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V2577-18 20 September 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · residencia fiscal

Determination of tax residence and withholding obligation for assignments abroad

A Spanish company has requested clarification on how to apply tax withholdings to employees seconded to the EU and whether exemptions for work performed abroad apply. The Directorate General for Taxes (DGT) has ruled that if the employee remains a tax resident in Spain, Income Tax (IRPF) must continue to be withheld, unless the relevant exemption is applied.

The question raised

Method for applying withholding tax on income paid to employees assigned abroad: whether they should be considered tax residents in Spain or not and whether the exemption provided for in letter p) of Article 7 of the Personal Income Tax Law is applicable.

The DGT's ruling

La exención del artículo 7.p) de la LIRPF requiere que los trabajos se realicen efectivamente en el extranjero para una entidad no residente y en un país con impuesto análogo que no sea paraíso fiscal. Si se cumplen estos requisitos, no existe obligación de practicar retención sobre la parte exenta, con un límite de 60.100 euros anuales. Si el trabajador no ejerce la opción de comunicar su cambio de residencia, la empresa debe continuar practicando retenciones por IRPF según el procedimiento general.

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