Refusal of income tax exemption for work abroad: a “contradictory” resolution of the Supreme Court
The Court of Cassation ruled on March 22 that administrators and directors of management bodies cannot avail themselves of exemptions for work abroad, considering that they can only apply to “labor income derived from ‘an employment or statutory relationship’.
The judgment refers to the regulation of personal income tax, which establishes an exemption applicable to labor income received for work actually performed abroad to promote the internationalization of Spanish companies, provided that the country where the activity is carried out has a corporate tax similar to Spanish.
“The argument used by the Administration is contradictory”, explains Roger Mestres López, lawyer and tax manager at CIM Tax & Legal, who understands that “if the legislator had wanted to exclude a certain type of work performance from the aforementioned exemption , he would have made it explicit. “.
The Personal Income Tax Law defines income from work as that which derives “from personal work or from the employment or statutory relationship and does not have the character of income from economic activities” and includes among these are the remuneration of directors and members of the boards of directors.
The National Court ruled in this direction until twice last year, understanding that the literal meaning of the rule did not provide for any limitation and that, therefore, the exemptions could apply to any work performance. .
In addition, according to Roger Mestres, this criterion prevents senior executives, such as a commercial director who has been integrated into the board of directors of the company and combines his functions with other commercial functions, “they will not be able to benefit from said exemption “.
“This gives the feeling that the Supreme Court dictates some of its sentences by taking into consideration extralegal questions such as the current economic situation of the country or the consequences that its decisions could entail”, condemned Roger Mestres.