BackIf you have the chance to find work abroad, and you are offered the opportunity to move temporarily outside Spain, or to provide training for a branch of your company in another country, you may find yourself in a situation where you have the opportunity to work abroad.
If this is your case, pay attention to this guide, because if you meet the requirements stipulated in article 7P of the IRPF Law, it is possible that the income you receive may be exempt from tax.
Please note, as we will see below, that this exemption applies subject to a limit.
What is article 7P?
Article 7P regulates the exemption of earned income obtained abroad, provided that the requirements detailed below are met and up to a limit of 60,100 euros.
This means that you will not have to include this income in your tax return and it will not be subject to withholding tax.
Necessary requirements
- Be a tax resident in Spain: A tax resident is considered to be someone who resides in Spanish territory for more than 183 days a year or who has their centre of economic interests in Spain.
- Actual travel to work abroad: To benefit from the exemption, you must physically travel to another country to work. For example, it would not be valid to work online from your residence in Spain for a Swiss company.
- Providing services for a foreign entity or a permanent establishment outside Spain: Provided this condition is met, it does not matter whether the payer is Spanish or not in order to apply the exemption. In the case of companies of the same group, the services rendered must have generated added value for the recipient company, which is considered to be fulfilled if the latter has paid for such services to third parties or has performed them itself.
- Existence of a tax similar to personal income tax in the destination country and not considered as a non-cooperative jurisdiction: there are currently few countries considered as such; for this purpose, we recommend that you see the list of countries that are currently considered as such for Spain.
How to apply Article 7P
For the calculation of this income it is important to take into account the proportional part of the annual salary corresponding to the work done abroad. The result is the amount of tax-free salary.
Calendar days of travel, including weekends and public holidays, are taken into account, but not days of stay for personal reasons or holidays.
Wage supplements specifically received for working abroad are also exempt.
In the case of multiple trips or work for different companies, the periods and amounts are added together, with a joint limit of €60,100.
If you have obtained this type of income in 2023 above this limit, the rest of the income above 60,100 euros must be taxed as earned income obtained in Spanish territory.
Necessary documentation
It is advisable to gather and keep all the documentation that can be used to prove that all the requirements of article 7P have been met, as the Inland Revenue may be demanding in this respect.
It is essential that the company certificate includes details such as the place and date of the posting, the company for which the service was provided and a description of the service.
In addition, it will be necessary to have documentation to justify both the trip and the stay abroad, such as transport tickets, rental contract, hotel bills and living expenses.
It is important to bear in mind that the application of this exemption can mean a significant financial saving for you and an equally significant loss for the tax authorities, so it is understandable that measures are being taken to prevent fraud in this respect.
If you have obtained this type of income during the year 2023, we can help you with your tax return. At B LAW & TAX we are experts in international taxation.
B Law & Tax International Tax & Legal Advisors.
“En B LAW&TAX somos especialistas en asesoramiento fiscal internacional tanto a empresas como para particulares. Si desea ampliar la presente información, estaremos encantados de poder atenderle en el 917817194 o en [email protected]”
