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Change in Taxation of Income for Expatriates in Spain

Miguel González 27 September, 2023

Proportional Approach

Spanish legislation provides a favorable tax regime for "impatriados" (expatriates), those who move to Spain and meet specific requirements. During the relocation and the following five years, these individuals are taxed under the Non-Resident Income Tax (IRNR), benefiting from reduced rates for employment income.

Recently, the General Tax Directorate (DGT) has adjusted its criteria regarding the taxation of income related to multi-year plans, especially when part of the work is performed abroad and part in Spain.

Previously, the DGT considered that this income was fully subject to taxes in Spain. However, according to Consulta V0813-23, they have now adopted a proportional approach. This means that only the part corresponding to the activity carried out in Spain will be taxed. This change seems to align with international OECD standards, reflecting greater harmonization in the taxation of expatriates.

This adjustment in the taxation criteria has significant implications for those benefiting from the expatriate regime in Spain. The application of a proportional approach provides greater clarity and fairness in the taxation of income related to multi-year plans, while following the course of international practices. This evolution in the DGT's criteria highlights Spain's ongoing adaptation to global regulations.

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