There are many foreign companies that receive services from workers residing in Spain.

These workers must pay their income tax in Spain but can apply the exemption - with a limit of € 60,100 - for the work income obtained if three requirements are met:

• that the works are intended for and are carried out in favor of a company or permanent establishment located abroad.
• that in the territory where these works are carried out there is a tax of a similar nature to personal income tax.
• that there is a posting of the worker to carry out the work abroad.

If the service is intragroup, logically they must produce an advantage to the recipient entity. In this sense, supervision and coordination tasks are admitted as such.

It is not required to be about prolonged or continuous stays, but its calculation only applies to the days of stay abroad.

The article has not been modified for years, and what is exposed is relatively well known. Consequently: where is the novelty?

Well, the novelty is found in a recent ruling of the National Court that on February 19 last considers that the nature of the relationship, whether labor or commercial, is not an essential element of the exemption, provided that the income classification is work performance. That is to say: that the recipients may also be the administrators or members of the Boards of Directors.

In the case set forth in the judgment - the application of the exemption to the members of the entity's administrative body - both the AEAT, the DGT and the TEAC have traditionally denied its application, basically basing it on the exemption not applicable if there is no employment relationship. For them, although the remuneration received by the administrators or, as in this case, by the CEOs, are classified for income tax purposes as income from work, the relationship that unites them with the paying entity is a commercial and not labor relationship. , and, therefore, the notes of alienation and dependency that characterize labor relations for others are not given, which in his opinion prevents the application of the exemption.

Well, the National Court now comes to deny this doctrine and considers that the IRPF regulations do not expressly require that the works that entitle the exemption be carried out within the scope of a labor or statutory relationship, nor can it deduct from the literal tenor of the Personal Income Tax Law. To the foregoing, it is added that most of the services provided abroad by the CEOs can be included in the executive and management functions and not merely deliberative; not forgetting that the Supreme Court has indicated that article 7 (p) does not contemplate what the nature of the work should be, and in particular, it does not prohibit the beneficiary of the work, not only the non-resident entity, but also, and among others, the entity that employs the recipient of the work income (or the one in which it provides its services).

Having explained the above, it is worth mentioning that the Supreme Court, by order dated February 21, 2020, has admitted this issue to cassation, having to rule on the following aspects:

• specify the scope of the expression "earned income received for work actually carried out abroad" contained in article 7.p) LIRPF.
• whether it can be applied to the performance of the management and control of participation in the Boards of Directors of a subsidiary abroad or, on the contrary, these functions are not considered effective work and, consequently, do not give the right to the exemption contemplated in the precept indicated above.

Said pronouncement will leave the matter completely settled. At the moment, it is convenient to know the arguments of the National Court for defense against verifications and, where appropriate, analysis of each specific case.