How the ‘Mbappé Law’ Could Benefit International Employees in Spain

If you’re an international employee contemplating a relocation, it might now be the perfect time to explore what Spain – and particularly Madrid – has to offer.

The Madrid regional government is working on a new law that could offer significant tax benefits for international employees working in Madrid, and therefore making Spain an even more attractive destination for international talent.

 

To help you understand why this legislation could be interesting for you, here’s five keys of the so-called ‘Mbappé Law’:

1. What is the ‘Mbappé Law’ all about?

 

Commonly referred to as the ‘Mbappé Law’, this potential law has been named after Real Madrid football team’s newest player, Kylian Mbappé, although it has nothing to do with the French footballer.

This proposed law could mean an IRPF income tax reduction for international employees working in Madrid. The IRPF is a progressive tax that any resident in Spain must pay according to the income they receive: the higher the income, the more needs to be paid. In Spain, the IRPF tax could represent up to 45% of your total annual income.

This deduction is applied on each monthly payslip, however all accounts must be rendered to the Tax Office once a year during the income tax return season to determine whether more or less must be paid.

From the IRPF, approximately half is collected by the national treasury and the other half by each region or Autonomous Community. With the ‘Mbappé Law’ drafted by the Madrid government, you could receive a 20% discount on the latter half if you have invested in bonds, treasury bills, shares in listed or unlisted companies or contributions to limited companies.

The main goal of this draft law is to attract international investment to the Spanish capital and reward foreign investors who decide to establish their tax residence in the region. However, it may have some limitations.

2. What are the requirements to benefit from the ‘Mbappé Law’?

 

Here’s a list of five limitations and requirements that you should meet to benefit from this new law:

• Your tax residency in Madrid must be maintained for at least six years. If you move out before these six years, the law provides that the deduction has to be returned plus interest.
• If you have resided in Spain at any time in the five years prior to arriving to Madrid, you won’t be able to benefit from this deduction.
• The investment must be maintained for at least six years, and it must be made in the same year or in the following year in which you acquire your Madrid tax residency.
• The investment must be made in certain financial products such as bonds, treasury bills, shares or participations in companies. Buying real estate or cars would not apply.
• The companies or entities which receive your investment can’t be owned by you or any family member, as well as you can’t have an employee relationship with these companies. And obviously, these businesses cannot be based in tax havens.

3. What does the ‘Mbappé Law’ mean for me if I am planning to move to Spain?

 

Firstly, this law would only apply to international employees moving to Madrid. Expats relocating to other parts of Spain would not be able to benefit from this law, unless other regional governments decide to replicate it.

The main benefit of the ‘Mbappé Law’ for international employees is the possibility of lower income taxes. This reduction would directly impact your net income, allowing you to retain a larger portion of your investment earnings.

In addition to tax savings, the ‘Mbappé Law’ could offer incentives for those bringing their families. Lower tax burdens and financial incentives could make it easier for international employees to manage the cost of living in a major city like Madrid, where housing and education expenses can be significant.

Spain is renowned for its exceptional work-life balance, and the ‘Mbappé Law’ could enhance this further. With the potential financial savings, international employees might find themselves with more disposable income, allowing them to enjoy Spain’s rich cultural offerings, from its world-class cuisine to its vibrant cultural scene.

4. What’s the status of the proposed ‘Mbappé Law’?

 

As of today, the ‘Mbappé Law’ presented by the Madrid government has been approved by the regional executive. The law is in the process of being ratified by the Madrid Assembly, the regional legislative body, where the government party has a majority.

If the law is approved, the Madrid government will decide when it starts to apply. It is expected to come into effect by the fourth quarter of 2024.

5. Why should the ‘Mbappé Law’ make me consider moving to Spain?

 

This initiative aims to replicate the success of the ‘Beckham Law’, which attracted many high-income foreign professionals to Spain. This law applies nationwide and was introduced in 2005 to allow expats to pay a flat tax rate of 24% on their IRPF for up to six years, instead of the progressive tax rates applicable to all residents. The ‘Beckham Law’ has been a significant factor in attracting skilled professionals to Spain, making the country a competitive option for relocation.

The ‘Mbappé Law’ seeks to extend additional tax benefits for Madrid newly residents, but with potential updates to reflect modern employment patterns and attract a broader range of international employees. The law could also support remote and hybrid work models, which have become increasingly popular post-pandemic.

The ‘Mbappé Law’ could be a game-changer for international employees looking to relocate to Spain. With attractive tax benefits, an improved financial outlook, and access to an unparalleled lifestyle, this proposed legislation is poised to make Spain one of the top destinations for global talent.

For Spanish-based multinationals, in an era where many companies are adopting global talent acquisition strategies, the ‘Mbappé Law’ could be an incentive for employees considering a move to Spain, making it an even more appealing destination for highly skilled professionals.

 

Either way, discover more about relocating to Spain with our experts and take the first step towards your new life today.

 

Contact us here.