For years the number of companies that send employees abroad has been increasing, due to the rise of the multinationals and the increasing number of Spanish companies with a presence in other countries, as well as the need to find new markets and diversify.
When a company sends employees abroad, Belzuz Abogados advise that a preliminary analysis should be carried out on the possible legal obligations of the employee and the company, not just in the country of origin, but also in the country where the employee will be working.
So, for example, it’s a good idea to check that tax-free subsistence allowances are not paid for longer than the legislation permits; whether or not it is advisable for residents of the EU or the European Economic Area to file an application to adopt the optional system of paying Income Tax; and also to consider how long the secondment/expatriation is expected to last and consequently whether that length of time will generate obligations of some kind in the host country. In many cases Double Taxation Agreements grant the power of taxation to the host country, which means that payments made to seconded employees, irrespective of whether their salary continues to be paid in Spain and they continue to be resident in Spain for tax purposes, will be subject to tax in that country. So we at Belzuz Abogados, as specialists in International Tax Law, think it is essential to count on specialised advice in order to analyse each specific situation.
The company also needs to provide employees with sufficient information to ensure that they are properly informed. If not, employees may find themselves in breach of their tax obligations and at the same time the company may well find that it has not complied with its duty to withhold tax.
It is also advisable to sign an agreement that establishes the causes, requirements, conditions and consequences of ending the secondment and the conditions in which the employee will resume his old job in Spain. Another important aspect is to establish the grounds on which either the employee or the company can, if necessary, end the secondment.
In general terms, employees that work abroad must comply with the legislation in force in the host country. If the host country is a member of the European Union they should, in principle, obtain a residence permit. On the other hand, if the host country is not a member of the EU, the legislation in force in that State will have to be respected in order to determine the permits needed and the procedures that will have to be carried out.
Accordingly, we at Belzuz Abogados, with its head office in Madrid and offices in Lisbon and Oporto, would like to draw attention to a Portuguese measure that is proving very useful for Spanish companies that plan to send employees to Portugal, and even retirees. It is a system for non-habitual residents. This measure has been introduced largely because the Portuguese Government wants to attract foreign talent, and encourage investment from abroad.
The non-habitual residents regime was created in 2009 and is aimed at non-resident tax payers who want to establish permanent or temporary residence in Portugal. The regime applies under specific conditions: the person concerned has to become tax resident in Portugal and not have paid tax as a resident in the country in the previous 5 years.
Taxpayers that meet these criteria can pay tax as non-habitual residents for 10 consecutive years, after which they will pay tax in accordance with the general rules of the Código do Imposto sobre o Rendimento das Pessoas Singulares (IRS), which is the equivalent of the Spanish Impuesto sobre la Renta de las Personas Físicas, or Income Tax.
Here at the offices of Belzuz Abogados in Spain and Portugal we are always available to our clients to clarify any doubt they may have in relation to the secondment of employees, and to help them with the necessary procedures.
Belzuz Abogados SLP
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