Under Spanish tax law, individuals who spend 183 days or more during a tax year in Spain are normally deemed tax resident. Temporary absences are ignored when determining residency unless a person can prove that he is habitually resident in another country. Thus, footballers coming to Spain would automatically become Spanish tax resident on the day count rule (over 183 days) and, as Spanish residents, would have been liable to Spanish tax on their worldwide income and assets.

However, the Royal Decree 687/2005 modifies this law with respect to wealthy foreign workers. To ease the tax burden and to attract the likes of Beckham and top executives, the government introduced amendments to the definition of tax residency.

On June 10th, 2005, the Spanish government approved Royal Decree 687/2005 implementing the Personal Income Tax regulations in relation to article 9.5 of the Spanish PIT Law. The “Beckham law”, as it is commonly known, regulates the procedure that applies to the new Spanish tax regime for expatriates in force since January 1, 2004.

Should such an election be made, the expatriate will be subject to Spanish taxes on their Spanish source income and on their assets located or exercisable in Spanish territory, calculated at a flat 24.75% tax rate on their salary income Note that under this option the taxpayer gets no personal allowances or other deductions from gross income (e.g. for mortgage costs) and thus for lower earners it does not always result in a lower tax burden.