16 May, 2017

Spanish tax highlights of the temporary international assignment of employees

Employees that are temporarily assigned out of Spain are entitled to exempt, up to 60,100.00 Euro annually, employment income obtained during their assignment.

Employees that are temporarily assigned out of Spain are entitled to exempt, up to 60,100.00 Euro annually, employment income obtained during their assignment.

In its turn, when we face the opposite situation, that is to say, when a foreign employee is temporarily assigned to Spain, income obtained for the personal activity performed in Spain qualifies as Spanish source income, taxable in Spain. This taxation may not apply if the employee resides in a country with a Double tax convention signed with Spain and employment income is not paid either by a company resident or established in Spain.

✔ Employees temporarily assigned out of Spain generally maintain their Spanish tax residence status as they remain for a period exceeding 183 days or their main source of income keeps located in Spain.

In these cases and to apply the exemption, the physical presence out of Spain is required as well as the emplacement, even if it is temporary, of the centre of work out of the Spanish jurisdiction and not in a territory qualified as a tax haven. This exemption can, therefore, not only apply to employees whose centre of work is located abroad and who keep their labour relationship with a Spanish company but to those having a labour relationship with a foreign company and whose centre of work is also located abroad.

Companies in these situations are not obliged to practice withholdings on account of Personal income tax for the part of the salary that relates to work developed out of Spain. However, please remember that it is necessary to prove the effective physical secondment of the employee and that his services generate added value for the benefit of a foreign company.

✔ Employees who temporarily are seconded to Spain do not necessarily become Spanish tax residents as they do not have a long enough physical presence in our country and do not generate most of their income in Spain either.

Spanish tax rules applying to non – residents qualify as Spanish source employment income that corresponding to a personal activity carried out In Spain. It, therefore, implies that the employment income in temporary assignments will be taxable in Spain at a 24% rate (19% for individuals qualifying as tax residents in a EU country).

Such taxation shall not apply, in general, whenever a Double tax Convention has been signed between Spain and the country of residence of the employee under the following circumstances: (i) the employee does not remain in Spanish territory for a period exceeding 183 days; (ii) the employment income is not paid by a company resident in Spain; and (iii) it is not paid either by a Spanish permanent establishment of the foreign employer. If any of these circumstances is not met, Spain will be entitled to tax such income.

Consequently, please remember to consult in each case whether a Double tax convention is in place between Spain and the country of tax residence of the employee to know the conditions under which the State of residence is the only allowed to tax employment income or it can also be taxed in the country where the personal activity is carried out.


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Based in Barcelona and Madrid. Englobally is our Latin American business partner established in Santiago de Chile.

We are also part of Englobally Group, an international association of independent accounting and advisory firms that provide a one-stop shop managed solution for accounting, payroll and HR needs, with member firms in over 25 countries and associates working in many others. Many fast growing technology and lifescience businesses find their international services invaluable. Companies in many other sectors are attracted by the close and supportive way Englobally Group works.




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