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V0078-14 15 January 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por trabajos en el extranjero

Exemption from foreign work rules does not apply to administrators with management and representation duties

A company asks whether four employees working abroad in European subsidiaries can benefit from the foreign work exemption. The DGT states that the President is ineligible due to his management duties, while the others depend on whether the services are intragroup services reporting profit to the subsidiary.

The question raised

Whether the application of the exemption established in letter p) of Article 7 of Law 35/2006, of November 28, on Personal Income Tax is appropriate.

The DGT's ruling

The exemption under Article 7(p) of the Personal Income Tax Law (LIRPF) does not apply to the remuneration of directors whose functions involve management, administration, and representation, as their relationship is commercial rather than employment-based. For all other employees, the service must be an intra-group service that provides an advantage or benefit to the non-resident entity. Furthermore, activities carried out by the parent company in its interest as a shareholder (such as exclusive audits for the parent company) do not constitute intra-group services.

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