Benefits and differences between expatriate workers with habitual residence in Spain or abroad
19 de November, 2021

After the interest generated in our post on How does the tax regime for expatriate workers function, then we proceed to expand the information related to this regime.

First of all, it should be remembered that a person who resides and works temporarily or permanently in a foreign country, other than they have or have been having their tax residence, is considered an expatriate.

What are the requirements to determine habitual residence in Spain

In accordance with the provisions of article 8 of the Personal Income Tax Law (hereafter – LIRPF) , it is understood that the taxpayer has his habitual residence within Spanish territory when any of the following criteria of residence in Spain occurs, except for the possible rules in this regard contained in the treaties and international agreement:

  • a) When a person stays more than 183 days, during the calendar year, within Spanish territory. It should be indicated that in order to determine the period of stay in Spain, sporadic absences abroad must also be computed as periods in which it is understood that the taxpayer has remained in this territory.
  • b) When the taxpayer’s center of economic interests is located in Spain. The center of economic interests constitutes an undetermined concept, which encompasses a set of circumstances closely linked to each person and which reveal their connection with a certain territory. Referring to these circumstances to the family situation, social relations, occupations, professional activities, patrimonial interests, personal customs …
  • c) When the so-called center of vital interests of the taxpayer is in Spain. Thus, the person whose spouse is not legally separated and the minor children who depend on him reside in Spain are also considered to be residents of Spanish territory. It is an “iruis tantum” presumption that admits proof to the contrary.

Criteria for decreeing what will be the habitual residence between two states or countries.

In case of conflict of residence between two states, international agreements establish the following criteria for prevailing in this order:

  1. Permanent housing.
  2. Center of material and personal interests.
  3. Place, where a person usually lives.
  4. Nationality.
  5. By mutual agreement between the States.

Differences between expatriate workers with habitual residence in Spain or abroad

We can identify two possible situations:

An expatriate who moves to foreign territory permanently

This will entail the loss of tax residence in Spain, taxed in this territory by the IRNR for the income obtained here.

In this case, and after the Tax Administration establishes and sets out in detail on its website, the employed workers who will acquire the status of non-resident Income Tax taxpayers as a result of their travel abroad by their company, They may communicate this circumstance to the Tax Administration through the presentation of the communication model 247.

How to apply for Non-Resident Tax?

In the aforementioned communication, the identification of the worker and the payer of the income from work is the date of departure from Spanish territory, the date of commencement of the provision of work abroad, as well as the existence of objective data in that labor relationship that make it foreseeable that, as a consequence, the permanence in another country will be more than 183 days during the calendar year in which the displacement occurs or, failing that, in the following one.

The Tax Administration, in view of the communication presented, will issue a supporting document for the worker, if appropriate, within a maximum period of 10 business days, with starting the date from which the withholdings for the Tax on Tax will be practiced Non-Resident Income.

The worker will deliver to the payer of the income a copy of the document issued by the Tax Administration, so that the latter, for the purposes of withholding, considers him a taxpayer of the Non-Resident Income Tax. The aforementioned document will extend its effects, at most, to two calendar years, that of the posting and the next or, if the year of posting cannot be computed, to the next two.

An expatriate who moves temporarily or sporadically

In general, it will continue to maintain a fiscal residence in Spain and it will be in these cases that the benefit established in article 7.p) LIRPF is applicable (up to 60,100 euros per year of exemption).

The purpose of this incentive is none other than to promote the competitiveness of Spanish companies, as well as their internationalization, as they can offer an additional tax incentive to their posted workers.

At Certus Asesores, we encourage you to contact us to learn more about how this incentive can help the company and its posted workers.

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