The tax administration has been considering that the exemption provided for in article 7p) of the Personal Income Tax Law of income derived from work carried out abroad by directors and members of the Board of Directors is only applicable to employed workers — in a situation of labor dependency—, denying its application in the case of administrators and CEOs, alleging that the link that unites them with the Spanish entity is commercial and not labor-related, regardless of the nature of the work carried out (TSJ 4 November 2021 and resolution of the TEAR of Catalonia of April 26, 2022).
In this sense, for a few years now the Tax Administration has initiated numerous management and inspection procedures with the aim of reviewing this type of situation to verify that the displacement did not occur with the purpose of carrying out mere supervision tasks associated with the condition of partner of the resident entity in which the administrator or director provides services, without the non-resident entity obtaining an advantage or profit derived from the displacement.
Well, now it is the Supreme Court in a recent ruling of June 20, 2022 - responding to one of the appeals -, which rejects the claims of the Tax Administration. To this end, the High Court states that “it cannot, as a matter of principle, be rejected that the income received by the administrators and members of the board of directors can benefit from the controversial exemption. That is what has happened on this occasion, since that conclusion is reached without engaging, properly speaking, in a debate about what kind of work is carried out abroad.
As a result of the aforementioned ruling, the controversy over whether administrators and members of the board of directors can apply the indicated exemption provided for in article 7.p) of the Personal Income Tax Law is settled, although they must analyze in detail whether The work carried out abroad is for the benefit of the non-resident entity and meets the required requirements.
Thus, administrators and members of the board of directors must analyze (i) whether they meet the requirements to benefit from the application of the exemption in future personal income tax self-assessments and (ii) if, if applicable, it is possible. challenge the self-assessments submitted for previous non-prescribed yearsin order to obtain a refund of undue income.