Taxation of Income from Work Abroad
As a Spanish Tax Resident, your worldwide income is subject to Spanish Personal Income Tax (IRPF). When you work abroad, Double Taxation Agreements (DTAs), based on the OECD Model Convention, determine which country (Spain or the source country) has the right to tax that income, preventing double taxation.
Key DTA Articles for Employment Income
The following articles in DTTs address various forms of work-related income:
| DTT Article | Income Type | General Tax Rule | Double Taxation Relief |
| Article 15 | Dependent Work (Generic) | General principle is taxed only in the State of Residence (Spain), unless the work is performed in the other country. | Depends on the DTT (Credit or Exemption). |
| Article 16 | Directors’ Fees | The Source State (where the company is resident) has an unlimited right to tax. | As determined by the specific DTT. |
| Article 17 | Artists and Athletes | The country where the activity is physically carried out has the right to tax. | Mostly Credit Method, some treaties use Progressive Exemption. |
| Article 19 | Public Functions | Salaries/Wages paid by the Spanish State (including Autonomous and Local Authorities) are taxed exclusively in Spain. | Not applicable, as Spain retains exclusive taxation. |
| Article 20 | Students/Trainees | Aid for living, studies, or training is generally exempt in the country where the studies/training is conducted, unless the source is in that country. | Exemption in the host country. |
Deep Dive: Article 15 – Dependent Work
General Principle
Income from dependent work is taxable only in the country of residence (Spain) unless the work is actually carried out in the other state (requiring physical presence).
The 183-Day Rule Exception (Article 15.2)
Income from work carried out in the other country is taxed exclusively in Spain (State of Residence) if all three of the following conditions are simultaneously met:
| Condition | Description |
| 183-Day Limit | The worker is present in the other state for a period or periods that do not exceed 183 days in any twelve-month period beginning or ending in the fiscal year considered. |
| Non-Resident Employer | Wages are paid by or on behalf of an employer who is not a resident of the other state. |
| No Permanent Establishment (PE) Charge | The remuneration is not borne by a Permanent Establishment (PE) that the employer has in the other state. |
Important Note: If the 183-day limit is exceeded, the right to tax is often retroactively applied by the Source State from the very first day of physical presence. Some DTTs require the 183-day period to be met within the fiscal year rather than a rolling 12-month period.
Identifying the “Actual Employer”
When establishing the “Actual Employer” for the 183-day rule, especially in cases involving related companies, various criteria are used to look beyond the contractual payer:
- Who gives instructions on how to perform the work?
- Who controls the workplace?
- Who determines holidays and working hours?
- Who can impose disciplinary measures?
Special Employment Rules (Article 15.3)
| Type of Work | Tax Rule |
| Work on a ship or aircraft operated in international traffic. | Income may be taxed in the country where the place of effective management of the operating company is located. |
| Domestic Flights (in a foreign airline) | Follows the general Article 15 rule (taxed where the work is performed/flight occurs). |
Special Cases: Stock Options and Termination Payments
| Income Type | DTT Tax Treatment / DGT Interpretation |
| Stock Options (Benefit Portion) | Taxable in the Source State (where the work was performed), even if the benefit is realized when the employee no longer works there. Distinction: Benefit for work performance (Art. 15) vs. Capital Gain from share sale (Art. 13). |
| Remuneration linked to Previous Work (Bonus) | Considered to derive from the State in which the work was performed. |
| Payments for Unused Vacation/Sick Leave | Considered linked to the last 12 months and must be prorated between the relevant States. |
| Termination Compensation | Treatment depends on the nature of the payment: Settlement (reference period), Unfair Dismissal (nature of income compensated), Discrimination (Art. 21), or Non-Compete (Residence at time of collection). |
Special Case: Frontier Workers
Frontier workers are individuals who live in one country and commute regularly (usually daily) to work in the adjacent country. The OECD Model does not specifically cover this, but special provisions exist in some Spanish DTTs:
| Border Country | Frontier Worker DTT Rule | Key Difference from General Rule |
| France | Taxed only in the State of Residence (Spain), provided both the residence and workplace are in specific border municipalities (based on the 1964 Exchange of Notes list). | Requires residence and work to be within a specific list of municipalities. |
| Portugal | Taxed only in the State of Residence (Spain), provided the worker has habitual residence in Spain and returns daily to Spain. | The specific municipality of residence or work is irrelevant. |
| Andorra | No specific provision. The General Article 15 rule applies (taxed where work is performed). | Double taxation is eliminated via the Credit Method (except for international transport, which is progressively exempt). |
| Morocco | No specific provision. Double taxation is eliminated via Exemption with Progression. | Uses the Exemption with Progression method. |
| Gibraltar | No DTT (UK DTT does not cover it). Taxable in Spain (as a resident) with a deduction/credit to avoid international double taxation if tax payment in Gibraltar is proven. | No DTT framework; subject to domestic Spanish tax and deduction rules. |
Note on Double Non-Taxation: In the cases of France and Portugal, the income may sometimes be double non-taxed if the exemption for work performed abroad (Article $7p$ of the Spanish IRPF Law) is successfully applied in Spain, while the source country is prevented from taxing it by the DTT.
