No personal experience, but Google is my friend (as opposed to Our Tony Down the Pub on this occasion!) Plan Pive 8 has been extended: http://revista.dgt.es/es/motor/noticias/2015/05MAYO/0518Plan-Pive-8.shtml#.VytTx2596hc
It would appear that the trade in car has to have an ITV and you have to have paid the latest circulation tax. Furthermore, you have to declare the vehicle has been scraped with DGT - so in answer to your question, I'm pretty confident in saying the car has to be Spanish registered.
Hope this helps
Further confirmation: "El vehículo a achatarrar deberá ser, indistintamente, de categoría M1 o N1, y estar matriculado en España" (the vehicle must be registered in Spain). From here: http://www.idae.es/uploads/documentos/documentos_BOE-A-2015-5377_PIVE8_99323a80.pdf articulo 4:2
This message was last edited by Roberto on 05/05/2016.