation does not automatically exclude the employer’s potential status as a taxpayer under the IRNR, which must be assessed based on the nature of the activities effectively carried out in Spain.
Because PE is a highly fact-specific test, a small operational detail can trigger Spanish tax and payroll exposure. Specialist review is essential to confirm the position under Article 5 and preserve Article 7 protection, with a defensible file if the AEAT asks questions. Del Canto Chambers provides that PE risk assessment and the practical safeguards to keep the structure robust.
The Administrative Critique: Spain’s Reporting Gap
This legal framework creates a genuine administrative impasse that critics argue leaves a “reporting gap” in Spain’s tax collection system.
The NIF Problem
Where a UK or US company wanted to voluntarily withhold taxes for their Spanish-based Beckham Law employee, they would need a Spanish NIF (Número de Identificación Fiscal): a tax identification number. In practice, obtaining a NIF may also be necessary where no valid A1 certificate or certificate of coverage can be obtained from the home jurisdiction, as registration with the Spanish Social Security To ensure the employee’s coverage in Spain, requires the employer to hold a NIF.
However, to obtain a NIF, a company must demonstrate a “tax interest” in Spain. If the company has no income in Spain (only an expense in the form of the employee’s salary), the AEAT technically has no legal grounds to treat it as a taxpayer.
The inconsistency is striking: the law requires the payer to be a taxpayer to withhold, but the payer only becomes a taxpayer if they have Spanish-source income. If the company’s only link to Spain is an expense, it remains legally invisible to the IRNR withholding mechanism.
The Burden Shifts to the Employee
The practical consequence? The AEAT receives no monthly withholding data on these salaries. There’s no Modelo 111 (quarterly payroll withholding report) being filed. No Modelo 190 (annual summary) arriving from the employer.
Instead, the entire burden is shifted to the employee, who must settle their 24% tax annually via Modelo 151, the annual tax return specifically for Beckham Law taxpayers.
For expatriates and the companies employing them, this creates both opportunity and responsibility. The employee must be disciplined about setting aside funds for their annual tax bill, as no one is doing it for them.
Summary: Filing Requirements at a Glance
What This Means for Your Business
For a US or UK company engaging a remote worker who is taxed in Spain under the Beckham regime, it may be possible, depending on the precise facts, that the employer is not treated as a Spanish “taxpayer” for non-resident income tax purposes and therefore may not have a Spanish withholding role.
In those cases, the individual typically settles their Spanish liability through the annual filing under the regime (Modelo 151). However, this outcome is not automatic and should not be assumed.
Because the interaction between Spanish domestic tax rules (including IRNR/IRPF), treaty concepts (notably PE), employment law, and social security coordination is highly fact-specific, employers should obtain a thorough, expert assessment before deciding whether to operate payroll withholding or adopt a “self-assessment by the employee” approach.
Good practice usually includes: (i) clearly documenting the arrangement and responsibilities in the employment contract, (ii) ensuring the employee understands their Spanish filing obligations, (iii) monitoring PE and role-creep risk (especially client-facing activity or contract authority), and (iv) taking specialist tax, employment and social security advice to avoid unexpected employer exposure or employee penalties.
How Del Canto Chambers Can Help
At Del Canto Chambers, we specialise in bridging the legal gap between the US, UK and Spain. Our team provides expert guidance on Spanish payroll obligations, Beckham Law applications, PE risk analysis, and cross-border employment structuring.
Whether you’re a company considering hiring in Spain or a professional planning a relocation, we can ensure your arrangements are compliant, efficient, and properly documented.
Contact us today to discuss your specific situation and avoid the pitfalls of Spain’s withholding vacuum.
