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V1942-21 21 June 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención

Foreign work exemption requires recipient to be non-resident

A Spanish tax resident asks whether the exemption for work done in the UK applies to a UK company. The DGT states that the exemption depends on fulfilling all legal requirements, particularly identifying the effective recipient of the services.

The question raised

Whether, since the company paying the earnings is a British company, the exemption regulated in Article 7 p) of the Personal Income Tax Law may be applied.

The DGT's ruling

To apply the exemption under Article 7 p) of the Personal Income Tax Law (LIRPF), the work must be performed for a non-resident entity or a permanent establishment abroad. Both the displacement of the worker and the location of the workplace outside of Spain are required. Furthermore, the territory must have an analogous tax and must not be a tax haven, a requirement that is met if an information exchange agreement exists. The exemption will depend on the ultimate recipient of the work being an entity that is not resident in Spain.

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