Special Income Tax (IRPF) regime for workers displaced in Spain

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The Special Income tax Regime for workers displaced to Spanish territory has been amended considerably since its approval in 2005, this special regime is still in force and regulated by the Personal Income Tax Law. Vives Pons inform you about all details regarding this changes in the Special Income Tax.

Special Income Tax regime for workers displaced in Spain

The Special Income tax Regime for workers displaced to Spanish territory has been amended considerably since its approval in 2005, this special regime is still in force and regulated by the Personal Income Tax Law. Specifically, the conditions for its application can be found in Article 93 of the Income Tax Law.

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Said Special Regime was designed to attract executives and qualified foreign workplaces to Spain, as well as foreign athletes who came to reside in Spain for a certain period of time. This regime has had two modifications, specifically a modification in 2010 in which it established a maximum income limit so that it could apply the special regime of 600,000 euros and later in 2015 where foreign athletes are excluded from the special regime but it remains valid and may be applicable to other professionals and workers.

Conditions for the application of the Special IRPF Regime for foreign workers displaced to Spanish territory.

The article 93 of the Personal Income Tax Law foresees that individuals who acquire their tax residence in Spain as a result of their posting to Spanish territory, may choose to pay income tax or the IRNR during the tax period in which the change of the residence is made and during the following 5 tax periods, provided that the following conditions are met:

  • They have not been residents in Spain during the 10 years prior to their new displacement to Spanish territory.
  • The displacement to Spanish territory occurs as a result of an employment contract or when a job letter exists. One of the novelties introduced in 2015 is that it is not necessary for the employer to be Spanish, in other words, a foreign company may order to its worker to move to Spain, keeping the employment relationship in force.
  • For the application of the regime, the displaced worker must exercise his right of option by providing a communication form (form 149) as well as supplementary documentation that proves compliance with the conditions within six months from the start of the work activity for which the displacement took place.

Special IRPF Regime content for workers displaced to Spanish territory.

As a result of the application of the Special Regime for displaced workers, the first € 600,000 obtained by the worker or administrator due to employment income are taxed at a rate of 24% and above that amount at a rate of 45%.

Taxation is applied to all employment incomes, regardless of whether they are obtained abroad, which could lead to situations of double taxation on this type of incomes, which should be studied in a case-by-case basis.

Likewise, the capital returns obtained in Spain (dividends, interest, capital gains) will be taxed at 19% for the first € 6,000, between € 6,000 and € 50,000 at 21% and at 23% above € 50,000.

 

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