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Beckham/Non-resident Paradox!

Beckham/Non-resident Paradox!

Old May 18th 2013, 3:36 am
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Default Beckham/Non-resident Paradox!

Dear expats,

I am posting for the first time in this forum, so hello everyone! I am finding it almost impossible to get answers to my questions from the 'experts' so I thought I would ask the expats instead . I have been given so much contradictory advice about non-residency, and the Beckham law, that I am losing the will to live. Hopefully someone out there has had a similar situation and can shed some light on some of these issues.

The Conundrum-

Ideally I want to be taxed as a non-resident in Spain. I will likely spend 7 or 8 months living/working here and so I am looking into the Beckham law/Displacement of foreign workers regime. However I was told by an 'expert' in income tax law that if you apply to be taxed under this regime and then leave before the end of the tax year, you will lose the benefits of the regime for the whole year.

Practically this means if I stay here for between 6 and 12 months I will be taxed as a resident, but if I stay here for 12 months + I will be taxed as a non-resident. As I am working under a permanent contract I believe that even if I leave spain before 183 days, the hacienda may view me as a tax resident due to the 'center of financial interests' clause.

This leads to the paradox-

If I come to Spain with no intention of residing here permanently and stay between 1- 364 days of the year, whilst working under a permanent contract, I will be taxed as a Spanish resident. However if I live here indefinitely as a resident would then I can chose to be taxed as a non-resident.

Does this sound right to anyone? I dont understand how it can be the case that the less time I spend in Spain, the more likely it is that I will be taxed as a resident !

Any help would be much appreciated, or if someone could point my head in the right direction (and help me find a good, english speaking tax advisor near Barcelona), then that would be fantastic!!!

Thanks
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Old May 18th 2013, 5:57 am
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Default Re: Beckham/Non-resident Paradox!

Originally Posted by williams2013
Dear expats,

I am posting for the first time in this forum, so hello everyone! I am finding it almost impossible to get answers to my questions from the 'experts' so I thought I would ask the expats instead . I have been given so much contradictory advice about non-residency, and the Beckham law, that I am losing the will to live. Hopefully someone out there has had a similar situation and can shed some light on some of these issues.

The Conundrum-

Ideally I want to be taxed as a non-resident in Spain. I will likely spend 7 or 8 months living/working here and so I am looking into the Beckham law/Displacement of foreign workers regime. However I was told by an 'expert' in income tax law that if you apply to be taxed under this regime and then leave before the end of the tax year, you will lose the benefits of the regime for the whole year.

Practically this means if I stay here for between 6 and 12 months I will be taxed as a resident, but if I stay here for 12 months + I will be taxed as a non-resident. As I am working under a permanent contract I believe that even if I leave spain before 183 days, the hacienda may view me as a tax resident due to the 'center of financial interests' clause.

This leads to the paradox-

If I come to Spain with no intention of residing here permanently and stay between 1- 364 days of the year, whilst working under a permanent contract, I will be taxed as a Spanish resident. However if I live here indefinitely as a resident would then I can chose to be taxed as a non-resident.

Does this sound right to anyone? I dont understand how it can be the case that the less time I spend in Spain, the more likely it is that I will be taxed as a resident !

Any help would be much appreciated, or if someone could point my head in the right direction (and help me find a good, english speaking tax advisor near Barcelona), then that would be fantastic!!!

Thanks
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Old May 18th 2013, 6:12 am
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Default Re: Beckham/Non-resident Paradox!

Originally Posted by williams2013

Does this sound right to anyone? I dont understand how it can be the case that the less time I spend in Spain, the more likely it is that I will be taxed as a resident !

My understanding is that you must elect for this form of taxation within six months of starting your employment and that if you wish to rescind the arrangement you can do that in November or December and the change will become effective for the FOLLOWING year, not the current year.
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Old May 18th 2013, 11:58 pm
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Default Re: Beckham/Non-resident Paradox!

Hi Fred, thanks for your post. I think you slightly misunderstand what I was asking. My problem is that I only plan on working in Spain for a total of 7 or 8 months. The advisor I spoke to said that If I was to stop working for my firm and leave Spain in August/September (i.e. before the end of the current tax year) then I would be breaking the terms of the 'displacement of foreign workers' regime and as a result I would be treated as a full tax resident in Spain (as I would be seen as having my centre of financial interests in Spain + I would have resided in Spain for over 183 days). I wanted to find out if this was really the case as it seems a strange way to go about things.
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Old May 19th 2013, 4:38 am
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Default Re: Beckham/Non-resident Paradox!

As I said, you can only opt out for the following year.

If you leave Spain in the first year then, no, I don't think you will qualify for the Beckham rule.
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Old May 19th 2013, 5:33 am
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Default Re: Beckham/Non-resident Paradox!

Ahh OK great I understand you, so are saying the Beckham rule is only an option for people staying longer term.

So now I guess that my options are
1) To leave my job now, and hope that I am not already being viewed as a tax resident - I have worked for my current employer for just short of 3 months (I don't know if this makes a difference).
2) Apply for the Beckham law, stay until the end of the year and then leave.
3) To leave as planned and become a Spanish Tax resident.

I need to understand whether or not I am already viewed as a Spanish Tax resident. Does anyone have any experience with the 'centre of financial interest' clause/have any members on the forum had cases involving the wording of this? How long does one have to work here in Spain for it to become your centre of financial interest?

In terms of income, the money I earn in Spain will be less than the money I earn abroad so in that respect Spain will not be my centre of financial interest during the tax year. I also don't have any family in the country with me, and my only ties to Spain the job I hold and the flat I currently rent on a short term contract.
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Old May 19th 2013, 7:40 am
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Default Re: Beckham/Non-resident Paradox!

My assessment of your situation would be that only the 183 day rule applies and if you meet that you are tax resident, if not you are not.
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Old May 19th 2013, 10:42 pm
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Default Re: Beckham/Non-resident Paradox!

Thanks again Fred. Really don't know what to do on this one though as I could really do with a clear answer one way or the other from some kind of authority. If I leave before 6 months I would be costing myself a few grand in pre-paid accommodation. Thus it would be a double blow if the Hacienda still deemed me a tax resident. If I stay longer than 7 months I will be guaranteeing my tax residency and costing myself several more thousand in the process.

May I ask where you get your information from? You couldn't suggest anyone in the tax business could you ? I've been turned down by Blevins Franks who say that they don't have the relevant expertise (Possibly because doing the research for my individual case would be too much effort for too little gain on their part). I have spoken to a few Spanish firms who have English speakers, but I always find it very difficult to discuss the intricacies of tax law with them because they don't always understand specific vocabulary that tax authorities love to use.
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Old May 19th 2013, 10:55 pm
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Default Re: Beckham/Non-resident Paradox!

I would have suggested Blevins as that is where my info came from but you are probably right, not enough in it for them.

The only other big firm I know of is BDO Fidecs in Gib. You could try them.
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Old May 19th 2013, 10:59 pm
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Default Re: Beckham/Non-resident Paradox!

Originally Posted by williams2013
Thanks again Fred. Really don't know what to do on this one though as I could really do with a clear answer one way or the other from some kind of authority. If I leave before 6 months I would be costing myself a few grand in pre-paid accommodation. Thus it would be a double blow if the Hacienda still deemed me a tax resident. If I stay longer than 7 months I will be guaranteeing my tax residency and costing myself several more thousand in the process.

May I ask where you get your information from? You couldn't suggest anyone in the tax business could you ? I've been turned down by Blevins Franks who say that they don't have the relevant expertise (Possibly because doing the research for my individual case would be too much effort for too little gain on their part). I have spoken to a few Spanish firms who have English speakers, but I always find it very difficult to discuss the intricacies of tax law with them because they don't always understand specific vocabulary that tax authorities love to use.
why not ask hacienda directly?
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Old May 19th 2013, 11:03 pm
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Default Re: Beckham/Non-resident Paradox!

Originally Posted by lynnxa
why not ask hacienda directly?
My understanding was that they scrapped the Beckham law years ago, but then what do I know
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Old May 19th 2013, 11:06 pm
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Default Re: Beckham/Non-resident Paradox!

Originally Posted by cricketman
My understanding was that they scrapped the Beckham law years ago, but then what do I know
I don't think it was so much scrapped as tweaked - but I'm no expert either
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Old May 19th 2013, 11:11 pm
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Default Re: Beckham/Non-resident Paradox!

It was modified on the 1st January 2010 to limit it to earnings below 600k.

It is still in effect.
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Old May 19th 2013, 11:12 pm
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Default Re: Beckham/Non-resident Paradox!

Originally Posted by Fred James
It was modified on the 1st January 2010 to limit it to earnings below 600k.

It is still in effect.
But as I understood it, only for those who were contracted before the amendment in the law?
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Old May 19th 2013, 11:16 pm
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Default Re: Beckham/Non-resident Paradox!

If you were in the scheme before that date the new cap does not apply.

The 600k cap applies after that date and the scheme certainly still is available.
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