What the TEAC has ruled
One of the trickiest aspects of Spanish tax rules for non-residents is that many provisions designed for resident taxpayers do not automatically carry over to Non-Resident Income Tax (IRNR). A recent decision by Spain’s Central Economic-Administrative Tribunal (TEAC), reported in the weekly bulletin of the Spanish Association of Tax and Financial Advisers (AEAFyT), makes that point again.
Article 19.2.f) of Spain’s Personal Income Tax Law allows employees to deduct up to €2,000 in additional “other expenses” from their employment income — a deduction many resident taxpayers apply almost automatically in their annual return. The question raised was whether this same deduction can also apply to IRNR taxpayers who earn employment income in Spain without being Spanish tax residents.
The TEAC’s answer was no. In its view, this €2,000 deduction requires a direct link between the deductible expense and the income earned in Spanish territory — a requirement that IRNR taxpayers do not meet in the terms the law demands. As a result, the Tribunal has denied this deduction to taxpayers filing under the IRNR.
Why this hits non-residents particularly hard
This ruling has a direct impact on a client profile very familiar to EBF: individuals who are not Spanish tax residents but who earn employment income here — for example, directors, board members, or seconded employees who retain Spanish-sourced employment ties or remuneration. If this €2,000 deduction had been applied in practice by analogy with the resident income tax rules, the TEAC’s ruling makes clear that it does not apply under the IRNR, which could mean a higher taxable base and a higher tax bill than expected.
It is a good example of why non-resident taxation cannot simply be handled by “copying across” the resident income tax rules: although the two taxes share much of their logic, the TEAC is a reminder that the IRNR has its own limits and requirements that must be respected.
What to check if you earn income in Spain without being a resident
If you are a non-resident who earns employment income in Spain, or you manage the tax affairs of non-resident directors, executives or employees, it is worth reviewing whether this deduction has been applied in previous returns and assessing the impact of this ruling on upcoming filings. It is also a good moment to review, more generally, which Personal Income Tax deductions and allowances genuinely apply under the IRNR and which do not — the two do not always align.
CLOSING: International and non-resident taxation is one of the areas where rulings like this one make a real difference to the final tax bill. At EBF Consulting, we support non-resident clients, companies with foreign directors, and groups with an international footprint in navigating the particularities of the IRNR. If you have questions about how this TEAC ruling affects you, let’s talk.