Research grants from foreign private entities will be subject to Personal Income Tax

The tax classification of financial aid intended for scientific research has been defined following a recent resolution by the Dirección General de Tributos (DGT). The body has clarified the treatment of those grants awarded by foreign private entities that do not fit within the regulatory exemption frameworks established in Spanish legislation.

What the DGT has ruled

The inquiry analyzes whether research grants granted by foreign private entities can benefit from the exemption provided in Article 7 j) of the Personal Income Tax Law (LIRPF). The DGT has ruled that these amounts are not exempt for the following reasons:

• They are not grants for formal studies.
• They do not fall within the scope of Royal Decree 63/2006.
• They do not meet the requirements demanded for grants intended for civil servants or teaching staff.

As they are not exempt, these amounts must be classified as employment income. Likewise, the administration has specified that the taxpayer must pay tax on the amounts according to their availability in the corresponding tax year. Finally, it has been clarified that it is not possible to deduct expenses linked to the research stay, such as academic travel or research material, given that the list of deductible expenses in Article 19 of the LIRPF is exhaustive.

What this means for you

If you are a researcher residing in Spain receiving a grant from a foreign private entity, you must consider that these amounts will be included in your IRPF taxable base. This implies that the amount received will increase your annual tax burden. Furthermore, you should bear in mind that expenses derived from your research activity, such as travel or the acquisition of materials, cannot be used to reduce the taxable base, as the regulations do not contemplate this type of deduction for this category of income.

What you should do

It is necessary to analyze the legal nature of the entity granting the scholarship and the content of the call for applications to confirm whether there is any applicable regulatory framework that allows for an exemption. Upon receiving these funds, a forecast of the tax impact on your income tax return should be made to avoid surprises from the inclusion of this income as employment income. It is recommended to assess each particular situation to determine the exact moment the aid becomes available.