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V1504-15 18 May 2015 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención de rendimientos del trabajo

Foreign work earnings may be exempt from IRPF if conditions are met

An NGO asks whether workers posted abroad can benefit from exemption under article 7.p) of the IRPF Law and whether the entity must withhold tax. The DGT explains that exemption requires work being carried out for a non-resident entity or a foreign permanent establishment, the existence of a similar tax in the destination country, and that it is not in a tax haven.

The question raised

Application of the exemption established in letter p) of Article 7 of the Personal Income Tax Law and the non-obligation of the taxpayer to withhold tax on the exempt income.

The DGT's ruling

To apply the exemption, the work must be effectively performed abroad for a non-resident entity or a permanent establishment abroad. If the recipient entity is related, the service must produce an advantage or benefit to said entity (economic interest). Furthermore, in the destination country, a tax of an identical or analogous nature to the Personal Income Tax (IRPF) must apply, and it must not be a tax haven. There is no obligation to withhold tax on income that meets these exemption requirements.

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