When a company needs to send employees abroad, it is important to plan and organise not only the labour implications of the assignment, but also its tax impact. In this regard, it should be noted that Spanish tax law provides certain tax advantages for posted workers, in particular the exemption set out in Article 7.p) of the Spanish Personal Income Tax Act (IRPF).
When applied correctly, this measure can result in significant tax savings for the employee and a more controlled and efficient management of the assignment for the company.
Although this exemption is not new, there are still many questions about how it should be applied in practice. The requirements imposed by the Spanish Tax Agency are not always easy to interpret and, in many cases, are applied under a strict approach.
For this reason, this article explains what the Article 7.p) exemption consists of, the tax advantages it offers for employees posted abroad, the requirements that must be met and other key aspects to consider.
What is the Article 7.p) IRPF exemption?
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Put simply, Article 7.p) provides that part of an employee’s salary may be exempt from Spanish Personal Income Tax when the work is effectively carried out abroad and certain conditions are met.
This exemption does not apply to the entire salary. It only applies to the remuneration corresponding to the days on which the employee actually works outside Spain, and it is subject to a maximum annual limit of €60,100. This means it is a tax benefit that must be calculated carefully.
It is also important to note that this exemption is intended exclusively for employees. It does not apply to self-employed individuals or to income other than employment income.
Requirements to apply Article 7.p)
In order for the exemption to apply, all the legal requirements must be met, as interpreted by the Spanish Directorate General for Taxation and the courts.
Work effectively carried out abroad
The first requirement is that the work must be effectively performed outside Spanish territory. The key factor is not where the company or the client is located, but where the employee physically performs their work.
The Spanish Tax Authorities have been clear on this point: working for a foreign company from Spain is not sufficient. There must be a real assignment abroad and an effective provision of services outside Spain.
Work for a non-resident entity or a foreign permanent establishment
The services must be provided to a non-resident entity or to a foreign permanent establishment.
A common mistake occurs when:
- The employee is posted abroad but continues to provide services for the Spanish entity.
- There is no clearly identifiable foreign entity benefiting from the work.
In these cases, the exemption does not apply.
The work must generate a real benefit for the foreign employer
In addition, the work carried out must generate a real and effective benefit for the foreign entity. In practice, the Tax Authorities often challenge the exemption when:
- The companies belong to the same group, but there is no demonstrable economic value.
- It cannot be justified that the work provides direct utility to the non-resident entity.
- The assignment is merely organisational or internal in nature.
Annual exempt limit of €60,100
The exemption has a maximum annual limit of €60,100, which is applied proportionally to the days worked abroad. The calculation is performed by:
- Determining the employee’s daily remuneration.
- Multiplying it by the days effectively worked outside Spain.
- Applying, where applicable, the annual maximum cap.
Country with a double exemption treaty
To apply the Article 7.p) exemption, it is not mandatory for a double taxation treaty to be in force with Spain. What the legislation requires is that, in the country where the work is carried out, there is a tax of an identical or similar nature to Spanish Personal Income Tax, and that the country is not classified as a non-cooperative jurisdiction.
Incompatibility with the excess allowances regime
It is important to note that the Article 7.p) exemption cannot be combined with the so-called excess allowances regime applicable to certain employees posted abroad. Both regimes pursue similar objectives, so taxpayers must choose one or the other, but never apply both simultaneously. Before deciding, it is advisable to analyse which option is more favourable in each specific case.
How much can be saved by applying Article 7.p): calculation examples
One of the aspects that attracts the most attention is the actual tax saving that can be achieved by applying Article 7.p). In practice, this saving is particularly significant for employees with medium to high salaries who are regularly posted abroad.
For example, an employee with an annual salary of €80,000 who has worked a total of 100 days abroad may exempt the portion of their salary corresponding to those days, resulting in an exempt amount of approximately €21,900.
When assignments increase and the number of days worked outside Spain grows, the proportional amount may reach the maximum annual limit of €60,100. This is common in roles involving recurring travel or periodic assignments, provided that the trips are properly justified and all requirements are met.
Cases in which the Article 7.p) exemption does NOT apply
This exemption is not applied automatically and depends on the interpretation of the Spanish Tax Agency. Both the Directorate General for Taxation and the courts have clarified the situations in which it does not apply.
In practice, the tax authorities tend to deny the exemption when the requirements are not clearly met. Broadly speaking, the following scenarios are common:
| Article 7.p) exemption applies | Article 7.p) exemption does not apply |
|---|---|
| On-site work carried out outside Spain | Teleworking from Spain for a foreign company |
| Services provided to a non-resident entity | Assignments in which the employee works for the Spanish entity |
| Existence of a real benefit for the foreign entity | Group companies without demonstrable benefit |
| Projects with real technical or productive content | Brief commercial trips or assignments without substance |
These situations clearly illustrate the criteria applied by the Tax Authorities. In particular, the exemption does not apply in cases of teleworking from Spain, even if the employer or client is located abroad, as there is no effective work carried out outside Spanish territory.
Nor is the exemption accepted when the employee physically travels abroad but continues to provide services to the Spanish entity, or in group structures where a real and effective benefit for the non-resident entity cannot be demonstrated. Likewise, the exemption is often denied in brief commercial missions, isolated meetings or very short stays that do not allow effective work with sufficient economic substance to be evidenced.
Documentation required to justify Article 7.p)
To apply the Article 7.p) exemption, it is not enough to meet the legal requirements; it is also essential to properly substantiate them before the Spanish Tax Agency. The regulations do not require a single specific document, but rather a consistent set of evidence demonstrating both the assignment and the reality of the work carried out abroad.
In practice, this justification is usually supported, among others, by the following documentation:
- Certificate issued by the foreign company identifying the non-resident entity, the period of the assignment and the work performed.
- Employment contract or assignment letter setting out the conditions of the transfer and the functions to be performed.
- Travel agenda or assignment calendar showing the days effectively worked outside Spain.
- Airline tickets, boarding passes and hotel invoices as material proof of travel.
- Time records or timesheets, activity reports or internal documentation evidencing the real content of the work performed and the benefit for the foreign entity.
Practical experience shows that it is the consistency of the documentation, rather than the existence of a single isolated document, that allows the successful defence of the application of Article 7.p) in the event of a tax audit.
How to apply the Article 7.p) exemption in payroll and in the IRPF return
The exemption can be applied in two ways:
- Through payroll, by reducing the IRPF withholding tax base according to the days worked abroad and correctly reflecting it in Form 111.
- In the personal income tax return, when the company has not applied it, by declaring as exempt the portion of salary corresponding to the days worked outside Spain.
In these cases, it is also possible to request the rectification of previous non-time-barred tax years, provided that the requirements are met and the necessary documentation is available.
Frequently asked questions about Article 7.p)
Does it apply if I only work abroad for a few days?
Yes, the exemption is applied proportionally to the days effectively worked abroad.
Does it apply to teleworking from another country?
No. The work must be physically carried out abroad; teleworking from Spain does not allow the exemption to be applied.
What is the daily limit?
There is no fixed daily limit. The limit is annual (€60,100) and is applied proportionally.
What if the client is in the EU?
The exemption can also be applied in European Union countries, if there is a tax similar to IRPF and that the requirements are met.
Can I apply it if I am self-employed?
No. The Article 7.p) exemption is only applicable to employees.
How we help you at Leialta apply the Article 7.p) exemption
At LEIALTA, we advise companies and employees on the correct application of Article 7.p) of the IRPF, analysing each case on an individual basis. We review compliance with the requirements, the necessary documentation and the calculation of tax savings, as well as potential adjustments for previous tax years.
Proper advice allows this exemption to be applied with legal certainty and minimises risks in relation to the Spanish Tax Agency.
