Earned income

Internal regulations

Regulations: Article 13.1.c) Law IRNR

According to internal regulations, employment income is deemed to be obtained in Spanish territory in the following cases:

• In general, when they derive, directly or indirectly, from a personal activity carried out in Spanish territory.

• Public remuneration paid by the Spanish Administration, unless the work is performed entirely abroad and such income is subject to personal tax abroad.

• Remuneration of employees of ships and aircraft in international traffic paid by resident employers or entities or by permanent establishments located in Spanish territory, unless the work is performed entirely abroad and such income is subject to a personal tax abroad.

Also, according to internal regulations, certain income is exempt :

Regulations: Article 14.1 letters a) and b) of the IRNR Law

• Public scholarships and scholarships awarded by non-profit entities to which the special regime regulated in Title II of Law 49/2002, of December 23, on the tax regime for non-profit entities and tax incentives for patronage applies and, since January 1, 2015, scholarships awarded by banking foundations regulated in Title II of Law 26/2013, of December 27, on savings banks and banking foundations in the development of their social work activity, received to pursue regulated studies, both in Spain and abroad, at all levels and degrees of the educational system. Likewise, public scholarships and those awarded by non-profit entities and, since January 1, 2015, banking foundations mentioned above for research in the field described by Royal Decree 63/2006, of January 27, approving the Statute of research personnel in training, as well as those awarded by them for research purposes to civil servants and other personnel in the service of public administrations and to teaching and research staff at universities.

• Scholarships and other amounts received by individuals, paid by Public Administrations, by virtue of international agreements and conventions on cultural, educational and scientific cooperation or by virtue of the annual Plan for international cooperation approved by the Council of Ministers.

• The benefits of work in kind of article 42.3 of the Law of IRPF :

  • Deliveries to employees of products at reduced prices that are made in company canteens or dining rooms or social stores

  • The use of assets intended for social and cultural services of the employed personnel

  • Premiums or fees paid to insurance companies for health coverage

  • The provision of preschool, infant, primary, compulsory secondary, high school and vocational training services by authorized educational centers, to the children of their employees, free of charge or at a price lower than the normal market price.

  • The amounts paid to the entities responsible for providing the public service of collective passenger transport in order to facilitate the movement of employees between their place of residence and the workplace,

  • The delivery to active workers, free of charge or at a price below the normal market price, of shares or interests in the company itself or in other companies in the group of companies

Agreement

In the case of residents in countries with which Spain has signed an agreement to avoid double taxation, generally the income received from employment in Spain can be taxed by the Spanish State, except if three circumstances occur together: that the non-resident does not remain in Spain for more than 183 days during the fiscal year in question, that the remuneration is paid by a non-resident employer and that this remuneration is not supported by a permanent establishment or a fixed base that the employer has in Spain.

Taxation

Regulations: Articles 24, 25 and 26 Law IRNR

Income obtained without the mediation of a PE must be taxed separately for each total or partial accrual of the income subject to tax.

As a general rule, the taxable base will consist of the full amount, that is, without deducting any expenses.

However, in the case of taxpayers resident in another Member State of the European Union or in a State of the European Economic Area in which there is an effective exchange of information (with effect from July 11, 2021, regulatory references made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance in matters of exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax Law, which is applicable. See Annex V ), the following expenses may be deducted to determine the tax base:

1. In the case of individuals, the expenses provided for in the Personal Income Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain.

2. In the case of entities, deductible expenses in accordance with the provisions of the Corporate Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain.

When, in accordance with internal regulations and, where applicable, the Convention, employment income may be subject to taxation in Spain, it will be taxed at the general tax rate in force:

• Residents EU , Iceland, Norway and, since 07-11-2021, Liechtenstein: 19%
• Rest of taxpayers: 24%

Special cases :

• The income from work of individuals not resident in Spanish territory, provided that they are not taxpayers of IRPF , who provide their services in Diplomatic Missions and Consular Representations of Spain abroad, when the application of specific rules derived from International Treaties to which Spain is a party is not applicable, are taxed at the tax rate of 8%.

• Income from work received by individuals not resident in Spanish territory under a fixed-term contract for foreign seasonal workers, in accordance with the provisions of labour regulations, is taxed at a tax rate of 2%.

Deductions: Only the following may be deducted from the tax rate:

• Deductions for donations, under the terms provided for in the Personal Income Tax Law and in the Law on the tax regime of non-profit entities and tax incentives for patronage.

• The withholdings that have been made on income.