The tax advantages of relocating to Spain or Portugal

Spain and Portugal, two of Europe’s most attractive relocation destinations, continue to refine their tax policies to entice high-net-worth individuals, digital nomads and skilled professionals.

 Recent changes to Portugal’s Non-Habitual Resident (NHR) regime, Spain’s Beckham Law and the introduction of Madrid’s new Mbappé Law offer compelling financial incentives for those considering a move. However, as with any financial decision, careful planning and professional advice are essential to ensure compliance and maximise potential savings.

Portugal’s new Non-Habitual Resident 2.0: A shift in focus

Portugal has long been a hotspot for tax-savvy expatriates, but 2024 brought a significant shift with the introduction of NHR 2.0, replacing the original NHR scheme. The previous regime, introduced in 2009, provided attractive tax benefits, particularly for pensioners and passive income earners, who could enjoy reduced tax rates and exemptions for a 10-year period.

The new system refocuses these benefits on highly skilled professionals, particularly in technology, research and innovation. Under NHR 2.0, qualifying individuals can access:

• A flat 20% income tax rate on employment and professional income from eligible sectors.
• Near-total tax exemptions on foreign-sourced income, including dividends, interest, rental income and capital gains.
• However, pensions are no longer eligible for these tax breaks.

For business owners, this can present significant opportunities. Entrepreneurs who structure their affairs properly may be able to receive dividend income from Irish businesses almost tax-free. Additionally, those planning a business sale or exit event could significantly reduce their capital gains tax if they time their residency correctly.

However, eligibility requirements are strict. Applicants must not have been a Portuguese tax resident in the past five years, must have an appropriate residence in Portugal by December 31 of the year they apply, and must spend at least 183 days per year in the country or maintain a permanent home there.

Spain’s Beckham Law: Tax relief for new residents

For those considering Spain, the Beckham Law – named after footballer David Beckham, who famously benefited from it – remains one of the most attractive tax regimes for expatriates.

The Beckham Law applies to foreign professionals who move to Spain for work. Qualifying individuals are taxed at a flat 24% rate on Spanish income up to €600,000 per year (income above that is taxed at 47%). Unlike regular Spanish residents, they are not taxed on foreign-sourced income, such as rental income, dividends and overseas capital gains.

However, eligibility is limited. The individual must:

• Not have been a tax resident in Spain for the previous five years.
• Relocate for work, either as an employee of a Spanish entity or under specific startup and research roles.

For remote workers and entrepreneurs, Spain’s Digital Nomad Visa may also provide access to Beckham Law tax benefits. However, business owners with more than 25% ownership in a company do not qualify.

Mbappé’s Law: A new tax perk for Madrid’s wealthy

Spain is adding another incentive for high-net-worth individuals with the Mbappé Law, coming into effect in 2025. This legislation, named after footballer Kylian Mbappé (who, despite the name, is not actually involved), is designed to attract investment to Madrid.

The law offers:

• A 20% tax deduction on investments in Spanish securities, equity or bonds – applicable to the regional portion of Madrid’s income tax.
• A five-year carry-forward if the tax deduction cannot be fully used in the first year.

To qualify, individuals must:

• Not have been Spanish tax residents in the past five years.
• Relocate specifically to Madrid.
• Maintain their investments for at least six years. 

Unlike Beckham’s Law, this scheme cannot be used simultaneously with it, meaning applicants must choose between low-tax employment income (Beckham) or investment tax breaks (Mbappé).

Tax-friendly relocation: A strategy, not just a move

Both Spain and Portugal offer appealing tax incentives, but the decision to relocate should not be taken lightly. Shifting tax residency can be complex and missteps could lead to unexpected tax liabilities in both the home and host countries.

Individuals considering a move must plan carefully – when and how they relocate, how their income is structured and how they qualify for these schemes all require professional tax advice. With the right approach, these favourable regimes could translate into substantial financial benefits, making relocation to Spain or Portugal an investment in the future, rather than just a lifestyle change.

Private tax partner Alan Murray will be an adviser at the Moving To Portugal Expo on 22 May 2025 at the Herbert park Hotel, Dublin 4, where he will be available to answer tax-related questions on moving to Portugal.