If you travel abroad to provide services entrusted to you by your company, it is very possible that your salary will not be subject to income tax.
This time we will discuss the exemption regulated in Article 7, section p) of the Personal Income Tax. It states that the following are exempt from taxation: “Income from employment received for work actually performed abroad,” specifying the necessary requirements, since not all income from work performed abroad is exempt.
Let's see what these requirements are:
1. That said work is carried out for a company not resident in Spain or a permanent establishment located abroad.
2. That in the territory where the work is carried out, a tax of an identical or similar nature to the Personal Income Tax (IRPF) is applied and it is not a country or territory considered a tax haven.
Once we have verified that the requirements are met, we must take into account that the aforementioned article establishes a maximum limit of €60,100 per year of accrued remuneration.
Practical example:
If we have an annual salary of €60,000, and during the year we have been posted abroad for 45 days, we must divide that €60,000 by 365 days to obtain the daily salary that will be exempt, and then multiply it by the number of days we have been abroad, 45 in this case, so:
· €60,000 / 365 days x 45 days abroad = €7,397.10 of exempt salary.
To this exempt salary we can add, where applicable, the amounts that the company provides us for the relocation, let's say it gives us €3,000.00, we would have a total figure of €10,397.10 on which to apply the exemption for income obtained abroad, lower than the limit of €60,100.00.
As we have seen, the correct use of this exemption could generate significant tax savings for the relocated worker; it is undoubtedly a benefit focused on promoting the competitiveness of Spanish companies as well as their internationalization.
Warning
However, we must point out that if the paying company has withheld taxes on the income earned abroad, and yet the posted worker has directly claimed the exemption in their tax return, the Tax Administration may require the worker to provide all the relevant evidence and supporting documents that prove that they were indeed working abroad for the benefit of a foreign company, and that they received remuneration for this that entitled them to the exemption.
Finally, it should be noted that this exemption will be incompatible with the excess regime, which also establishes the exemption from taxation of the "remuneration excesses" received by workers assigned abroad over the remuneration they would receive if they were in Spain.
Juan Ojea
Consultant
Àmbit Assesor
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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