The TSJ of Catalonia opens the door to the exemption of the income of administrators who provide their services from abroad
In a recent ruling, the High Court of Justice of Catalonia considers that the personal income tax exemption for income obtained abroad should also be applicable to directors of entities
The High Court of Justice of Catalonia (TSJC), in a ruling of 4 November 2021, has considered that the exemption from personal income tax (IRPF) that exempts from taxation income from work effectively earned abroad, should also be applicable to company directors, provided that the rest of the conditions are met and up to the limit of 60,100 euros.
The TSJC ruled in favour of the taxpayer, refuting the criteria of the TEARC which stated that the exemption regulated in section p) of article 7 of Law 35/2006 on Personal Income Tax only applies to employment dependency relationships, strictu sensu. In the ruling, the TSJC states that this interpretation by the administration goes too far and imposes requirements not foreseen in the legal text in that: “limiting the application of the exemption only to those cases of income obtained abroad in relationships of employment dependence, means demanding a condition in the relationship between employer and worker that is not required by the provision of the aforementioned regulation nor does it respond to the purpose of the latter”.
Two appeals in cassation are pending before the Supreme Court on the application of the aforementioned exemption.
If the high court rules in favour of the interpretation set out above, it will confirm the criterion that will allow possible applications for refunds of undue income on this issue to be accepted. It is therefore advisable to review the possible application of the exemption of article 7p in the receipt of earned income by administrators who perform their services from abroad in order to interrupt the statute of limitations, if applicable, given that it is possible that the Supreme Court will confirm their exemption.