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Europe questions the taxation of homes used as primary residences by taxpayers under the expatriate regime (Beckham Law)
| Publications | German Desk Individuals / Tax
The European Union considers the allocation of property income to the personal income tax of primary residences of taxpayers under the Beckham regime to be discriminatory.
The European Commission has initiated infringement proceedings against Spain by means of a letter of formal notice (Article 258 of the Treaty on the Functioning of the European Union), considering that the allocation of property income to personal income tax on homes used as the habitual residence of taxpayers under the special regime for expatriates, also known as the Beckham Law, is discriminatory.
What is the case?
- Non-Resident Income Tax Law (IRNR): The Non-Resident Income Tax Law does not include the concept of ‘habitual residence’. Therefore, any urban property owned by a non-resident in Spain is subject to an allocated income of 2% of the cadastral value (1.1% if the value has been revised in the last 10 years), regardless of whether it is actually their habitual residence in the territory.
- Personal Income Tax Law: However, Article 85 of the Personal Income Tax Law exempts resident taxpayers from this allocation when the property constitutes their habitual residence.
- Consequence: The result is a difference in treatment which, according to Brussels, violates the freedoms of movement of workers and capital under the Treaty on the Functioning of the EU. Spain has two months to justify or amend the rule; otherwise, the case will proceed to a reasoned opinion and, eventually, to the Court of Justice of the EU.
The High Court of Justice of Madrid has already ruled critically on this issue, although in its judgment of 6 May 2024 (Rec. 685/2022), the court held that, even under the special regime for impatriates, income should not be allocated to the habitual residence, in order to be consistent with the treatment of residents.
However, there is still no established doctrine or ruling by the Supreme Court, so the administrative criterion continues to require allocation.
The obligation to allocate income to the habitual residence of non-residents is under review at the European level and is already generating debate in the Spanish courts.
In the short term, there are no regulatory changes, but the scenario could evolve.
Our firm will continue to monitor the situation and will communicate any relevant developments.
For further information, please contact:
Alexandra González Alfaro | Senior Associate
alexandra.gonzalez@es.andersen.com
PCS Department | Andersen
pcs@es.andersen.com
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