B Law & Tax
16 October 2023

Tax advisor: Spanish Tax Authority: Scholarships for aspiring judges, prosecutors, and court clerks are not exempt from Personal Income Tax

The binding consultation of the General Tax Directorate (V1975-23), dated July 7, 2023, analyzes whether the exemption provided in Article 7.j) of the Spanish Personal Income Tax Law (LIRPF) can be applied to scholarships for the preparation of competitive examinations established through Order JUS/377/2022, dated April 27.

The General Tax Directorate has expressed its opinion on the tax exemption of scholarships for the preparation of competitive examinations according to Order JUS/377/2022. The consultation focuses on whether these scholarships are eligible for the exemption provided in Article 7.j) of the LIRPF.

The ministerial order specifies that these financial aids cover expenses related to the preparation of competitive examinations for judicial and prosecutorial careers, the Body of Legal Clerks of the Administration of Justice, and the Body of State Attorneys. The requirements for obtaining these scholarships are outlined in the regulations, including meeting the access requirements for these careers and receiving training under the guidance of a specialized center or preparers.

From a tax perspective, Article 17 of the LIRPF classifies scholarships as full income from work, but Article 7.j) of the same law establishes a special exemption for them. The consultation seeks to clarify whether these scholarships in question can benefit from this exemption.

Article 7 of the Spanish Personal Income Tax Law (LIRPF), subsection j), states the following:

“The following incomes will be exempt:

(…)

  1. j) Public scholarships, scholarships granted by nonprofit entities subject to the special regime regulated in Title II of Law 49/2002, dated December 23, on the fiscal regime of nonprofit entities and tax incentives for patronage, and scholarships granted by banking foundations regulated in Title II of Law 26/2013, dated December 27, on savings banks and banking foundations in the development of their social work activities, received for pursuing formal education, both in Spain and abroad, at all levels and grades of the education system, under the terms established by regulation.

Likewise, public scholarships and those granted by nonprofit entities and banking foundations mentioned above for research in the area described by Royal Decree 63/2006, dated January 27, approving the Statute of Trainee Research Personnel, as well as those granted by those with research purposes to civil servants and other personnel in the service of public administrations and teaching and research staff at universities, will be exempt as established by regulation.”

Among their employees or their spouses or relatives, by blood or marriage, up to the third degree of kinship inclusive.

In the case of scholarships for studies granted by nonprofit entities subject to the special regime regulated in Title II of Law 49/2002, dated December 23, on the fiscal regime of nonprofit entities and tax incentives for patronage, or by banking foundations regulated in Title II of Law 26/2013, dated December 27, on savings banks and banking foundations in the development of their social work activities, the above-mentioned principles will be considered met when the following requirements are met…

For the purposes of the provisions of the second paragraph of Article 7.j) of the Law, scholarships for research in the field described by Royal Decree 63/2006, dated January 27, approving the Statute of Trainee Research Personnel, will be exempt as long as the research grant program has been recognized and registered in the general registry of research grant programs referred to in Article 3 of the aforementioned royal decree. In no case will the amounts paid under an employment contract be considered as scholarships.

For the application of the last clause of Article 7.j) of the Law, the terms of the call must expressly stipulate that recipients should be civil servants, personnel in the service of public administrations, and teaching and research staff at universities as a requirement or merit. Furthermore, when scholarships are awarded by nonprofit entities subject to the special regime regulated in Title II of Law 49/2002 or by banking foundations regulated in Title II of Law 26/2013 in the development of their social work activities, they must also meet the requirements provided in the second paragraph of this section.”

In order for a scholarship to be exempt from taxes according to the established requirements, it must be a public scholarship or one granted by the entities mentioned in Article 7.j) of the Spanish Personal Income Tax Law (LIRPF). It should be awarded for formal education at all levels and grades of the education system, or for research purposes to civil servants, personnel of public administrations, and university teaching and research staff.

The scholarships in question are not for research or for pursuing formal education within the education system. Therefore, they are not eligible for the exemption under Article 7.j) of the LIRPF and must be subject to taxation as income from work in the Personal Income Tax (IRPF), according to the General Tax Directorate.

 

 

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