Taxation of salaries in Portugal for residents in Spain

The Directorate General of Taxation (DGT) has issued a relevant ruling regarding Portugal's authority to tax employment income of persons residing in Spain. The central issue lies in determining whether a Portuguese employer can subject the salaries of a worker residing in Spanish territory to taxation.

What the DGT has resolved

According to the Convention between Spain and Portugal, the salaries of a resident in Spain may be taxed in Portugal as long as the employment is physically exercised in that State. However, the Convention establishes a fundamental exception for cross-border workers: if the employee returns daily to their home in Spain, the taxing authority rests exclusively with Spain.

Furthermore, the ruling analyzes the application of Spanish regulations regarding the exemption of income obtained abroad. According to the Personal Income Tax (IRPF) Law and its Regulations, this income may be exempt in Spain if certain requirements are met:

• The work must be performed for a non-resident entity in another State.
• That State must have an information exchange agreement with Spain.
• The amount of the income must not exceed the limit of 60,100 euros per year.

What this means for you

If you reside in Spain but carry out your professional activity in Portugal, your tax situation will depend on the nature of your travel and your habitual residence. If your activity involves traveling to Portugal but you return to your home in Spain every day, you will be taxed only in Spain under the status of a cross-border worker.

Conversely, if the exercise of professional activity in Portugal does not meet the condition of a cross-border worker, Portugal will have the right to tax that income in accordance with the Double Taxation Convention. This directly affects residents in Spain who provide labor services abroad.

What you should do

It is necessary to verify whether your employment situation fits the definition of a cross-border worker to avoid double taxation or undue taxation. Likewise, if you seek to apply the 60,100 euro exemption, you must ensure that your employer meets the residency and information exchange requirements provided for in Spanish regulations. Given the complexity of applying international conventions, it is fundamental to assess your particular case before the tax authorities.