regimen exceso irpf



For those employees who must travel abroad to carry out their job, the regulations of the Spanish Personal Income Tax (IRPF) include two different regimes that allow a part of their salary to be exempt from taxation in Spain.

However, although the regime provided for in article 7p of the Personal Income Tax Law (LIRPF) is the best known by Spanish employers, the excess tax regime provided for in the Personal Income Tax Regulations, specifically article 9.A. 3.b 4th is not so well known. The latter (to avoid the possible misunderstanding from the use of the term ‘said’, since two different types of tax regime are referred to above…) deserves special attention, since it allows treating as an employment income exempt from taxation “the excess earned by the company employees working abroad over the total remuneration that they would have obtained for salaries, daily wages, seniority, extraordinary payments, including allowances, such as family support or any other concept, on grounds of position, employment category or profession in the event of working in Spain”.

On the other hand, it should be emphasized that the excess amount of remuneration or mileage allowance that may be exempt from taxation is not capped as in the case of the regime provided for in the aforementioned 7p of the IRPF – which meant endless problems of application -, since it was specially taxed by the Tax Administration: Endless evidence was claimed to justify compliance with the numerous legal requirements for its application when calculating employee withholdings.

This has led to the fact that many employers reject its application due to the uncertainty of being able to satisfactorily prove the compliance with the requirements of the Tax Administration, a circumstance that leaves the employee defenceless against a possible tax inspection, should he decide to apply it in his income tax return.

The relevance of the application of the most unknown exemption regime for companies arises here, which is incompatible with the previous one and which requires the compliance with easier and objective requirements for its application: Firstly, the employee must continue having his tax residence in Spain after the temporary relocation, which implies that his family residence remains in Spain. Furthermore, there must be an excess between the employee’s remuneration before and after his relocation, which proves that this excess is a mobility supplement. Finally, the relocation abroad must be for a period of more than nine months and because of an employment contract.

A large number of companies will probably reconsider their relocation policies because of the legal uncertainty from the application of the regime of article 7p of LIRPF, and will consider the application of this alternative exemption regime in order to encourage relocations that improve the employee’s tax conditions.



Representación Fiscal

Susana Arroyo

Tax Manager, Barcelona

+34 93 218 07 08