Compensation for a non-compete covenant received under the Beckham regime is not taxed in Spain if it derives from activity carried out abroad

The Spanish Directorate-General for Taxation (DGT), in its binding ruling V2560-25 of 18 December 2025, examines compensation for a non-compete covenant paid by a former foreign employer to an employee who has already moved to Spain and elected the special regime for inbound workers, known as the Beckham regime.

The DGT concludes that the compensation derives from the work carried out before the move and is therefore not taxed in Spain to the extent that it does not derive, directly or indirectly, from a personal activity carried out in Spanish territory. Since it is not taxable, no withholding applies either.

The facts

The applicant, a Spanish national, worked for two German companies: for one from 2019 to 2023, and for the other from 2023 until the end of 2024. With the latter, as part of the negotiations to end his employment, he signed a non-compete covenant at the end of 2024 in exchange for compensation, which he chose to receive in monthly instalments during 2025.

On 12 February 2025 he moved to Spain to start a new job with a Spanish company and intends to elect the special regime of article 93 of Law 35/2006 of 28 November on Personal Income Tax (LIRPF). He asks whether the monthly payments he receives in 2025 will be taxable in Spain and subject to withholding.

The legal framework

Three provisions come together in the answer.

Article 93.2.b) LIRPF provides, as a rule of the special regime, that all employment income obtained by the taxpayer while the regime applies is deemed obtained in Spanish territory.

Article 114.2.a) of the Personal Income Tax Regulations, approved by Royal Decree 439/2007 of 30 March (RIRPF), introduces an exception: “income deriving from an activity carried out before the date of the move to Spanish territory shall not be deemed obtained while the special regime applies (…), without prejudice to its taxation where such income is deemed obtained in Spanish territory under the consolidated text of the Non-Resident Income Tax Act” (our translation).

Finally, article 13.1.c).1 of the consolidated text of the Non-Resident Income Tax Act (TRLIRNR), approved by Royal Legislative Decree 5/2004 of 5 March, treats employment income as obtained in Spain “where it derives, directly or indirectly, from a personal activity carried out in Spanish territory” (our translation).

The DGT’s answer

The DGT considers that the monthly payments derive from an activity carried out before the move: “the work he performed in Germany” (our translation). Under article 114.2.a) RIRPF, they are not deemed obtained during the special regime, so the rule in article 93.2.b) LIRPF does not reach them.

They would therefore only be taxed in Spain if they could be deemed obtained in Spanish territory under the TRLIRNR. The DGT concludes that they “will not be subject to tax in Spain to the extent that they do not derive, directly or indirectly, from a personal activity carried out by the applicant in Spanish territory” (our translation), and that non-taxable income is not subject to withholding.

Our assessment

In our view, the conclusion is consistent with the structure of the regime: the rule in article 93.2.b) LIRPF refers to income obtained while the regime applies, and the regulations expressly exclude income deriving from earlier activity.

One observation is nonetheless warranted. The compensation pays for a commitment to refrain from competing during 2025, a period in which the applicant was already resident in Spain. The DGT links it to the work performed in Germany, which is reasonable for a covenant signed on the termination of that employment and as part of its settlement. But it does not examine whether the abstention itself might be regarded as a personal activity carried out in Spain, and its conclusion is conditional on its not being so.

Practical consequences

The different components of an exit package from a foreign employer should be separated contractually. Severance payments, deferred bonuses or share options linked to activity before the move fall outside the rule in article 93.2.b) LIRPF and will only be taxed in Spain if they are deemed obtained in Spanish territory under the TRLIRNR, for example to the extent that they relate to work performed in Spain.

Timing also matters. If the covenant had been signed after the move, or if part of the remunerated activity had been carried out in Spain, the analysis could change.

Finally, it is advisable to document the origin of the compensation: the foreign employment from which it derives, the period covered by the non-compete obligation and the absence of services rendered in Spain in exchange for it.