It is commonplace in the tourism industry to hire workers from abroad and send employees to work outside Spain. The Personal Income Tax Law provides personal income tax benefits for both these cases.

In the Spanish tourism industry, which is generally highly international, companies and groups usually need to hire staff from other countries to work in Spain, as well as send employees to work temporarily abroad. The personal income tax legislation contains a few tax incentives for those workers which are worthwhile considering.     

A case in point is the special regime under article 93 of the Personal Income Tax Law which allows employees coming from other countries to work in Spain by reason of a new employment contract or after being sent on an overseas work posting by their employers where there is an posting letter by the employer or where, instead of being sent by their employer, they work remotely, using only computer, remote and telecommunications systems and technology; they are remote workers, in other words.  

To be able to elect this regime, overseas workers cannot have been resident in Spain in the five-year period before they came over to work, or have obtained personal income in Spain through a permanent establishment. In all but a few exceptional cases, a spouse and any children under 25 accompanying the overseas worker in Spain are also able to elect this regime. 

If all formal and material requirements are met, after notifying the Spanish tax authorities of their election, the overseas worker will be able to apply the special regime in the year they obtain tax residence in Spain and in the following five years, unless the individual waives or is excluded from the regime. 

Under this special tax regime, the worker is allowed to be taxed, generally, as if they are nonresident, with certain exceptions. Among other advantages, the earned income received annually by the overseas worker (including amounts obtained in Spain and any other countries) is taxed at a fixed 24% rate on the first 600,000 euros. Any amounts over and above that threshold would be taxed at a fixed 47% rate. Other types of income are only taxed in Spain if they are obtained here. 

Under the general personal income tax rules, by contrast, those same wages and salaries up to 600,000 euros would be taxed at far higher rates than 24%, which could go up to marginal rates of between 45.5% and 54%, depending on the autonomous community where the individual resides.  

Elsewhere, workers at Spanish companies who are sent to work in other countries temporarily (while keeping their tax residence in Spain) can apply another tax benefit; an exemption, in this case. 

Article 7.p) of the Personal Income Tax Law states that income in respect of work actually performed abroad is exempt from personal income tax if, among other requirements, the worker’s services benefit an entity or permanent establishment resident or located in a country not classified as a tax haven.  

This exemption will be applicable (i) to any specific amounts of income received by reason of the worker being sent abroad, and (ii) to the proportional part of the sent worker’s gross annual income relative to the days in which work was actually performed abroad; up to a €60,100 annual limit. 

This exemption is incompatible with the rules on nontaxable post allowances (“régimen de excesos”) provided in the Personal Income Tax Regulations for workers sent to work abroad (which, you are reminded, has no limit, but only applies to amounts of income that are received, precisely, by reason of the posting); and the worker is allowed to elect the option that benefits them the most. 

As you can see, these benefits reduce the outbound or inbound worker’s tax burden, resulting in their receiving higher “net” salaries, with no additional cost to the employer except for the formal costs of implementing control mechanisms, basically in the case of the exemption for outbound workers.

 

Alberto García Suau
Tributario