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Olga Galindo Carazo.  

Income tax withholdings for embassy employees

Embassies and Consular Offices of foreign countries located in Spain are not obliged to withhold Personal Income Tax (IRPF) to their employees. Madrid is the city in Spain where all the Embassies of foreign countries are located, however, many countries have Consulates in other cities in Spain with which they have a special relationship, such as Valencia, Algeciras, Vigo or the Canary Islands.

In all of them, Embassies and Consulates, local employees provide services, whose labor relationship is subject to the Collective Agreement of Offices and Offices of the different provinces, and all of them, in turn, are subject to the tax regulations that establish that Embassies are not obliged to withhold Personal Income Tax (IRPF).

The Vienna Convention on Diplomatic Relations establishes that the Embassies and Consulates are obliged to comply with the local regulations, i.e. the Spanish regulations, and returning to the question of the withholding of Personal Income Tax (IRPF), the law establishes that they are not obliged to withhold tax on the salaries of local employees.


It is the Personal Income Tax (IRPF) regulation itself that releases Embassies and Consulates from the obligation to withhold Personal Income Tax (IRPF).

Article 99 of the Personal Income Tax Law expressly establishes that under no circumstances shall diplomatic missions and consular offices of foreign countries be obliged to make withholdings or payments on account.

Embassies and consular offices are therefore excluded from the obligation to make withholdings since they cannot be considered as residents in Spanish territory, they do not have their own legal personality independent of the State they represent, nor are they permanent establishments nor do they carry out economic activities.

In the same sense, the Central Economic Administrative Court pronounced in its decision of November 22, 2002, that these offices have the character of a legal person or entity by derivation, since it is the sovereign State that they represent. The Embassies and Consular Offices of other countries in Spain are not obliged to withhold personal income tax (IRPF) on labor remuneration paid to their employees.


Personal Income Tax Withholdings

Local employees of Embassies and Consulates have to pay personal income tax on their salaries even if the Embassy is not obliged to withhold personal income tax from their paychecks.

The fact that the Embassies are not required to withhold income tax does not mean that the employees of these Embassies and Consular Posts are not obliged to declare and pay taxes on the income obtained. That is to say, it is the employees who have to declare the totality of their income at the time of making their annual Personal Income Tax (IRPF) return.


What happens with the formal obligations, is it necessary to present the Model 190, do the Embassies have to deliver the Annual Withholding Certificate?

The question arises as to whether Embassies are obliged to file Form 190 (Annual Summary of Income and Withholdings) and provide local employees with the Income and Withholdings Certificate.

The exemption of Embassies and Consulates from the obligation of withholding also extends to the exemption of complying with the formal obligations before the Tax Agency, for this reason we consider that they are also exempt from filing the Annual Summary of Income and Withholdings.

A different matter is the obligation to provide the employees with the income and withholding certificates, in this case, the Embassies must deliver it so that the employees can make the corresponding annual income declaration.

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