Expat Taxation

Expat workers are those who provide services in a temporary or permanent way to the company outside its country of origin. To perform management in the best possible way, it is recommended to contact experts in international taxation.

The general rule in terms of expat taxation is to pay taxes according to the income of the work done in the country where they have taxation residence.

However, there are different exceptions which our specialists in expat taxation will notify you about.

There is an exception for also paying taxes in the country which is the source of income if the work has been physically executed there.

Nonetheless, an exception is applicable to this exception, which is why the definite rule will allow the expats to only pay the taxes in their country of residence if they meet the following requirements:

• A stay shorter than 183 days in the source, the fiscal year considered or any period of 12 consecutive months, and
• Salary paid by an employer who is not a resident in the source, and
• Salary not supported by a Permanent Establishment in the source.

On the other hand, there is an exemption in the art. 7 of the IPRF Law in Spain, which establishes the following information about the income received abroad by the expat personnel who maintain their tax residence in Spain:

“The working output by work effectively performed abroad will be exempted, among others, if they meet the following requirements:

1.º Those works should be performed for a company or an entity which is not a resident in Spain, or a permanent establishment set abroad under the established rules and conditions. In particular, when the designed entity of the work is related to the employer entity of the worker or the one they offer their services to, it should meet the requirements stated in the paragraph 5 of the art. 16 of the restated text of the Society Income Tax Law approved the Real Legislative Degree 4/2004, 5^th March.

2.º The territory where the work is performed is applicable of an identical or analogue nature of this tax and is not a territory which has been legally qualified as a tax haven. This requirement will be considered to have been met when the country or territory where the works are performed has signed an agreement with Spain to avoid international double taxation which contains a clause for information exchange.

The exemption will be applicable to the remunerations paid during the days of stay in another country, with a maximum limit of 60,100 annual euros. According to the regulations, it will be possible to establish the process to calculate the daily exempt amount.”

For that reason, specialists in expat taxation seek solving double imposition through this exemption in the case of income received by the expat personnel for their work performed in companies established in Mexico or permanent establishments of Spanish societies in Mexico. For example, this would be the case of a Spanish worker who keeps their fiscal residence in Spain and offer their services to a Mexican subsidiary with whom they have a work contract in force.

Therefore, and as a conclusion, an expat who is a fiscal resident in Spain will uniquely pay taxes in Spain for the income derived from their work performed in Mexico if they have spent less than 183 days in that country. Also, if the salary has not been paid neither by a resident entity in Mexico nor a permanent establishment of a foreign company in Mexico.

Moreover, when there is a tax resident in Spain who has offered their services to a company in Mexico or a permanent establishment of a Spanish company in Mexico, the income received for that work will be exempt of taxation in Spain to a maximum of 60,100 annual euros. Regardless of the partnership who paid directly to the parent company or the subsidiary in Mexico. Considering the most important company is the one they offered their service “to”.

To solve problems with expat taxation, contact us and we will help you with everything which is necessary to optimize your business.