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V3908-15 4 December 2015 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención

Requirements for the exemption of employment income due to overseas assignments

A company asks whether its employees assigned abroad can apply the exemption provided in Article 7 p) of the Personal Income Tax Law (LIRPF). The DGT explains that the exemption requires the work to be performed for a non-resident entity or a permanent establishment, and that the destination country must have an analogous tax and not be a tax haven.

The question raised

Question raised: Whether the exemption provided in Article 7 p) of Law 35/2006, on Personal Income Tax, is applicable.

The DGT's ruling

To apply the exemption, the work must be effectively performed abroad and for a non-resident entity or a permanent establishment. If the entity is a related party, the service must produce an advantage or benefit to the recipient entity, being considered an intra-group service if an independent company would have paid for it. Furthermore, the destination country must apply an analogous tax and not be a tax haven. The exemption does not apply to services that result in a benefit for the Spanish entity itself or for purposes of commercial promotion or internal meetings.

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