Finally, the Supreme Court (SC), on appeal, considers that the exemption of 7.p) of the Personal Income Tax Law, for income obtained abroad, can also be applied to the administrators and members of the board of directors of the entities
The Supreme Court, in a ruling dated June 20, 2022, has confirmed that the exemption from personal income tax regulated in section p) of article 7 of Law 35/2006 of the Personal Income Tax Law (IRPF), which exempts from taxation the income from work effectively obtained abroad, must also be applicable to the administrators and members of the board of directors of the entities.
As we already advanced in March, the High Court of Justice of Catalonia (TSJC), in its ruling of November 4, 2021, decided in favor of the taxpayer, leaving the application of the exemption for the administrators pending the resolution of the Supreme Court on the cassation appeals.
Likewise, following the criterion maintained by the TSJC, the Supreme Court, on appeal against a judgment of the Audiencia Nacional, validates that the application of the exemption of 7.p) cannot be limited by the mere fact that the income does not derive from an employment relationship, since such interpretation would not be in accordance with the literal, logical, systematic and finalist interpretation of the rule. In this sense, the Supreme Court understands that the remuneration paid to the administrators is earned income by referring to article 17.2 of the LIRPF, which defines the concept of earned income and includes in letter e) the remuneration received by the administrators.
Therefore, it is advisable to review whether it is possible to request a refund of undue income for the taxation of all income from work for services performed abroad, received by directors, as well as its regularization for income paid in 2022.