More than 17 million of us choose Spain for our holidays each year. But for some, the allure of sunshine, good food and a cheaper cost of living is too enticing to be squashed into a week-long getaway.
There are some 350,000 Brits officially registered as living in the country, with north of 12,000 settling permanently with their own property each year.
Despite the government’s pledges to levy holiday homes and prioritise nationals, Spain remains one of the most popular destinations for British expats in the world.
But dozens of people leaving the British Isles for a place in the sun now claim that they are being ‘fleeced’ out of hundreds of millions of pounds after being ‘lured’ to the country with the promise of favourable terms, one international law firm claims.
Robert Amsterdam, the founding partner of Amsterdam & Partners LLP, says Spain has become a ‘tax trap’ for foreign residents, with many feeling their ‘lives have been ruined’ by ‘relentless tax probes’ he says are inconsistent with European law.
Amsterdam says that as many as 80 expats – including Brits, Europeans and Americans – have been in touch fearing that they face financial ‘ruin’ after Spain ‘reneged’ on its offer of low taxes for wealthy arrivals.
Families have faced attempted asset seizures of their properties, unprompted and unexplained audits and ‘onerous, expensive, and confusing compliance requirements,’ according to the legal expert.
Central to the issue is a tax regime named after David Beckham.
File photo. Spain introduced a tax regime with incentives for wealthy expats in 2005
File photo. Families have faced attempted asset seizures of their properties in the country, legal experts say
The so-called ‘Beckham’s Law’ was enacted in 2005, allows expatriates to benefit from a significant reduction in their income tax rate.
The introduction of the law coincided with the English midfielder’s move from Manchester United to Real Madrid in 2004.
Spain hoped that a favourable tax system would attract top talent and investment to the country… not just England’s Number 7.
In short, foreign residents could benefit from paying just 24 per cent on their Spanish-sourced income as tax, up to a limit of €600,000.
This could be significantly lower than the progressive tax rates for everyone else, which go up to 45 per cent.
There are other caveats – like moving for work and having not been a resident in Spain for the five years prior to the move.
But Spain has gradually ‘pared back its tax breaks and instituted relentless tax probes into individuals who benefited from the initial scheme’, Amsterdam says.
The law has undergone several changes since inception. One, in the wake of the pandemic, was to extend the provision for digital nomads in December 2022.
But the regulations to bring the tax regime in were not passed, which made it impossible to apply for it under the new scenarios.
File photo. There are some 350,000 Brits officially registered as living in Spain
As a result, many moving to Spain between 2022 and 2023 faced huge uncertainty around how much they would be expected to pay.
A Royal Decree brought in at the end of 2023 seemed like the solution, confirming that anyone who became a Spanish tax resident in the fiscal year 2023 because of a move to Spain in either 2022 or 2023 would be able to access the regime.
But legal experts now claim that they are hearing from scores of people who say they are having their tax status reassessed, filing ‘unfair audits and punitive tax claims’.
Amsterdam & Partners LLP took out adverts in the British press as part of their ‘Spanish Tax Pickpockets’ campaign, warning Brits of the potential tax issues they may face.
According to the ads, those under investigation are told they cannot appeal tax demands from the Spanish Tax Authority (known as the ‘AEAT’ in Spain) unless they pay all they ‘owe’ up front.
León Fernando del Canto, a tax lawyer and founder of Del Canto Chambers, told The Telegraph that they have seen instances where the tax office contests the granting of the stats ‘after two or three years in the country’.
He said this has ‘upset a lot of people and created insecurity’, as people no longer know how much of their income stands to be taxed.
David Beckham of Real Madrid celebrates with team-mate Ronaldo during the Spanish Primera Liga match between Real Madrid and Valladolid at the Bernabeu on September 13, 2003
Amsterdam said: ‘We have heard from many victims in Spain who say that they have had their Beckham Law status withdrawn without explanation and then have been retroactively charged with back taxes to said periods, which is completely outside the semblance of rule of law.
‘These same victims say that in order to prove their standing, they are buried in arbitrary, contradictory paperwork and drawn in long and expensive legal cases to challenge the tax authority.
‘By the time they get to the end of it, for some, it is already too late – they’ve lost everything.’
Tax inspectors, meanwhile, receive commissions on the sums they recoup from expats, regardless of whether the audit is proven to be accurate, says Amsterdam.
He told The Telegraph that ‘what Spain is doing to expats would embarrass a mafia don’.
In 2023 alone, non-residents from outside of the EU bought 27,000 houses and flats in Spain, ‘not to live in them, but mainly to speculate’, Pedro Sanchez said in January (Altea pictured)
Amsterdam argues that the tax authority is acting in a ‘manner inconsistent with fundamental European law and human rights,’ which has created a ‘tax trap’ that will damage future investment in the country.
Foreign residents may also shy away from a move if uncertain of how they stand to be treated.
‘The solution is not to crack down on those who accepted Spain’s invitation but to address the underlying corruption and greed within the tax administration itself,’ Amsterdam said.
‘Spain’s profit-driven enforcement mechanism must be dismantled, and its pay-to-appeal policy reformed.’
Facing ‘overtourism’ and challenges getting Spanish nationals into homes, the Spanish government has looked to clamp down on property speculation with new laws targeting foreign buyers.
Resolving a housing crisis has become one of prime minister Pedro Sanchez’s most pressing challenges amid a chronic shortage of affordable homes and rising rents.
His Socialist government said in January it would limit the purchase of homes by non-EU residents by increasing the tax they have to pay by as much as 100% of a property’s value, pointing to similar schemes in Denmark and Canada.
Spanish real estate platform Fotocasa said the measure may discourage foreign investment, but suggested its effectiveness would be questionable since only two per cent of Spanish homes are purchased by non-EU residents.
But CaixaBank, Spain’s third-largest lender by market value, revealed in January that foreign demand for housing in Spain has continued to grow since the end of the pandemic.
Foreigners were driving nearly 20 per cent of all transactions, a 30.7 per cent increase from 2019 levels.
Stock image. Residents face uncertainty amid concern over Spain’s tax policy for expats
While Sanchez will be in part trying to respond to demand for affordable housing options for residents, non-resident foreigners, including Brits, more often buy more expensive properties, with an average price of €2,895 per square metre in H1 2024, compared to €1,734 for resident foreigners and €1,659 for Spaniards, Caixa reports.
Spain is also planning to bring an end to its ‘golden visa’ programme by April, which has allowed non-EU citizens to obtain residency by investing in lucrative property worth more than €500,000.
Still, analysts at Caixa expect the end of this programme will have little impact on the wider market.
Just over 15,000 such visas were granted between 2013 and October 2024, many to Brits.
