The Supreme rejects that the salary of MEPs is exempt from personal income tax

Spanish MEPs cannot apply the personal income tax exemption for working abroad. This has been decided by the Contentious-Administrative Chamber of the Supreme Court, by dismissing an appeal filed by a Popular Party MEP in a ruling made public this Wednesday. The High Court has concluded that there is no dependent employment relationship between the members of the Eurochamber and the institution, which is why the tax benefit cannot be applied.

The litigation refers to the tax settlements presented by Gabriel Mato between 2010 and 2013. In these four years, the politician considered that part of the remuneration paid by the European Parliament should be considered exempt income, in accordance with the provisions of article 7 of the personal income tax law. In this, it is determined that the income from work “received for work actually carried out abroad” is exempt up to a maximum of 60,100 euros, as long as some requirements are met. Among them, that the paying company or entity is not resident in Spain and that the territory where it is located has similar taxation.

The Tax Agency, however, corrected the settlements of the MEP: it demanded that he include the exempt income and imposed a sanction on him. The politician appealed to the Superior Court of Justice of the Canary Islands, which agreed with the Treasury. The next step was appeal to the Supreme. Mato argued in his defense that the exemption provided for in article 7 of the personal income tax law is applicable to the income from work provided for in another article of the same rule, 17.2, which establishes that they will be considered income from work, among others, the “amounts that are paid, by reason of their position, to the Spanish deputies in the European Parliament”.

“There is no employment relationship”

The Supreme Court dismantles the MEP’s argumentation in its ruling: it stresses that his regime is not comparable to that of workers and officials of the European institutions, by exercising “freely and independently”. First of all, he explains that the exemption for working abroad requires that there be a relationship of employment, labor or statutory, with the paying entity. And it considers that, in the case of a deputy with the European Parliament, “there is no labor relationship, in any of its possible aspects, nor statutory, nor is there any dependency of its members on the Chamber”. “The relationship of a deputy with the European Parliament is completely alien to this characteristic of alienation, in the sense of dependency”, he adds.

The judges add that the European Parliament cannot be equated to “a company or entity not resident in Spain”, nor to “a permanent establishment located abroad”, since a Parliament “neither constitutes a fixed place of business, nor does it fit into some of the examples to use such as branches, agencies, offices, workshops, warehouses, stores, mines, quarries, oil and gas wells or any other place of extraction or exploitation of natural resources”.

On the contrary, Parliaments are the places where “popular sovereignty represented by its members resides, entrusted with a function, mainly legislative, budgetary and political control”. Its members, elected by universal suffrage, exercise “by representative mandate of the citizens of each Member State, functions of representation of citizens that they exercise freely and independently, without any hint of dependency, labor or statutory or similar”.

The sentence, according to a note published this Wednesday by the High Court, considers the similarities and parallels “artificial and forced” that the MEP presents with an employee posted abroad, who is recognized as an exemption in the Income tax to help your company to internationalize. “It is badly in keeping with the institutional character and parliamentary purposes in a common political and economic organization of several countries and the role that the European Parliament fulfills and, therefore, the public obligations assumed by the State of origin and the MEPs whose displacement results from all point unrelated to an economic incentive neither from the company or entity, nor from the workers for labor reasons, ”says the ruling.

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