Article 7P on the personal income tax exemption: everything you need to know

Find out everything you need to know about article 7P.

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Home » Foreigners and income tax returns » Article 7P on the personal income tax exemption

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Article 7.p of the Personal Income Tax Law, which allows workers resident in Spain who work abroad to exempt up to 60,100 euros of their income from taxation. It details the necessary requirements, such as tax residence in Spain and effective work abroad, and offers advice on how to correctly apply this exemption in the income tax return.

Do you have the possibility of going to work abroad? Maybe they offer you the opportunity to move for a few months outside Spain, or to provide training for a subsidiary of your company, to say something?

If this is the case, read this article carefully because if you meet the requirements established in article 7P of the Personal Income Tax Law, the income you receive may be exempt.

Yes, exempt from taxation or, in other words, you will not have to pay a single euro of tax on them.  

What is Article 7P

Article 7P is the one that regulates the exemption of income from work obtained abroad when the requirements explained below are met and up to an amount of 60,100 euros.

This implies that you will not have to include this income in your income tax return nor will it be subject to withholding.

Requirements

  • Being a tax resident in Spain: This is the person who resides in Spanish territory for more than 183 days a year or has his center of economic interests in this country.
  • Effectively moving to work abroad: In order to qualify for the exemption, there must be a real and effective movement to another country. It would not be valid, for example, if you work online from your home in Spain for a Swiss company.
  • Providing services for a foreign entity or a permanent establishment located outside Spain: As long as this condition is met, the fact that the payer is Spanish or not does not affect the application of the exemption.

On the other hand, in the case of companies belonging to the same group, the services rendered must represent an added value for the company receiving them and this is deemed to be fulfilled when it has paid for them to third parties or has performed them itself.

Spain has established agreements to avoid double taxation with all countries belonging to the European Union. Also with almost all the countries of South America and many others.

When you work in a country with which Spain does not have an agreement, you must pay taxes. This is because each country has different ways of taxing.

Another important requirement: The destination country must have a tax similar to personal income tax and must not be considered a tax haven.

In this sense, it is understood that this requirement is met when there is a Double Taxation Treaty in force with Spain. By the way, on the AEAT website you can see which countries are considered tax havens.

This condition does not imply that the income obtained has to be taxed there, but simply that there is a tax levied on the overall income of the taxpayer in which a progressive tax rate is applied (which is one in which the percentage to be applied to calculate the tax goes up as the volume of income does).

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How to apply article 7P

Once it is clear that the application of article 7P corresponds, it is necessary to calculate the amount of the exemption and for this it is important to take into account the following:

From the amount of the annual salary you will have to calculate the proportional part that corresponds to the work done abroad. This is done by dividing the total income by 365 days and multiplying the result by the number of days you have been working abroad. What you obtain from this operation is the amount of the salary that will be exempt.

This calculation takes into account the number of calendar days you have been away, which includes weekends and holidays. However, those days you have been there for particular reasons (for example, before or after work) and vacations are not included.

Also exempt are any salary supplements you have received specifically for working abroad.

If there are several trips or several companies, the periods and amounts are added together and the joint limit of 60,100 euros applies.

Translated with DeepL.com (free version)

What documents do you need?

The best thing to do is to collect and keep any kind of documentation that can be used to prove that you have complied with all the requirements established in article 7P, because the Tax Authorities can be quite «picky» in this regard.

It is essential that the company certificate (which is the one they provide you with the amount of your total income) shows the place and date of the trip, the company to which the service has been provided and a description of the same.

Other documentation that you will need is the one that justifies both the trip and the stay there: airplane tickets (or train or boat), housing rental contract, hotel bills, credit card movements, bills for living expenses…

In short, anything that leaves no doubt that you have really been in the country concerned for any length of time and actually working.

Think that the application of the exemption can suppose an important economic saving for and a damage of equal size for the Treasury, reason why it is logical that this one tries by all means to avoid the fraud in this sense.

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What is the favorite superpower of a worker under article 7.p? Tax invisibility! But only up to 60,100 euros, of course.

Incompatibilities

The IRPF exemption contemplated in article 7P is incompatible with that of the excess regime.

What is this? I’ll explain it right now:

This is the exemption contained in article 9A.3.b) of the Personal Income Tax Regulations according to which the excess of the amount that the employee would receive for all concepts if he/she worked in Spain is exempt from taxation.

That is to say, what is received in excess due to the fact of being displaced would not have to be included in the income tax return.

It applies to private sector workers as well as to civil servants and Administration personnel.

And, in any case, it will be the worker the one who will be able to choose to apply this exemption or, if he prefers, the one that we have explained of article 7P.

Apply 7P with TaxDown

Let’s see, although we have explained it in detail we will not deny that the application of the IRPF exemption of art. 7P in the income tax return can have its «little things» … But that need not be a problem because that’s what TaxDown is for : to calculate it perfectly, so that you comply with the Treasury with the least possible headaches but getting the greatest tax savings allowed by the rules. We wait for you!

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