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V1723-23 15 June 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos de actividades económicas

Tax treatment of UK COVID-19 aid for Spanish self-employed residents

A self-employed person who worked in the UK until 2021 asks whether UK COVID-19 aid is taxable in Spain under IRPF. The DGT states that if the individual is a fiscal resident in Spain, the aid is classified as income from economic activity and must be taxed according to the Spain-UK Double Taxation Convention.

The question raised

The taxpayer wishes to know whether Article 20 "Other income" of the Convention for the avoidance of double taxation between Spain and the United Kingdom is applicable to said aid and whether, by application of said provision, they should not be taxed on said aid for Personal Income Tax for the 2021 tax period.

The DGT's ruling

If the aid is granted to compensate for the decrease in income from the activity, it is classified as income from economic activities. If the taxpayer is a resident in Spain, they shall be taxed on their worldwide income, but according to the Convention, only the income from their economic activity in Spain may be taxed in Spain, unless there is a permanent establishment in the United Kingdom. In the event of double taxation, Spain shall apply the corresponding deduction.

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