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Non-Resident Taxation Manual (January 2023)

Earned income

Internal regulations

Regulations:article 13.1.c) Law IRNR

According to Spanish law, work income is understood to be obtained in Spanish territory in the following cases:

  • In general, when this income is derived directly or indirectly from a personal activity performed in Spanish territory.

  • Public remuneration paid by the Spanish Government, except where the work is wholly performed abroad and such income is subject to a personal tax abroad.

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

In addition, under domestic law, certain income is exempt :

Regulations:Article 14.1 (a) and (b) Law IRNR

  • Public grants and grants awarded by non-profit organisations falling under the special regime governed by Section II of Law 49/2002, of 23 December, on the tax regime of non-profit organisations and tax incentives for patronage, and from 1 January 2015, grants awarded by bank foundations governed by Section II of Law 26/2013, of 27 December, on the social work activities of building societies and bank foundations, to be used for official courses of study in Spain or abroad, at all levels of the educational system.Likewise, public grants and those awarded by non-profit organisations, and from 1 January 2015, the bank foundations mentioned above, for research in the field described by Royal Decree 63/2006, of 27 January, approving the Statute of research staff in training, and research grants awarded by those organisations to civil servants and other Public Administration personnel, and to university teachers and research staff.

  • Scholarships and other amounts received by individuals, paid by Public Administrations, by virtue of international cultural, educational and scientific agreements or treaties or by virtue of the annual international co-operation plan approved by the Council of Ministers.

  • Income from work in kind under Article 42.3 of the Personal Income Tax Act:

    • The supply to employees of products at discounted prices in canteens, canteens or canteens of a social nature

    • The use of goods intended for the social and cultural services of the employed staff.

    • Premiums or contributions paid to insurance companies for sickness cover

    • The provision of pre-school, infant, primary, compulsory secondary, baccalaureate and vocational training education services by authorised educational centres for the children of its employees, free of charge or at below-market prices.

    • The amounts paid to the entities in charge of providing the public collective passenger transport service for the purpose of facilitating the travel of employees between their place of residence and their place of work,

    • The supply to current employees, free of charge or for less than the normal market price, of shares or holdings in the company itself or in other companies in the group of companies

Agreement

In the case of residents of countries with which Spain has signed a Double Taxation Avoidance Agreement, income received from employment in Spain can generally be taxed by the Spanish State, unless three circumstances are jointly met:That the non-resident does not remain in Spain more than 183 days during the tax year in question, that the remunerations are paid by a non-resident employer and that these remunerations are not supported by permanent establishment or a fixed base that the employer has in Spain.

Taxation

Regulations:Articles 24, 25 and 26 Law IRNR

The income obtained from sources other than permanent establishment must be declared separately for each partial or total accrual of income subject to tax.

As a general rule, the taxable base will consist of the full amount, i.e. without deduction of 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 11 July 2021, the 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 the exchange of tax information under the terms set out in Law 58/2003, of 17 December, General Taxation, which is applicable.See Annex V), the following expenses may be deducted for the determination of the tax base:

  1. In the case of individuals, the expenses provided for in the Personal Income Tax Act, provided that the taxpayer can prove 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 Income Tax Act, provided that the taxpayer can prove 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 domestic legislation and, where applicable, the Convention, the income from work can be taxed in Spain, it will be taxed at the general tax rate in force:

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

Special cases::

  • Income from employment of individuals not resident in Spanish territory, provided that they are not taxpayers of IRPF, who render 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 rate of 8%.

  • Employment income received by individuals who are not resident in Spanish territory by virtue of a fixed-term contract for foreign seasonal workers, in accordance with the provisions of labour legislation, is taxed at the rate of 2%.

Deductions:of the tax liability may only be deducted:

  • Deductions for donations, under the conditions described in the Income Tax Act and in the Act on the tax regime of non-profit organisations and of tax incentives for patronage.

  • Tax withholdings that have been applied on the taxpayer's income.