Notes

Hacienda: Hacienda Stalks Those Residing Abroad And Taxes Illegally In Spain

The Tax Agency has opened a new front. These are Spanish expatriates who continue to declare personal income tax in Spain in order to benefit from some tax deductions.

The inspection of the Tax Agency has a new objective in the fight against tax fraud. The Treasury now tightens the fence on those who declare personal income tax in Spain despite working abroad for more than 183 days. What the Treasury is seeking is that they stop benefiting from the tax advantages of paying taxes in Spain, in particular, the exemption in personal income tax for work actually carried out abroad.

Likewise, these taxpayers benefit from taxation in the so-called excess regime, included as a case of not being subject to personal income tax, together with allowances and allowances for travel expenses and normal living and living expenses.

The so-called excess regime leaves without subject to personal income tax the remuneration received by foreign-bound workers over those they would have obtained in Spain for salaries, wages, seniority, extraordinary payments, including benefits, family assistance or any other concept, with respect to the same position, job, category or profession. For the application of this regime it is necessary for the worker to be permanently stationed abroad and, therefore, not to go abroad to perform a specific job, returning to his / her usual place of work once the job is finished.

These tax advantages were created, precisely, to support the internationalization of Spanish companies, but in no case were they intended to reduce the tax bill of those who live more than 183 days a year outside of Spain, and, therefore, are considered to be non-residents except in special circumstances, either for family reasons or because the expatriate cannot prove their stay abroad.

It so happens that a law firm specialized in the taxation of nationals abroad, which prefers to remain anonymous, has warned its clients that the increasing use of incentives by taxpayers has forced the Tax Agency to take letters in the matter. The number of filers who are inspected is increasing. Other official sources, however, deny that it is a significant problem that affects many taxpayers.

The 183 day ruleThe law makes it clear that tax incentives can only be applied by individuals who are personal income tax payers, that is, with tax residence in Spain. It is not enough, however, to stay more than 183 days residing in Spain, but at the same time, it is taken into account whether the main nucleus or the base of its activities or economic interests lie in the country.

The casuistry of expatriates from a fiscal point of view is complex. And, in fact, there can be cases of double tax residence (it is taxed by world income) that in principle can only be corrected by deductions for international double taxation. However, when there is an Agreement to avoid double taxation in force between Spain and the State of destination, such situations are resolved by virtue of the rules established by the OECD Convention, which allows residence to be established only in one of the two States..

According to Bárbara Pardo de Santayana, partner responsible for Human Capital at EY, Spanish law is very attractive. Among other things because sporadic absences from the country are not taken into account. And the truth is that, on occasions, many companies continue to impose tax withholdings on their expatriate employees in an improper way. Including large companies with important economic and labor interests abroad. "His thing is that it is paid in the country in which it works," emphasizes Pardo de Santayana.

Many companies continue to impose tax withholdings on their expatriate employees improperly

The Personal Income Tax Law exempts workers resident in Spain from paying income from work actually performed abroad, with a limit of 60,100 euros per year, when two requirements are met. In the first place, that said works are carried out for a company or entity not resident in Spain, or a permanent establishment based abroad. And secondly, that the territory in which the work is carried out applies a tax of an identical or analogous nature to personal income tax and is not a tax haven.

The incentive is applied on the salary corresponding to the days of stay abroad of an employee who travels for work reasons, whether or not he is a senior manager. But it also serves employees who move abroad to work permanently there, when in the year of change of residence they are still tax residents in Spain.

No official statistics identify the number of Spaniards working abroad. The Register of Spaniards Residing Abroad (PERE) estimates that 1.3 million are of normal working age (between 16 and 64 years old), but this figure is unrealistic since, logically, not all have a paid job. What is evident is that the crisis has encouraged the search for new markets, and hence the number of Spaniards residing abroad has grown significantly.

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