We have several employees who will be travelling to different countries of the EU with the purpose of carrying out different duties.
Some of them have international roles within the Company and the travels will respond to their International duties. In addition, there will be employees who will be travelling with the purpose of making market research and a third group of individuals who will be travelling to different subsidiaries to give training sessions about new products and services provided in Spain.
These employees are asking to apply the exemption from taxation provided in article 7p of the Spanish Tax Law. What are the requirements for benefiting from this exemption? If the company does not apply the exemption at withholding tax level, would the employees be able to claim for the exemption at the time of filing their tax returns?
The exemption for services rendered abroad, provided in Article 7p of the Spanish Personal Income Tax Law, is subject to the fulfilment of the following requirements:
- The individual must be tax resident of Spain
- The individual must render services for the benefit of a non resident Entity, or a Permanent Establishment of the Spanish Company located abroad
- The work must be physically performed in a foreign county (work on remote from Spain is not considered)
- The country where the services are rendered cannot be considered as a Tax Haven
- In the relevant county, a personal tax like the Spanish Personal Income tax, must be applicable.
- There is a maximum amount of employment income that can benefit from this exemption: 60.000 Euros per year.
The application of this exemption requires a case-by-case analysis. Each different scenario should be analysed to conclude about the possibility of applying the exemption. And in any case, the Company should keep all the supporting documents to be able to prove the fulfilment of the requirements in case of a hypothetical inspection.
If the exemption is not applied by the Company at withholding tax level, the individuals could claim for its application either trough their Personal Income Tax Return or through a written communication to the Spanish Tax Authorities. However, it should be noted that this could be a length process until the Tax Authorities would accept the exemption.