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The DGT clarifies that the 60% of bonus (after 40% reduction) or 100% should be used to calculate exemption for foreign work. It states that the taxable portion of the bonus must first be determined before applying the 40% reduction.
Question posed: Assuming that all requirements to qualify for the exemption under Article 7 p) of Law 35/2006, on Personal Income Tax, are met, and that the retention bonus is subject to the reduction provided for in Article 18.2 of the aforementioned Law, the question arises whether, for the application of the proportional distribution criterion based on days worked abroad in the calculation of the said exemption, 60% of the bonus is taken into account (i.e., after previously applying the 40% reduction) or if it is integrated at 100%.
To determine the exemption, it must first be established which employment income is subject to and not exempt from taxation. The 40% reduction provided for in Article 18.2 of the LIRPF shall apply to the portion of the bonus that is subject to Personal Income Tax (IRPF).
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