Causality of relocation to apply the special Personal Income Tax (LIRPF) regime

The application of the special taxation regime for relocated individuals provided for in the Personal Income Tax Law (LIRPF) is not automatic upon arrival in Spanish territory. The Dirección General de Tributos (DGT) has specified the requirements necessary for an administrator to benefit from this specific tax treatment.

What the DGT has resolved

The query concerned whether an individual who moves to Spain after acquiring the status of an administrator of a limited liability company can apply the special regime of article 93.1.b).2º of the LIRPF. The Administration's criteria establish that it is imperative that the relocation to Spain be a direct consequence of acquiring said status as an administrator.

In this sense, the DGT points out that:

• There must be a causal relationship between the position assumed and the move to the country.
• The absence of this link prevents the option for this tax regime.
• The existence of such causality is a matter of fact that the interested party must prove to the Administration.
• If the entity is an asset-holding company, according to article 5.2 of the Corporate Tax Law (LIS), the administrator may not have a shareholding that determines their status as a related entity.

What it means for you

If you are a natural person moving to Spain to perform management functions and are seeking the application of this regime, holding the position is not enough. The Administration will require evidence demonstrating that the main reason for the move is, precisely, the exercise of those management functions in the Spanish company.

For companies, the nature of the company is a determining factor. If the entity is considered an asset-holding company under Corporate Tax regulations, the administrator's shareholding structure could condition the possibility of applying this special regime.

What should be done

It is fundamental to exhaustively document the reason for the relocation. The burden of proof lies with the taxpayer, so it is necessary to have elements that demonstrate that the move is a consequence of the new professional position. It is recommended to assess the shareholding structure and the economic activity of the company to ensure that all requirements of the LIRPF and the LIS are met.