Spanish Sports Stars Renege Spanish Residency
Living in Spain as a resident has become a rarity among Spanish elite sports professionals. This includes Fernando Alonso, Sergio Garcia and Jorge Lorenzo, among others, who have their residence in tax havens such as Switzerland. Rafa Nadal and Alberto Contador (2-time Tour the France winner) on the contrary feel that paying taxes in Spain is a moral obligation.
The Spanish Inland Revenue and a couple of smaller political parties want to stop them from representing Spain internationally.They had already tried to implement this law some month ago but was it thrown out.
“Social scourge”, “tax cheaters”, “lacking in solidarity”, “miserable compatriots” are just some of the adjectives used to define these sports stars who could, if a law proposal succeeds, stop performing for Spain in future. But when is a person considered to be a resident in Spain for tax purpose and how can the tax office invoke residency of a certain individual in Spain so that he is forced to pay taxes on world-wide income? As with many other countries, any person staying in Spain for more than 183 days in a fiscal year (ending 31st Dec.) will be deemed a resident for tax purposes and is obliged to submit a tax return on world wide income. Unlike the UK, the 90-day rule does not apply in Spain but on the contrary other points of connection with the latter country do apply. To make it simple, the criteria used is one the following:
- Spending more than 183 days per tax year.
- Having the main center of its activities or economical interests, directly or indirectly, in Spain.
- For companies, having most of the assets, directly or indirectly, in Spain or when the primary activity is carried out, as well as having the management centers, in Spain.
Nowadays it is extremely complex for the Spanish Inland Revenue (and presumably for other Tax Offices in the EU) to determine when is a person resident in Spain for the simple reason that passports don’t get stamped any longer. But if someone gets a letter from the Inland Revenue saying that they have detected that he/she is a resident for tax purposes and request payment of taxes on worldwide income the onus of proof falls on the tax subject. Showing water and electricity bills of a property in a third country is no longer a valid excuse for the Spanish Inland Revenue which has now increased the proof of residency by demanding a Certificate of Residency issued by the tax authorities of the third country, provided this country is not classed as a tax haven and that it has some form of tax information exchange agreement.
Where this third country is a tax haven the Spanish Inland Revenue will only let the tax suspect off the hook if he/she can prove that they are effectively spending more than 183 days per year in this country. The reason is that foreign taxpayers are being issued with what they consider as a “passive residents card” which does not oblige them to declare any income nor, ultimately, pay any taxes (normally only a small investment easy to comply with, such as lodging a few tens of thousands of Euros in a bank account or buying an apartment).
If the Spanish Inland Revenue and the Catalan Party CIU (Convergencia I Unio) can convince the Spanish parliament that fellow compatriots dodging taxes is immoral and that consequently they are to be stripped of the Spanish flag on their endorsements we may soon see Fernando Alonso and Sergio Garcia racing and hitting balls, respectively, for Switzerland, Lorenzo riding for Andorra or Pedrosa also riding but for England, leaving the poor(er) Nadal and Contador the burden of…building roads and council tennis courts for their beloved fellow compatriots.
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