A note for founders, executives and investors who have established Spanish tax residence while continuing to direct a business incorporated abroad.
An individual relocates to Spain and leaves the structure of his affairs ostensibly intact. The operating company remains incorporated where it always was, in Delaware, in London, in Luxembourg; its clients, its banking and its ownership remain outside Spain; and the special regime for inbound workers under Article 93 of the Personal Income Tax Act, commonly known as the Beckham regime, is understood to permit Spanish residence while leaving foreign-source income largely beyond the reach of Spanish taxation. Nothing in the business has moved. Only the individual has.
It is precisely that assumption which the Spanish tax authority has, over the course of 2025 and 2026, set about dismantling, and it is the single most consequential exposure now facing the relocated principal.
The authority’s contention is structurally straightforward and unusually penetrating. The company did not remain abroad; it relocated with its owner, not in form but in substance, because the place from which the business is in fact directed is no longer its registered office but the residence of the person who runs it, now situated in Spain. If the business is directed from Spain, the foreign company has acquired a taxable presence in Spain, a permanent establishment, and the consequences of that finding extend considerably beyond the individual’s personal position.
This note examines why the argument has become prevalent, why it is materially more dangerous than the loss of the regime considered in isolation, and what in truth determines whether it succeeds. It is addressed to the principal rather than to the adviser, because the exposure is one that the individual is best placed to recognise in the particular facts of his own arrangements.
A risk distinct from eligibility
Discussion of the Beckham regime at the planning stage tends to concentrate on eligibility: whether residence was acquired in the correct year, whether the employment relationship was properly constituted, whether the Modelo 151 return was correctly filed. Those questions are real, but they are no longer where the principal danger resides.
Article 93 conditions access to the regime on the relocating individual not obtaining income through a permanent establishment situated in Spanish territory. For a considerable period this condition was treated as a formality. The Spanish tax authority now treats it as a proposition to be established, and it advances that proposition with a confidence and a breadth that were not previously in evidence.
The condition is consequential because its breach inflicts damage twice over, and the second instance is ordinarily the graver.
The first consequence is the loss of the regime. That is itself severe, since revocation is seldom confined to a single period; it extends across every open year in which the regime was applied, with the individual’s Spanish liability recalculated as though he had been taxed throughout as an ordinary resident on worldwide income.
The second consequence, which the personal-tax framing tends to obscure, is the exposure of the foreign company itself. A permanent establishment is by definition a taxable presence of the company within Spain. To establish one is not merely to disqualify the individual; it is to assert that the foreign entity has been carrying on business in Spain through a fixed base, and is accordingly subject to Spanish corporate income tax on the profits attributable to that base, together with the corresponding value added tax and registration obligations and the penalties and interest attaching to years of undeclared corporate presence. The individual forfeits a personal advantage; the company acquires a Spanish fiscal history of which it was unaware.
It is for this reason that the permanent establishment argument warrants particular vigilance. It is the only line of challenge that transforms a question concerning a personal regime into a corporate liability, and for the founder whose wealth is concentrated in the company, it is in that transformation that the substantial exposure lies.
The two routes to a permanent establishment
The concept proceeds by two distinct routes, and the relocated principal is commonly exposed through one or both. The distinction merits attention, because the answer to each differs.
The first is the fixed place of business. A permanent establishment arises where the foreign company has at its disposal a fixed place through which its business is wholly or partly carried on. The location the authority most readily advances for this purpose is an unremarkable one: the individual’s residence. The home office of a founder whose working day is occupied with the company’s clients, the review of the company’s contracts and the direction of the company’s operations is, on the authority’s analysis, a fixed place of business of that company situated in Spain. The same is said of a permanent station in a co-working facility used habitually for the company’s affairs. What was once regarded as too informal to constitute a business establishment has become the centre of the argument.
The second is the place of effective management. Independently of any fixed location, a company is managed from the place at which the persons who genuinely direct it take the decisions that determine its conduct. Where the individual is the person who directs the company, and those decisions are now taken from Spain, the contention is that the company’s true centre of management has relocated to Spain, irrespective of the situs of its registered office or the nominal location of its board meetings. This is the more penetrating of the two arguments, since it depends upon neither a place nor an address, but solely upon the location of the directing mind, which is now resident in Spain.
The fact patterns that give rise to these findings are well established, and the principal will recognise whether they describe his own position. A newly incorporated Spanish company of limited substance formally employs the individual, while operational invoicing continues to flow through the foreign entity he in fact directs. A founder or consultant performs his work from a fixed point in Spain, his residence, conferring upon the foreign company a de facto fixed base. The individual retains directorships, signing authority or operational control over foreign companies, the steering decisions for which are now demonstrably taken from Spanish territory. Each of these, to an inspector reconstructing the position from banking flows and digital records, is a permanent establishment awaiting assertion.
A determination made upon facts already in existence
The observation of greatest practical importance, and the one most frequently appreciated too late, is this. Whether a permanent establishment exists is not a question argued towards a favourable conclusion once the notice of inspection has been received; it is a question of operational reality during the periods under examination. That reality is recorded, contemporaneously and inconveniently, in evidence generated without deliberate attention to it: the location of the individual when contracts were concluded, the metadata of the communications in which decisions were taken, the place from which the company’s accounts were accessed, the pattern of travel, the situs of the persons material to the business.
By the time the authority poses the question, that record is settled. It admits of explanation but not of improvement, and explanation carries materially less weight than the contemporaneous record it seeks to recharacterise. Documentation prepared for the inspection, however carefully composed, is treated by inspectors and tribunals alike as a reconstruction, and the Spanish tax authority and the economic-administrative tribunals are practised in distinguishing records that existed at the material time from accounts assembled subsequently; the latter not infrequently confirm the authority’s concern rather than allay it.
The implication is exacting but instructive, for it identifies precisely where the advantage lies. The permanent establishment question is determined before it is asked. It is determined by the manner in which the business is in fact structured and conducted from the moment of arrival; by whether the foreign company genuinely possesses substance, decision-makers and function beyond Spain, or whether that substance accompanied the individual through passport control; and by whether the contemporaneous record will support the position that the company is not directed from within Spain.
The appropriate response
For those who have already relocated, the correct course is not to await the question in hope that it will not be posed, but to establish, in advance of any inspector, what the existing contemporaneous record in fact discloses as to the place from which the company is directed. That assessment is seldom as adverse as the worst case nor as comfortable as the assumption that nothing moved; it is particular to the manner in which the individual genuinely operates, and the position can ordinarily be improved prospectively even where the historical record is fixed.
For those preparing to relocate, the permanent establishment analysis belongs at the forefront of the planning rather than as an adjunct to the regime application. The questions are concrete and capable of resolution in advance: where the genuine decision-making of the business will reside, and whether that is defensible; whether the foreign company possesses substance independent of the individual; and how activity, governance and documentation are to be arranged so that the record, when in due course it is read, discloses the accurate and favourable position rather than the damaging one. These questions admit of answers. They are answered economically before arrival and expensively afterwards, and almost never retrospectively.
The relocated principal who regards the Beckham regime as a matter confined to his personal taxation has misapprehended the exposure. The regime is its visible aspect. The permanent establishment of the company brought to Spain without deliberate intention is the aspect that carries the greater liability, and it is the aspect that rewards attention before the question is asked rather than after.
About Lullius
Lullius is a tax boutique based in Palma de Mallorca, advising high-net-worth and ultra-high-net-worth individuals and their families on Spanish and cross-border tax matters, and confining its practice to three disciplines: tax, private wealth, and tax controversy. The defence of inbound regime beneficiaries against permanent establishment and place-of-effective-management challenges is a central part of its controversy practice.
The firm is the author of the Spain chapter in both of the principal independent practice guides on the subject: the Tax Disputes chapter in The Legal 500 Country Comparative Guides 2026, and the Trends and Developments chapter in the Chambers Tax Controversy 2026 guide, where the permanent establishment risk addressed in this note is examined in its doctrinal context.
This note is provided for general information and does not constitute legal or tax advice. Permanent establishment and place-of-effective-management analysis is acutely fact-sensitive; specific circumstances require specific analysis.
