relocation services for companies and expat: tax optimization for expatriates
In the aim of promoting the internalization of Spanish companies to make them more competitive, the Law on Personal Income Tax provides for various tax incentives for workers who work outside Spain. In basic terms, the most widely known is the exemption for work done abroad, which allows a worker who is a resident for tax purposes in Spain to be exempted from taxation up to 60,100 euros with regards to income from work. It is the well-known 7.p, which allows for the aforementioned exemption, provided that certain criteria are met, such as:
- The work must be carried out for a company or entity that is not a resident in Spain, which may be linked to the employee’s employer, generating a benefit and/or profit exclusively for the non-resident entity, and
- The country where the services are provided must have a tax comparable to personal income tax.
On the other hand, in other cases, it may be more beneficial for the worker to apply the excess scheme which, being incompatible with the previous exemption, allows them not to tax the excess they receive over the amounts they would have received if they had not gone abroad. The most positive aspect of this scheme is that it does not have a quantitative limit when not subjecting these excesses received to taxation.
At the same time, when the flow of workers enters Spanish territory, and depending on their remuneration package, there are mechanisms that can be very beneficial, such as the well-known special scheme for expatriates, which brings together a series of tax benefits as long as the worker can meet the requirements and formalities required to exercise their option.
It is especially important to consider the type of each posting, since each one is unique. This helps ensure that it is dealt with in the best way, and to better understand what the interests of the company and the employee may be.