Spanish tax residents have an exemption (up to EUR 60,100) for employment income developed abroad.
In accordance with article 7p of the Spanish Personal Income Tax (PIT) Law. If certain conditions are met, Spanish tax residents are entitled to an exemption in their tax return for the employment carried out outside Spain of up to 60,100 euros per year.
Therefore, everyone who has worked abroad temporarily, keeping residency in Spain has right to the exemption of this article if the certain requirements are met, such as:
- The work must be developed physically abroad.
- The employment must be carried out for a company not resident in Spanish territory.
- In the country where the work is performed there must be an identical or similar tax to the Spanish PIT. This requirement shall be considered achieved whenever there is Double Tax Treaty signed between both countries, that includes a clause of information exchange. This cannot be effective if the country of destination is qualified as a tax haven.
- The exemption has a limit of 60,100 annual euros.
One of the more frequent questions when applying the exemption is the length of displacement. The Spanish Law does not specify a minimum or maximum number of days abroad in order to be able to apply the exemption. Nevertheless, several binding consultations have established that the length of displacement is irrelevant in order to apply the exemption.
Therefore, an employee who accomplishes with the rest of the requirements will be able to apply the exemption no matter if the employment abroad lasts 1 days or 6 months.
The main problem of the application of this tax benefit is that the Spanish Tax Office can demand a lot documents and information to verify if the requirements are really met, such as memorandums of meetings, travel tickets, expense invoices in the foreign country or company certificates that confirm the work done by the employee, among others. On top of this, all these documents must be sworn translated into Spanish.
Considering the above, it is highly recommendable to verify before in advance if the requirements are met in order to keep all the necessary documents related to the trips outside Spain.
B Law & Tax
International Tax & Legal Advisors