Pre-relocation carried interest: the DGT clarifies its tax treatment in Spain

The DGT addresses carried interest generated before relocation to Spain

In binding ruling V5374-26 of 28 July 2026, the Spanish Directorate-General for Taxation (DGT) addresses an issue of particular relevance to investment professionals relocating to Spain: the taxation of carried interest under the special inbound expatriate regime provided for in Article 93 of the Spanish Personal Income Tax Law, where the carried interest rights were generated before the relocation.

Carried interest rights generated before relocation to Spain

The taxpayer was a UK tax resident working for the London subsidiary of a pan-European alternative asset investment manager. The group had decided that he would lead the development of the Spanish market, for which purpose he would enter into a senior management agreement with the Spanish entity and relocate to Spain with his family.

As part of his remuneration package, the taxpayer had been awarded participating points giving him economic rights to carried interest from different funds. The points were allocated on a transaction-by-transaction basis when each investment closed. Once awarded, the employee's entitlement became vested and was not conditional upon his remaining with the employer, although the final amount and payment would only be determined at a later stage, when the relevant funds disposed of their investments and generated the corresponding gains.

Eligibility for Spain's inbound expatriate regime

The first issue considered by the DGT concerns eligibility for the special regime under Article 93. The ruling concludes that the taxpayer may elect to apply the regime if he becomes Spanish tax resident as a consequence of relocating to Spain due to the commencement of his employment relationship with the Spanish company and provided that the remaining statutory requirements are satisfied.

More significant is the DGT's conclusion regarding the carried interest.

Taxation of carried interest under the inbound expatriate regime

The ruling expressly assumes that the income is allocated for tax purposes to a year during which the taxpayer is subject to the special regime. Although employment income obtained while the regime applies is generally deemed to arise in Spain, Article 114.2(a) of the Personal Income Tax Regulations excludes income deriving from activities performed before the relocation from that rule, without prejudice to taxation where such income is regarded as Spanish-source income under the Non-Resident Income Tax rules.

On the facts described in the ruling, the carried interest would derive entirely from work performed before the relocation to Spain, as the corresponding points had already been awarded before the taxpayer moved to Spain.

The DGT's conclusion on taxation in Spain

Accordingly, the DGT concludes that such income will not be subject to tax in Spain to the extent that it does not derive, directly or indirectly, from personal activities performed by the taxpayer in Spanish territory.