Many people know about Spain’s Beckham Law, but its new Mbappe Law is not as well known. This article explains how the Mbappe Law works, who can benefit from it and the the tax advantages of the Mbappe Law vs. Beckham Law.
What is the Mbappe Law?
The Mbappe Law is a relatively new law. It was introduced in November 2024. Its aim is to attract wealthy individuals, families and sports stars to Madrid from abroad by offering a 20% tax deduction on eligible financial instruments. It is particularly relevant for individuals who cannot access the Beckham regime or for whom it provides limited benefit. Non-lucrative residents, retirees and professional athletes (excluded from the Beckham law) are key beneficiaries. The Community of Madrid designed the law as part of a strategy to attract non-resident taxpayers, mobilize investment capital, reduce regional tax pressure and reinforce the Community of Madrid’s fiscal competitiveness. There are two key points to this law:
- This tax incentive is only available in Madrid; it is not a Spain wide law (as of yet).
- Eligible financial instruments do not have to be based in Spain; international financial instruments qualify. In fact, the benefit may be claimed even where capital is invested entirely abroad.
Mbappe Law specifics
Who benefits?
Unlike the Beckham Law, which targets people working in Spain, the Mbappe Law targets those whose primary source of income comes from investments. Non-lucrative residents (investors and high net worth individuals), retirees and professional athletes (expressly excluded from the Beckham Law) are key beneficiaries.
To be eligible for Mbappe deductions, you must not have been a tax resident in Spain for the previous five years. Once you take advantage of these deductions, you must maintain your Spanish residency, and your investments, for a mandatory minimum of six years. Disinvestment in qualifying assets is only permitted if 100% of the proceeds are reinvested within one month into eligible assets. Pre-residency investments qualify only if they are in Spanish entities and must be maintained until the taxpayer becomes a tax resident.
Eligible investments
The Mbappe deduction applies exclusively to financial investments: debt instruments, equity in companies and shares in investment funds. It should be noted that real estate, tax-haven entities and companies in which the taxpayer holds more than 40% are expressly excluded. Note: this 40% ownership limit also includes spouses and relatives up to the second degree of kinship.
A key feature of this law is that it does not require investments to be made in Spain. Both Spanish and international financial assets qualify.
Carry Forward Provision
If your deduction exceeds your regional tax bill in a given year, the unused portion can be rolled forward for up to five years, maximizing the long-term benefit.
Madrid only
Spain’s personal income tax is called the IRPF (Impuesto sobre la Renta de las Personas Físicas). There is both a country wide and regional component to the IRPF. The deductions allowed under the Mbappe Law only apply to the regional component of the IRPF, and only in the autonomous Community of Madrid. This may seem obvious, but you cannot just live in Madrid to take advantage of the Mbappe Law; you must be an official tax resident of Madrid. Moreover, taxpayers cannot be eligible for both the Beckham Law and the Mbappe Law. This is because the Beckham Law places eligible taxpayers under a special IRPF status that excludes all regional deductions.
Don’t risk your investment. Let us introduce you to our vetted, international legal and tax partners for a secure purchase strategy. Don’t hesitate to contact our founder directly at fabiana@madrid-estate.com or WhatsApp +34 680 306 337 to learn more.
Mbappe Law vs. Beckham Law: Which is optimal for you?
The Beckham Law and Mbappe Law are not substitutes. As we mentioned above, the IRFP stipulations mean that they are mutually exclusive.
In short if:
- You are a high-earning employee or self-employed professional relocating for work,
- Your foreign-source income is high,
- You don’t plan on staying in Spain for more than six years,
- You do not want to live in Madrid,
the Beckham Law is the most appropriate for you.
On the other hand, if:
- A substantial portion of your income comes from investments,
- You want to live in Madrid,
- You plan on staying in Spain for more than six years,
the Mbappe Law is optimal for you.
What about tax treaties?
Many countries have tax treaties. One of the primary benefits of these is that they prevent double taxation. It’s important to point out that workers taking advantage of the Beckham Law typically have limited eligibility for double taxation treaty benefits as the individual is taxed as a non-resident.
Investors and high net worth individuals that avail themselves of the Mbappe Law have full access to tax treaty protection as they are considered full tax residents of Spain.
Which deductions perform better?
It’s simple math; the Mbappe deductions may outperform benefits derived from the Beckham Law when one’s qualifying investments are large enough that the 20% credit exceeds the total tax savings the Beckham regime would provide over six years.
For families: Mbappe Law vs. Beckham Law
While the primary beneficiary is the individual investor, other family members can benefit if one takes advantage of the Mbappe Law.
- Inheritance and Gift Taxes: Spouses, descendants and ascendants in Madrid benefit from a 99% relief on succession and gift taxes.
- Family Eligibility for the Deduction: The Mbappe Law itself is an individual deduction for the person making the investment and meeting the residency/investment criteria. Family members moving with the primary taxpayer (spouses and dependent children) typically do not automatically qualify for the investment deduction unless they also meet all the individual requirements.
Broader Madrid Tax Advantages: Beyond the Mbappe Law, Madrid offers a highly favorable tax environment. Notably, non-residents only pay Spanish wealth taxes on their Spanish assets. For non-EU or non-EEA residents, regional wealth tax rules apply, meaning that the specific rules of the region where your assets are located will govern your tax liability and potential allowances. The Community of Madrid, through various allowances, has effectively eliminated this tax for local taxpayers. Furthermore, significant reliefs are available for inheritance and gift taxes, with spouses, descendants, and ascendants benefiting from 99% relief. Other relatives such as siblings, nieces and nephews receive 25% relief. These additional benefits further underscore Madrid’s attractiveness as a tax-efficient destination for ultra high net worth individuals.
Real world examples
Consider these case studies of who can benefit from the Mbappe Law:
- Israeli Tech Entrepreneur: A Tel Aviv based tech founder moves to Madrid and invests €10 million in a Madrid AI startup. They can use the Mbappe Law to achieve a 20% deduction in their investment. This will significantly reduce their regional income tax liability while expanding their European presence.
- International Investor from Saudi Arabia: An international investor, having spent several years investing in KSA real estate ventures, establishes Madrid residency and diversifies their portfolio by investing in several EU non-real estate startups. The Mbappe Law provides a means to offset a significant portion of their Spanish taxes, while simultaneously securing EU residency benefits.
- US Family Office Seeking a European Base: A family office wants to establish a European presence. The Mbappe Law makes establishing a Madrid location an appealing proposition. The new office can benefit from the 20% tax deduction on new investment opportunities they avail themselves of in Spain.
- UK Private Equity Partner: Post-Brexit, a British private equity partner relocates their tax residency to Madrid, contributes €5 million to a US based fintech fund. Under the Mbappe Law, they can claim a 1€ million deduction through the Mbappe Law, lowering their tax burden.
Although this article details the Mbappe Law and offers suggestions on which is optimal for you, determining which regime is best requires a careful analysis of your income composition, mobility profile and investment portfolio. It also requires a thorough understanding of Spanish tax law. Madrid Estate works with an array of trusted professionals, including accountants and tax attorneys. Don’t hesitate to arrange a free consultation with us to learn how we can help you relocate to Madrid and determine which tax regime is best for you. We invite you to contact our founder directly at fabiana@madrid-estate.com or WhatsApp +34 680 306 337 to book your appointment.
