Beckham Law with Cyprus Holding

[FixieHartmann]

What do you guys think about the following setup?
- Person A is employed by Company A in a EU country (not Spain)
- A moves to Spain and makes use of Beckham Law
- A has a holding company in Cyprus that holds shares in a variety of companies in EU, including Company A
- The holding company in Cyprus is completely passive and doesn’t generate any active income

Questions
- do you think Company A would be liable for corporate tax in Spain because it is controlled from there?
- if the holding makes capital gains that are left in the company, would they be liable for tax in Spain?
- what if Person A would get rid of the holding in Cyprus and hold the shares directly, would the disposal of foreign shares be liable for CGT in Spain (my assumption is not)?

I know that the Beckham Law is limited in time and that the hacienda is very aggressive, so do you have any other ideas to make a similar setup work?

 

[uncreative]

I think it could work as long as there is enough substance in the companies and there is no business activity from Spain.

In the long run, I think it would be best to run the business directly from Spain. With a spanish SL the first two years you will have only 15% CIT, (even 4 years under the Startup Law, but complex). After that, CIT would be at 23% (below 1 million turnover). With new Beckham law you can have an own company with 100% shares (recent changes of startup law), big advantage. So all in all the beckham law for 6 years with your own company is a good option if you want to move to Spain.

But I would try to use a setup within Spain and use an effective tax rate of 24% under beckham law with own company, then there is less stress and more clarity.

 

[tomboy]

The key point, as previously mentioned, is ensuring sufficient substance in the companies outside of Spain to avoid the characterization of them being managed from within Spain, which could potentially trigger Spanish corporate tax liabilities.

The suggestion of operating your business directly from Spain using a Spanish SL (Sociedad Limitada) is also worth considering. The reduced corporate income tax rate for the first two years (or even four years under the Startup Law, albeit with more complex conditions) is a significant benefit. Furthermore, under the revised Beckham Law, it's now possible to hold 100% of the shares in your own company, adding another layer of advantage to this approach.

 

[FixieHartmann]

Thanks for the suggestions. Would there actually be a need for the Spanish company if the shares were simply transferred from Company A to Person A, so Person A would hold the shares in the foreign companies directly and not through a holding.

 

[uncreative]

It is probably the case that under Beckham Law you are a non-resident for the Spanish Tax Authorities i.e. you only have to pay tax on your income and assets within Spain.

It probably doesnt matter to spain the amount of shares you own outside of Spain, as long as you dont do any work for the company abroad. So passive income outside of Spain is legitimate, you dont even have to give any information to the Spanish tax authorities because you dont have to fill out the Modelo 720 under beckham law.


I have even heard of cases where residency in another country could remain even though Beckham law is being used. In that case you can also avoid the exit tax of your company and continue to be a tax resident in that country even though you live in Spain under Beckham law. From spanish side it will be fine, and for the home country there will be no substance escape.

But the best thing you can do is speak to a good tax lawyer who is familiar with the new law. From the information I have received, it is possible to live in Spain without any problems, to hold shares in other own companies and to distribute dividends that are tax-free in Spain. If you move the august of the year will be perfect, so you can use it 6 years and 6 months. A lot of time...