A few days ago, in early December 2024, the UK’s Financial Times carried a full page advertisment that heavily criticised the behaviour of Spain’s tax office inspectors.
We are passing on this message because we think it is important and because it also reflects our own experience. Anyone who has already, or is contemplating, a move to Spain making use of the tax regime commonly known as the ‘Beckham law’ needs to read this article.
I think that every tax advisor in Spain specialising in tax inspections would agree with me when I say that tax inspectors have become increasingly more aggressive in the last few years, presumably driven by the policies of the central tax administration.
spanishtaxpickpockets.com is an action group created by a firm of tax advisers based in London and Washington who are organising resistance against the abusive behaviour of the Spanish tax office.
From our perspective as tax advisers based in Spain, we see this kind of problem all too often and in relation to all kinds of state and regional taxes that are subject to formal tax inspections . It would be fair to say that it is such a common problem that tax advisers can become inured and regard the process as normal.
However, the promoters of this action group are publicising the problem, which is absolutely right, and it is refreshing for us to see this kind of action. Sadly, we have seen that the tax office just digs in when criticised and only central Government action modifying the actual regulations will have any real effect, unless EU law can be applied directly. EU law is very popular in Spain! Without EU law, there is not much chance of change with a Government coalition made up of a left wing, albeit normally reasonable party, and neo-trotskyists, desperate to generate cash from the population it governs. I would be only too happy to be proven wrong…
The Beckham Law – a bit of background
In the mid 2000s, Spain introduced the special scheme to attract high value foreign workers to its economy. Commonly known as the Beckham Law because it appeared at the same time as David Beckham moved to real Madrid, when, allegedy, he refused to move to Spain and be suject to tax on worldwide income and wealth. It has since gone through many revisions and its current details can be found in our guide here.
Spanish tax inspections
However, the Spanish tax office has instead decided that foreigners making use of the scheme are an easy target for their tax inspectors.
It will probably not amuse our readers to know that Spanish taxpayers are called in Spanish “Sujetos Pasivos”, not an encouraging name for tax payers given the behaviour of authorities towards the people that pay their wages!
It has been reported in the national press of Spain that tax inspectors receive opaque financial incentives. The same reports mention up to 25% of normal salaries, likely to total between 18.700€ and 32.000€ annually. These incentives have come under very heavy criticism by tax professionals and the AEDAF, the tax association of which we are members, took a case to one of the senior tax tribunals in Madrid and obtained an order to require the tax office to publish details of the incentive schemes as required by Spain’s transparency laws.
Despite these legal rulings demanding greater openness about its practices, the Spanish Tax Agency (AEAT) has not fully complied, maintaining a lack of clarity on the criteria and distribution of bonuses. What can we conclude from this lack of transparency?
What is unarguable is that tax inspectors are highly motivated to assess tax on their Sujetos Pasivos, whether they receive related financial incentives or not, and, in our direct experience, they do so whenever they can find any justification whatsoever. If such allegations are true then this calls into question the fundamental obligation of tax inspectors to interpret tax law fairly and reasonably.
In our opinion, and we are not alone, the tax inspection system regulations are heavily biased against the Sujetos Pasivos. Victims of tax inspections, even if they have reasonably applied the relevant tax regulations are often given the choice to accept the assessments, sometimes grossly unfair, they are offered or be heavily fined on top of the assessments.
The rules are such that even when the Sujeto Pasivo strongly disagrees with the assessments and has a very good technical basis to fight their case in the tax tribunals, they usually decide to accept and pay up, based on reduced fines and other concessions. The alternative of signing ‘en disconformidad’, rather than fight their case, will result in the tax inspector assessing the maximum fines they can and removing whatever concessions they have made in their calculations.
In Spain, tax has to be paid when assessed, together with the fines, pending an appeal process. An appeal would typically take a minimum of two years and, in some cases where the sums are large or the tax issues complex or problematical, can take as long as twelve years by the time the appeals case reaches the highest tax tribunals. If a tax assessment exceeds 120.000€, the sanctions extend to liability under criminal prosecution rules with sanctions including prison, a threat that tax inspectors salivate over, when explaining to their victims, as they extort acceptance from the Sujeto Pasivo of often unfair tax assessments.
My UK colleagues have shown me the old Monty Python sketch “The Spanish Inquisition”, which is painfully (sorry for the pun) apposite. Groan!
I want to assure the readers of this article that my comments arise from personal experience defending clients from increasingly aggressive tax inspectors during the last 20 years. The problem is becoming worse all the time as the system encourages such behaviour.
Despite all this regretable news, I should emphasise that the Beckham scheme remains a valuable asset to Spain because it has without any doubt attracted talented individuals who make valuable contributions to the Spanish economy, one way or another. Equally, potential beneficiaries should not be afraid of the system, but the scheme should not be used carelessly and attempts to abuse its benefits are very ill advised.
Individuals must understand the rules and make sure they observe them and leave no space for a likely future tax inspection. Properly prepared and documented, individuals who have elected to use the ‘Beckham Law’ should have no difficulty, even if they face an aggressive tax inspector. The problem we are encountering is that individuals have used the scheme without understanding the rules and sometimes in marginal situations that make them vulnerable to attack.
So, the message for readers using the ‘Beckham Law’ is:
- Make sure you understand the rules and do not use the scheme carelessly.
- Make sure your tax adviser is knowledgeable and conservative in the advice given.
- Make sure that you have solid documentary proof that you qualify for the scheme.
- If you are inspected, make sure you are represented by an expert in the scheme and an expert in tax inspection management.
- If you have suffered a negative inspection, contact us or the action group direct.
