Company directors: application of the exemption relating to earned income received for work effectively carried out abroad

Company directors: application of the exemption relating to earned income received for work effectively carried out abroad

Article 7.p) of the Spanish Personal Income Tax Act

On 4 November 2021, the High Court of Justice of Catalonia issued an interesting ruling, which we will comment on briefly as, without doubt, it is a matter of unquestionable practical application; the Court was asked to determine whether the refusal to apply the exemption set out in article 7.p) of the Spanish Personal Income Tax Act to an individual for work carried out abroad, based on his/her status as director, is in accordance with the law.

The Court ruled in favour of the taxpayer, reasoning that limiting the application of the exemption to only those cases of income obtained abroad in a dependent employment relationship means requiring a relationship between employer and employee that is not required by law and does not correspond to its purpose, which is the internationalisation of human talent residing in Spain.

Let us remember that the exemption can reach 60,100 euros per year.

We await with great interest the definitive case law of the Supreme Court on this issue, which has been generating a great deal of debate for a long time.