🇪🇸Strategy: Beckham Law + Hong Kong

Concept

Tax residency plays a key role in determining tax obligations of individuals and legal entities. In today's world, where borders are becoming increasingly transparent and business is global, strategic tax residency planning becomes the only tool for optimizing tax burden.

Our strategy is based on combining advantages of different jurisdictions and using legal tax benefits available to international entrepreneurs and investors. This allows significant reduction of tax burden while complying with all legislative requirements.

The international tax system applies two main principles:

Countries competing to attract capital often use territorial taxation regimes for this purpose. For example, Singapore and Hong Kong exempt foreign ("offshore") business income from taxation.

Other countries provide the same benefits for individual income:

🇬🇧 United Kingdom ("non-domicile")

🇮🇹 Italy ("Investor Visa Special Regimes")

🇨🇭Switzerland ("Forfait Regime")

🇮🇪 Ireland ("SARP")

🇪🇸 Spain ("Beckham Law regime")

Our proposed tax planning strategy consists of using the territorial taxation principle to achieve exemption from taxes at all levels of activity. This combines personal tax residency in Spain with a Hong Kong company.

I. Strategy advantages

Tax benefit

Effective personal income tax rate under Beckham regime

Average cumulative tax loss:

100% - 26.41% = 73.59% (corporate income tax)

100% - 42.5% = 57.5% (shareholder personal income tax)

73.59% × 57.5% = 42.31% (total remaining personal wealth)When accumulating capital, an entrepreneur would on average lose57.69%

of their profit. Using this strategy allows avoiding such losses.

No administrative burden

A Hong Kong company does not require bookkeeping and administration; simply archiving invoices for audit is sufficient.

Our proposed residency scheme provides exemption from declaring foreign assets, including CFCs.

In Hong Kong, a company is not subject to taxes if it is not managed from Hong Kong and has no counterparties in Hong Kong.

The Hong Kong company pays the client's living expenses, which are tax-deductible when determining the tax base.

When cash withdrawal is necessary, the Hong Kong company pays dividends to the client quarterly or annually. Dividend payments from Hong Kong will be exempt from declaration in Spain under the Beckham Law.

III. Tax risks and their mitigation

Under the Beckham Law, income is exempt from taxes only if it was not received in Spain. If the Hong Kong company is managed from Spain and/or has income on its territory, it is recognized as a tax resident and must pay corporate taxes.

• To exempt dividends from taxation in Spain, the client:
• cannot be a "dependent agent" of the Hong Kong company;

must not create a "permanent establishment" of the Hong Kong company in Spain."Dependent agent"

is a person authorized to conclude contracts on behalf of the company and regularly concluding them. According to the modern OECD approach, dependent agents also include persons negotiating on behalf of the company regarding terms of agreements."Permanent establishment"

is a place from which an enterprise conducts its activities, i.e., has employees and an office. A permanent establishment can be a home office of employees working remotely.

To comply with the described restrictions, we recommend appointing a trusted person or management organization as director of the Hong Kong company, who will sign agreements on its behalf. In this case, the client remains on the board of directors to manage the company and control its transactions.

$5,800

$56,100