The interaction between the Spanish expatriate tax regime for inbound workers and holdings in foreign entities treated as transparent for tax purposes has been clarified by the Spanish Directorate General for Taxation (Dirección General de Tributos, DGT) in binding ruling V1372-25 of 21 July 2025. The ruling analyses the Spanish tax implications of the special regime for individuals moving to Spain and the treatment of income derived from a foreign partnership, specifically a United Kingdom Limited Liability Partnership (UK LLP), which is taxed under an attribution of income system in its jurisdiction of incorporation.
1. Factual background of the DGT ruling
The taxpayer, an individual, transferred his tax residence to Spain in February 2023 and exercised the option to apply the special inbound regime set out in article 93 of Law 35/2006 on Spanish Personal Income Tax (Ley del IRPF). This regime is available to workers, professionals, entrepreneurs and investors who move to Spain and meet certain statutory conditions.
Since 2011, the taxpayer has been a partner in a United Kingdom entity incorporated as a Limited Liability Partnership under UK law (the UK LLP). The ruling highlights several features of the LLP that are decisive from a Spanish tax perspective:
- The UK LLP is not liable to a personal income tax in the United Kingdom.
- The income generated by the LLP is allocated directly to the partners, who are taxed on it in their own personal tax, by reason of its accrual, regardless of whether profits are actually distributed.
- The income retains the nature and source that it has at the level of the LLP, for example business income, interest or capital gains.
Under the partnership agreement, the assets are owned by the LLP itself, losses attributable to the partners are limited to their capital contribution, and partners are entitled to a share of the annual profits calculated at the end of each financial year. Partners may make periodic withdrawals of accumulated profits and are subject to duties of dedication, diligence and good faith vis-à-vis the LLP.
The UK LLP provides asset management services, financial consultancy and advice and conducts research in financial technology, designing and implementing systematic investment strategies from its offices in the United Kingdom. It has no premises, clients, assets, bank accounts or registrations in Spain.
The taxpayer does not carry on any professional activity for the LLP in Spain, nor does he hold authority to contract in the name of the LLP in Spain. The entity does not operate or maintain a permanent establishment in Spain.
On this basis, the taxpayer asks whether the income imputed to him by reason of his partnership interest in the LLP could jeopardise the continued application of the expatriate regime.
2. The special expatriate regime and the condition regarding permanent establishments
The special inbound regime in article 93 of the Personal Income Tax Law, further developed by articles 113 and following of the Personal Income Tax Regulations, permits qualifying individuals who obtain Spanish tax residence as a result of their relocation to Spain to be taxed under the rules of the Non-Residents Income Tax, while remaining formal taxpayers for Personal Income Tax. This applies for the tax year of the move and the following five tax years, provided that all statutory requirements are met.
Among those requirements, article 93.1.c) of the Personal Income Tax Law requires that the taxpayer must not obtain income that would be treated as obtained through a permanent establishment situated in Spain, except in limited cases expressly provided for. If any of the conditions ceases to be met, the regime is withdrawn with effect from the tax period in which the breach occurs, in accordance with article 118 of the Regulations.
The central question in the ruling is therefore whether the income attributed to the taxpayer from the UK LLP might be regarded as income obtained through a permanent establishment in Spain. If that were the case, the taxpayer would fail to satisfy article 93.1.c) and would lose entitlement to the special regime.
3. Classification of the UK LLP as a foreign entity under the attribution of income regime
The DGT begins by examining whether the UK LLP should be treated as an entity under the attribution of income regime for Spanish tax purposes, in line with previous administrative criteria, including ruling V1825-24 and the DGT’s Resolution of 6 February 2020 on the characterisation of foreign transparent entities.
Articles 37 and 38 of the consolidated text of the Non-Residents Income Tax Law (TRLIRNR), together with article 87 of the Personal Income Tax Law, provide that entities incorporated abroad will be treated as entities under the attribution of income regime where their legal nature is identical or comparable to that of entities taxed under attribution of income rules in Spain.
The DGT reiterates the three core conditions that a foreign entity must satisfy to be considered a transparent or attribution of income entity for Spanish purposes:
- It must not itself be subject to a personal income tax in the State of incorporation.
- Its income must be attributed for tax purposes to the partners or members as and when it arises, irrespective of actual distribution.
- The income must preserve its original nature at the level of the partners or members.
On the facts presented, the ruling confirms that the UK LLP fulfils all of these criteria. Consequently, the LLP must be treated as a foreign entity under the attribution of income regime. The taxation of the income allocated to the partners falls to be analysed under the special rules for foreign transparent entities in the Non-Residents Income Tax regime, in particular articles 38 and 39 TRLIRNR.
4. Distinguishing between foreign transparent entities with and without activity in Spain
Article 38 TRLIRNR governs foreign transparent entities that carry on an economic activity in Spain through fixed premises or permanent places of business, or through an agent authorised to contract on behalf of the entity on a continuous basis. In such circumstances, the entity is treated as a taxpayer for Non-Residents Income Tax through a permanent establishment.
Article 39 TRLIRNR applies where a foreign transparent entity obtains income in Spain without carrying on an economic activity in Spain through a permanent establishment in the sense described above. In that case, the non-resident partners are considered Non-Residents Income Tax payers without a permanent establishment and are taxed individually on their share of the Spanish-source income in accordance with the rules of chapter IV TRLIRNR.
The DGT recalls that, for Spanish tax purposes, there is an economic activity where an individual or entity organises on its own account a set of production means or human resources with the intention of participating in the supply of goods or services to the market, as set out in article 27 of the Personal Income Tax Law.
Applying this definition, the DGT concludes that the UK LLP does not carry on any economic activity in Spain. It does not have premises, staff or other production means in Spanish territory and does not act in Spain through an agent authorised to contract in its name on a continuous basis. Nor does it meet the requirements to be treated as having a permanent establishment in Spain.
If the partners were non-residents, the UK LLP would therefore fall under article 39 TRLIRNR and each partner would be taxed as a Non-Residents Income Tax payer without a permanent establishment on any Spanish-source income that might be attributable. This conceptual framework is important, because the expatriate regime determines the tax liability of inbound taxpayers by reference, with certain adjustments, to the Non-Residents Income Tax rules for income obtained without a permanent establishment.
5. Impact on the expatriate regime in article 93 LIRPF
The final step in the reasoning is to assess whether the attribution of income from the UK LLP to the taxpayer can be assimilated to having income obtained through a permanent establishment in Spain.
Given that the LLP does not operate in Spain and does not have a permanent establishment there, the DGT concludes that the income attributed to the taxpayer cannot be characterised as income obtained through a permanent establishment in Spanish territory. The mere fact that the taxpayer has moved to Spain and opted into the expatriate regime does not alter the absence of any Spanish permanent establishment at the level of the LLP.
On this basis, the DGT considers that the condition set out in article 93.1.c) of the Personal Income Tax Law is not breached. In the wording of the ruling, since the LLP is not considered to have a presence in Spain within the meaning of the Non-Residents Income Tax rules, the taxpayer does not infringe the requirement relating to income attributable to a permanent establishment in Spain.
Accordingly, the attribution of income derived from the UK LLP does not lead to the exclusion of the taxpayer from the expatriate regime. The taxpayer may continue to benefit from the regime for the full duration of the six-year period, provided that the remaining conditions are satisfied on an ongoing basis.
6. Practical implications for inbound taxpayers holding interests in foreign partnerships
The administrative position set out in ruling V1372-25 is of particular interest to professionals, entrepreneurs and investors who relocate to Spain and elect into the expatriate regime while maintaining interests in foreign partnerships or similar structures that are treated as transparent in their home jurisdictions.
In practical terms, the ruling confirms that:
- Holding an interest in a foreign transparent entity, such as a UK LLP, does not of itself imply the existence of a permanent establishment in Spain.
- The critical question is whether the entity carries on an economic activity in Spanish territory through premises, personnel or an agent with authority to contract on its behalf. In the absence of such factors, there is no permanent establishment.
- Properly identifying the foreign entity as a transparent entity under Spanish rules, and determining whether it would fall under article 38 or 39 TRLIRNR, is essential in order to assess both the taxation of the income attributed to the partner and its compatibility with the expatriate regime.
In summary, the DGT confirms that a taxpayer may retain the benefit of the expatriate tax regime while holding an interest in a foreign transparent entity, provided that the entity does not operate in Spain through a permanent establishment or otherwise carry on an economic activity in Spanish territory in the sense required by Spanish tax law.
For internationally mobile executives and investors, this interpretation increases the legal certainty of combining the Spanish expatriate regime with existing foreign partnership structures, typically in the form of asset management or professional service LLPs, although each case will still need to be analysed carefully in light of the specific facts and contractual arrangements.
