
What is the exemption for work performed abroad or «7P?
Article 7P of the Personal Income Tax Law regulates the exemption of income from work performed abroad, with an annual maximum exempt amount of €60,100, provided certain requirements are met.
Requirements for Applying 7P:
- Tax residency in Spain: The individual must be a tax resident in Spain, which means residing in the country for more than 183 days a year or having their main economic interests located in Spain.
- Effective relocation to work abroad: A real and effective relocation to another country is required to qualify for the exemption.
- Providing services to a foreign entity or a permanent establishment outside Spain:
- Whether the payer is Spanish or foreign is irrelevant, as long as the services are provided for an entity based outside Spain.
- For companies within the same group, the services provided must have added value for the receiving entity. This is considered fulfilled if the recipient company would have paid a third party for such services or performed them internally.
- The destination country must have a tax similar to Spain’s Personal Income Tax (IRPF) and not be considered a tax haven:
- This requirement is deemed satisfied if a Double Taxation Agreement exists and is in force between that country and Spain.
- The income does not necessarily need to be taxed in the destination country.
How to Apply 7P?
The exemption can be applied in two ways:
- By the company: The employer may stop withholding the corresponding amount, recognizing the employee’s status as an expatriate.
- By the employee: If not applied by the company, the worker can apply the exemption when filing their tax return, requesting a refund based on the exempted income.
If there are multiple relocations or multiple employers in the same tax year, the periods and amounts are combined, with the €60,100 limit applying jointly.