Skip to main content
Practical manual for Income Tax 2022.

Estimated performance of work and related operations

Estimated work performance

Regulations: Articles 6.5 and 40 Law IRPF

The provision of services likely to generate employment income is presumed to be remunerated, unless proven otherwise.

In the absence of proof to the contrary, the valuation of said returns will be carried out at their normal market value, with normal market value being understood as the consideration that would be agreed between independent subjects, unless there is proof to the contrary. However, the valuation of certain estimated remuneration paid in kind will be carried out by applying the special valuation rules discussed in the next section ( Income from work in kind ).

Income from work in related-party transactions

Regulations: Art. 41 Law Income Tax

In cases where the provision of personal work is carried out for a company with which there are related relationships, in the terms provided for in article 18 of the LIS , operations between related persons or entities will be valued at their market value. Market value shall be understood as that which would have been agreed upon by independent persons or entities under conditions of free competition.

Regarding the LIS see Law 27/2014, of November 27, on Corporate Tax.

According to article 18 of the LIS the linking relationships occur in the operations carried out between:

  • An entity and its partners or participants,
  • An entity and its legal and de facto directors or administrators,
  • An entity and the spouses or persons related by direct or collateral family ties, by consanguinity or affinity up to the third degree of the partners or participants, directors or administrators,
  • An entity and the directors or managers of another entity, when both entities belong to a group.

When the link is defined based on the partner-company relationship, the partner's participation must be equal to or greater than 25 percent.

In the case of remuneration for the exercise of their functions as directors or administrators of entities, the rules of the related relationships are not followed, because this is expressly established in article 18.2 of the LIS , and therefore said remuneration is excluded from the scope of related-party transactions regulated in article 41 of Law IRPF .

The tax authorities may verify that transactions carried out between related persons or entities have been valued at their normal market value and will, where appropriate, make appropriate valuation corrections with respect to transactions subject to Corporate Tax, Income Tax or Non-Resident Income Tax that have not been valued at their normal market value. For this purpose, the taxpayer of IRPF must comply with the documentation obligations of related-party transactions under the terms and conditions established in Chapter V (articles 13 to 16) of the Corporate Tax Regulations, approved by Royal Decree 634/2015, of July 10 ( BOE of July 11).