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V1421-19 13 June 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por trabajos en el extranjero

Exemption for work performed abroad cannot be applied by directors with effective control of the company

A query was raised regarding whether working directors can apply the exemption for employment income earned while working abroad. The Directorate General of Taxes (DGT) ruled that if directors exercise effective control over the company, no employment relationship exists; therefore, they are ineligible to use this exemption.

The question raised

Whether the exemption provided for in letter p) of Article 7 of the Personal Income Tax Law applies to the remuneration of said director-employees for days worked abroad.

The DGT's ruling

The exemption under Article 7.p) of the LIRPF applies only to income derived from an employment or statutory relationship. For directors, the income must not arise from their functions as officers (Art. 17.2.e LIRPF), but rather from a status as an employee characterized by remoteness and subordination. If the director exercises effective control over the company, they are excluded from the employment relationship, preventing the application of the exemption.

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