The Directorate-General for Taxes, in its binding consultation V2560-25 of 18 December 2025, clarifies a question of operational relevance for executives moving to Spain under the special inbound-expatriates regime —the so-called Beckham Law— with employment packages in transition. The compensation derived from a non-compete covenant entered into with the foreign employer, paid after the contributor’s move to Spain, is not taxed in Spain where it derives from a personal activity carried out prior to the move and outside Spanish territory.

It is helpful to begin with the case under review, because its structure is the usual one in the practice of clients with significant wealth and of international executives.

The consulting party, of Spanish nationality, had performed work activity in Germany continuously between 2019 and the end of 2024 for two distinct German companies. In the framework of the negotiations of the termination of his last employment relationship, he entered, at the end of 2024, into a non-compete covenant with his German employer, undertaking not to provide services in competing activities for a subsequent period, in exchange for monetary compensation paid in monthly instalments throughout 2025.

On 12 February 2025, the consulting party moved to Spain to begin a new employment relationship with a Spanish entity and communicated his election for the special regime of article 93 of Law 35/2006 on Personal Income Tax (LIRPF) —as worded by Law 28/2022—.

The question put to the DGT consists, in essence, in determining whether the monthly instalments under the non-compete covenant that the consulting party will receive during 2025, now as a Spanish tax resident under the Beckham regime, are subject to Spanish taxation and, where applicable, to withholding.

The applicable legislative framework is articulated on the confluence of three provisions.

The first is article 93.2.b) of the LIRPF itself, which establishes, as a general rule of the Beckham regime, that “all employment income obtained by the contributor during the application of the special regime shall be deemed obtained in Spanish territory”. The rule seeks to prevent the moved contributor from artificially splitting his or her employment income depending on its place of performance.

The second is article 114.2.a) of the Regulation of the Tax (RIRPF, RD 439/2007), which qualifies that rule on a point critical for planning: “income derived from an activity carried out prior to the date of move to Spanish territory (…) shall not be deemed obtained during the application of the special regime, without prejudice to its taxation where the said income is deemed obtained in Spanish territory in accordance with the Consolidated Text of the Non-Resident Income Tax Act”.

The third is article 13.1.c).1 of the Consolidated Text of the Non-Resident Income Tax Act (TRLIRNR, RD-Legislative 5/2004), which considers income obtained in Spanish territory “employment income where it derives, directly or indirectly, from a personal activity carried out in Spanish territory”.

The articulation of the three provisions yields, in this case, a clear conclusion.

First, the monthly instalments of the non-compete covenant unequivocally derive from the work activity carried out by the consulting party in Germany between 2019 and 2024, prior to his move to Spain. They are the consideration for a commitment —not to compete— agreed in the framework of the German employment relationship and tied to the professional qualification acquired in that jurisdiction.

Second, in accordance with article 114.2.a) of the RIRPF, that income is not deemed obtained during the application of the Beckham regime because it derives from an activity prior to the move. The general rule of article 93.2.b) of the LIRPF is, on this point, modulated by the regulatory rule.

Third, the income would only be taxed in Spain if it could be deemed obtained in Spanish territory in accordance with the TRLIRNR. And, under article 13.1.c).1 of the TRLIRNR, that case requires the income to derive, directly or indirectly, from a personal activity carried out in Spanish territory. In the case under review, the activity —the work performed in Germany and the very obligation not to compete assumed in Germany— is carried out entirely outside Spain.

The consequence is non-subjection of the monthly instalments to Spanish tax. And, the income not being subject, no withholding is to be applied on it.

In our view, the doctrine of the DGT is coherent with the logic of the Beckham regime and with the international doctrine on the localisation of the source of employment income. The source rule attributes taxation to the State where the activity that generates the income is carried out. Compensation for a non-compete covenant is ancillary to the prior employment relationship: it shares its source. Fictitiously transferring that source to Spain by the mere circumstance that the contributor has changed residence would amount to an excess of taxation that neither the domestic rule nor the treaties contemplate.

The practical consequence is highly relevant for the structuring of the employment transition of an executive moving to Spain.

It is advisable, first, to identify and contractually separate the components of the foreign employer’s exit package. Termination indemnities, deferred bonuses tied to pre-move tax periods, stock options vested pre-move and non-compete covenants covering prior activity are taxed, in principle, outside the Beckham regime and not in Spain, where the underlying activity has been carried out outside Spanish territory.

It is advisable, second, to calibrate the timing of the move. If the consulting party had moved to Spain before signing the covenant, or if part of the non-compete period were performed through activity in Spain, the analysis might change and a percentage of the income might be considered obtained in Spanish territory.

It is advisable, third, to document the origin of the income. The non-compete covenant must evidence (i) the underlying work activity carried out abroad, (ii) the period to which the non-compete obligation refers, and (iii) the absence of provision of services in Spanish territory during the application of the Beckham regime. Contemporaneous documentation is the best defence against any re-characterisation by the Inspection.

In conclusion, what this new consultation of the DGT makes clear is that the rule of article 93.2.b) of the LIRPF —which attributes to Spanish territory the employment income during the Beckham regime— does not operate on income derived from activities prior to the move, which is taxed in Spain only if it can be deemed obtained in Spanish territory in accordance with article 13.1.c).1 of the TRLIRNR, which requires a personal activity carried out in Spain as the direct or indirect cause of the income.

Sources

  • Directorate-General for Taxes, binding consultation V2560-25 of 18 December 2025, Sub-Directorate-General for Personal Income Taxes: petete.tributos.hacienda.gob.es.