Are you an employee working abroad and wish to reduce your tax burden?
If so, it is essential that you are aware of article 7.p of the Personal Income Tax Act 35/2006. This legal provision establishes that employees who are tax resident in Spain may apply an exemption to income from work carried out abroad.
The application of this exemption may allow you to significantly reduce your tax burden in your income tax return. The application of this exemption is a valuable tool for those employees who carry out their work activities abroad and wish to benefit from the tax advantages of this regulation.
In order to benefit from the exemption for income earned abroad, you must meet two specific requirements:
- Firstly, you must provide services to a non-resident company or entity in Spain, or to a permanent establishment located abroad. It is important to remember that this must be a real physical movement.
- Secondly, the country in which you carry out your work must have a tax that is identical or similar to the Spanish personal income tax; this requirement is considered to be met if there is a double taxation avoidance agreement (DTA) between Spain and the foreign country.
It is important to note that the exemption for income from work abroad is limited to EUR 60,100 per year. In addition, it is possible to establish a procedure for calculating the daily amount of the exemption.
To better understand the practical application of this regulation, here is an example: Let’s say you are an engineer resident in Spain and your employer sends you to Berlin to work on a project for his client. If you meet the requirements set out above, you will be able to benefit from the tax exemption on the income from your work in Germany. This means that you will only be taxed in Spain on the income earned in the country, which may result in tax savings on your next income tax return.
It is therefore essential that you keep proper documentation and comply with your reporting obligations to the Tax Agency in order to support the application of the exemption and ensure compliance with the regulations.
In conclusion, the exemption of income from work abroad under article 7.p of the Personal Income Tax Act is a valuable tool for improving your financial situation as an employee working abroad. Taking advantage of this opportunity can have a positive impact both on your personal finances and on the competitiveness of companies hiring highly qualified foreign employees.
Please do not hesitate to contact us if you have any doubts or require individual advice on the application of this exemption.
