Bilateral agreement to avoid double taxation between Spain and Ireland


Double taxation treaties are generally established to avoid being taxed twice, these situations can occur for various reasons such as living in one EU country and working in another, if you work abroad for a short period of time, if you live and look for a job abroad and if you have retired in one country and receive a pension from another.

In these situations, you will ultimately be subject to the tax rules of your country of residence, which is why double taxation treaties are signed to prevent you from being taxed twice.

In general, you should refer to the provisions of the Convention to find out the taxation powers of each State and, where applicable, the measures applicable to mitigate double taxation.

The conventions list certain types of income and provide, in respect of each of them, the taxing powers of each signatory State:

  • In some cases, exclusive power for the country of residence of the taxpayer.
  • In other cases, exclusive powers for the country of origin of the income.

Finally, and only in some cases, shared authority between the two countries, with both being able to tax the same income, but with the obligation, in general, for the taxpayer's country of residence to take measures to avoid double taxation.

The treaty between Spain and Ireland was signed on 10 February 1994 and applies to income and capital gains taxes levied by each of the contracting states.

We provide two practical cases to give a more specific view of the implications of double taxation agreements, bearing in mind that the casuistry is large and each situation is different, so that in case of doubt, it is necessary to turn either to the tax authorities of the country of residence or issuer of the payment, or to a tax advisor specialised in international taxation.

First case:

Company based in Ireland wants to hire a worker resident in Spain as a teleworker. The company is resident for tax purposes in Ireland and does not carry out any activity in Spain, nor does it have a branch, agency or other type of establishment. Likewise, and in accordance with the data provided in the consultation, the workers who receive remuneration from the Irish company are tax residents in Spain, and this is the premise on which the answer to the question raised is based.

As a general rule, the income derived from teleworking from a private residence in Spain, even if the income from such work is for an Irish company and the employees are considered tax resident in Spain, will only be taxed in Spain, as the employment is carried out in Spain.

It is important to point out that the consideration of tax residence is to stay at least 183 days in Spain in the case of the worker in order to benefit from this particular case, you can consult the source here indicating consultation: Consultation No. V3286-17.

Second case:

Salaried worker employed by an Irish company who resides in Ireland and moves to live in Spain in 2020, continues to work for the same Irish company in the form of teleworking, travelling sporadically to Ireland for work.

The income from work carried out remotely in Spain for the Irish company, given that the work is carried out from his private home in Spain as a teleworker, even though the fruits of that work are for the Irish company, and the employment is carried out in Spain as he is a tax resident in Spain, will only be taxed in Spain. In this case it is of no legal or tax relevance that the fruits of the work are received by the Irish company.