International business travel, tax advantages

In recent years, the world has come to a standstill and, therefore, travel for work reasons has also come to a standstill. But as part of the return to life before Covid, these are gradually becoming more common among entrepreneurs. Are you thinking of doing international business trips? We tell you everything you need to know before diving into one. 

Face-to-face international business meetings

Technology allows us to be close to our colleagues, potential partners, distributors, etc., but in certain situations it is necessary to have the presence of certain profiles in the workplace and start an international business trip. Nothing like stepping on the ground to find out the peculiarities of the market, if your team is working well, because customers buy from you or why they don’t, and what your competitors are doing better or worse than you.

It is true that new technologies and digital tools allow us to maintain fluid and immediate communication with consumers, with alliances or with possible alliances. Although better results are always obtained and more confidence is transmitted when the meeting or conversation is face-to-face. 

Having a face-to-face meeting allows you to provide security to the recipient of the message. In addition, it will allow you to better express what you want to achieve, solve certain doubts that may arise. But above all, it conveys concern and interest on the part of the company that travels to an international destination.

When to take an international business trip?

When to make international business trips is a question that may arise for certain managers or salespeople, but the main situations in which it is worth traveling for business to other countries are:

• If you are looking to get new customers and need to close a deal.
• Every meeting can be turned into an opportunity to network. In countries such as Mexico, Chambers of Commerce help a networking network thanks to face-to-face events that help to meet many other companies that are also in the process of internationalization in the country.
• Identifying new trends and markets
• To learn about how they work in other countries and cultures, and see how they conduct business. For example, in Latin or similar countries (Spain or Portugal in Europe, Latin America, etc.) culturally it is valued and becomes an added value to be able to have an “in situ” treatment and for both parties to know each other personally.
• Identify new resources, employees, materials that can offer you a new perspective on your business.
• New opportunity to seek new inspiration by breaking the routine of being in the office.
• To know our competitors at destination, how similar products or services are sold, their prices, sales channels, etc.

Generally, it is very common to take advantage of trade missions organised by national or regional public bodies to facilitate a first immersion in a country, as well as attendance at fairs in our sector that make our brand begin to be recognised at the destination.

Tax advantages of international business travel

When traveling for work reasons , there are a number of tax aspects to consider when traveling internationally for business:

Tax-exempt allowances

Employees who go to work away from their usual workplace incur additional expenses. Therefore, these expenses and amounts produced by business trips to other countries will not need to be taxed in Spain. For example, locomotion expenses, kilometers traveled with the car, living expenses, living expenses, etc.

Destination allowance

Amounts received by employees of companies with an international destination and that are considered an excess of what their common salary would be if they had remained in Spain are exempt from tax.

Regime of excesses

It determines the exemption from taxation of the excesses received by employees of companies destined abroad over those remunerations that they would receive if they were stationed in Spain. It requires the establishment of the job abroad for more than 9 months. This regime is very rarely used in practice since it will only be applicable when we are dealing with a displacement of more than 9 months, and on many occasions it will be difficult to maintain Spanish tax residence while residing more than 183 days in Mexico the worker becomes a tax resident in that country and Spanish legislation ceases to apply

Exemption for work carried out abroad (7p), although more focused on longer stays than a business trip

Tax residents in Spain who are expatriates abroad can benefit from any of these regimes:

1. a) Exemption from allowances for travel expenses and travel allowances outside Spain, in accordance with the current limits (€91.35 per day).
2. b) Special regime for expatriates. Article 7.p) of the Personal Income Tax Law exempts from taxation income received from work actually carried out abroad when the following requirements are met:

1. That such work is carried out for a company or entity not resident in Spain. To prove this; The Spanish company must issue invoices to the foreign company that support the profit that the latter is obtaining from the services provided by the worker.

2º That in the territory in which the work is carried out, a tax of an identical or analogous nature to that of this tax is applied (a requirement that is met in the case of Mexico, for example, and in general for all the countries with which Spain has signed DTAs).

**It should also be noted that this exemption will apply to remuneration accrued during the days of stay abroad, with a maximum limit of €60,100 per year.

Thus, through this exemption, the aim is to solve the problem of double taxation in the case of income received by expatriate personnel for work carried out for companies based in Mexico or permanent establishments of Spanish companies in Mexico. This would be the case, for example, of a Spanish worker who retains his tax residence in Spain and who provides his services to the Mexican subsidiary of the Spanish company with which he has an employment contract in force.

Therefore, and as a conclusion, an expatriate tax resident in Spain will be taxed in full in Spain on the income derived from his work carried out in (for example, Mexico) if he has spent less than 183 days in Mexico and the remuneration has not been paid by an entity resident in Mexico or by a permanent establishment of a foreign company in Mexico.

Likewise, in the case of a tax resident in Spain who has provided his services for a company resident in Mexico or a permanent establishment of a Spanish company in Mexico, the income he has received from these works will be exempt from taxation in Spain, with a maximum limit of €60,100 per year. This regime does not establish a minimum duration of travel, which means that tax benefits can be applied regardless of the time spent outside Spain (as long as tax residence in our country is maintained). All this regardless of which company has made the effective payment to the worker for the provision of his services. That is, it does not matter if you have been paid directly by the parent company or the subsidiary in Mexico, the important part being the company “for” which you have been providing your services.

Although it is not a legal requirement, in practice it is necessary for the worker to be able to apply this regime that the company has made its payrolls considering the exempt and subject income in accordance with the requirements of article 7 p).

At UR Global we are experts in tax optimisation and taxation of expatriates and we will advise you on tax advice on international investment projects and advice in the field of international mobility of workers both in Spain and in Latin America. Do not hesitate to contact us.