Beckham Law: The Control Test, CEO Roles, and Share Option Taxation for Tech Founders

The Beckham Law: A Brief Recap

Spain's Special Tax Regime for Inpatriates — colloquially known as the Beckham Law (Article 93 LIRPF) — is available to individuals who become Spanish tax residents for the first time or after an absence of at least five years. Under this regime, qualifying taxpayers are taxed on a semi-territorial basis: employment income and Spanish-source income are taxed at a flat rate of 24% (up to €600,000; 47% above that), while foreign-source passive income, capital gains, and dividends are not taxed in Spain.

The regime also limits the application of Spanish Wealth Tax and Solidarity Tax to Spanish-based assets only, creating a significant planning advantage for individuals with substantial wealth outside Spain.

Since the 2023 reform under the Startup Law, the regime has been significantly expanded. New qualifying causes now include relocation for personal reasons to work remotely as a "Digital Nomad," appointment as a director of a Spanish company (under certain conditions), or acceptance of a position with a Spanish employer or secondment from a foreign employer.

The Core Eligibility Requirements

To qualify for the Special Regime, three principal conditions must be met simultaneously:

• A. Non-residency in the prior five years: The taxpayer must not have been a Spanish tax resident in any of the five calendar years preceding the year of relocation.
• B. Qualifying cause of relocation: There must be a causal link between the individual's move to Spain and one of the qualifying reasons. The Spanish Tax Administration (STA) has confirmed that the qualifying cause must exist at the time of relocation, but changes in the nature of the employment during the regime's application period are permitted, provided the new activity could also qualify under the regime.
• C. No professional/business income from Spain: The taxpayer cannot derive income characterised as rendimientos de actividades económicas (professional or business income) from activities carried out in Spain. Income from employment, director fees, and passive income do not fall into this category — consultancy and freelance activity in Spain would.

The Director's Dilemma: When Is a CEO an "Employee"?

One of the most complex eligibility questions concerns individuals who serve as directors of the foreign company they work for. Consider a typical tech founder scenario:

An individual ("T") relocates to Spain from the United States. At the time of relocation, T was working remotely for a US company under an employment contract. He subsequently resigns from that employment and, together with two US-based partners, incorporates a new Delaware corporation (each holding one-third of the shares). T is appointed CEO of the new company and is also a member of the three-person board of directors.

The question is whether T can qualify for the Beckham Law Regime as a Digital Nomad working remotely for this new company.

Why This Is Legally Complicated

Spanish tax law does not define the concept of "employment relationship" autonomously — it defers to Spanish labour law and case law of the Spanish Supreme Court (Tribunal Supremo, "TS").

Under TS case law, senior management functions performed by an individual who is also a director are classified as director functions, not employment — a doctrine known as the "theory of integration" or teoría del vínculo. As a result, a person who is both a director and performs senior management functions (as a CEO or Managing Director would) cannot simultaneously hold an employment contract with the same company for those functions.

This has a direct bearing on the Beckham Law: if T's functions are classified as director functions rather than employment, Condition B — which requires either an employment relationship or appointment as director of a Spanish company — may not be satisfied for a non-Spanish company.

The Path to Eligibility: Resigning from the Board

The solution in many such cases is for T to resign from the board of directors while continuing to perform senior management functions under a separate (non-director) arrangement. In this structure, since T no longer holds a directorship, the teoría del vínculo does not apply, and his senior management role can potentially be characterised as an employment relationship — enabling access to the Beckham Law as a Digital Nomad.

However, there is an important additional hurdle.

The "Control Test": Shareholding and the Beckham Law

Under Spanish Social Security regulations, an employment relationship can only exist if the employee does not effectively control the company. This matters for the Beckham Law because the STA applies Social Security law concepts when determining whether a genuine employment relationship exists.

Control is presumed — unless rebutted — in the following situations:

• Holding 50% or more of the company's share capital (direct control);
• Holding 33.33% or more of the share capital (rebuttable presumption of control);
• Holding 25–33.33% and serving as a director (rebuttable presumption).

In the example above, T holds exactly 33.33% of the new company — which triggers the rebuttable presumption of control. To rebut this presumption, T must demonstrate that, although he meets the statutory shareholding threshold, he does not effectively control the company. In a three-shareholder structure where decisions require a two-thirds majority, no single shareholder can act unilaterally — which provides solid grounds to argue that effective control does not exist.

This analysis should be supported by documentary evidence, including the shareholders' agreement and voting procedures under the company's constitutional documents.

Share Options and Equity Compensation Under the Special Regime

A separate but related issue arises when employees covered by the Beckham Law hold share options or other equity compensation from prior or current employment. This is highly relevant for tech executives and startup founders.

Under the Special Regime, the territorial scope means that:

• Share options relating to employment performed in Spain (i.e., options that vest while the taxpayer is a Spanish tax resident working in Spain) are taxed in Spain as Spanish-source income at the 24% flat rate;
• Share options earned prior to Spanish residency that are exercised during the Beckham Law period raise complex sourcing questions. The STA's general approach is to prorate the gain between the vesting period spent in Spain and the total vesting period — but professional advice is essential given the significant amounts involved.

Additionally, the six-year maximum duration of the Special Regime means that timing of option exercises can have a substantial tax impact. Exercising options shortly before the regime expires (and the taxpayer transitions to ordinary IRPF rates of up to 47% on general income) requires careful planning.

Practical Checklist for Beckham Law Eligibility in Complex Cases

For a detailed eligibility assessment and Beckham Law application, consult the team at internationaltaxlegalspain.com.