Antonio Flores’ Blog

The title of the post is confusing, contradictory and appears to make little sense; I will admit to that. But at times, the idiosyncrasy of Spanish bureaucracy lends itself to these situations.

The case relates to a client who was selling his property, had been a resident of Spain for 20 years but, because he was not legally obliged to file annual tax returns (he was retired) he did not exist for the Spanish Tax Office and so, he would not be given a Tax Residency Certificate, necessary to avoid the 3% CGT retention on the proceeds when a property is sold.

And because he was so adamant that Spain was his place of retirement, and of his tax residency, he was not going to let the Tax Office get away with it.

So in the knowledge that in the Costa del Sol, if you submit a query to 3 different tax/legal professionals you end up with 4 different opinions, we told him about Hacienda’s Binding Consultation Service, the ultimate official opinion on a tax matter: the case was submitted to the Directorate General of Tax (DGT) for a definitive confirmation of what he had previously read on the subject.

And this was their response:

1. The main document that proves tax residency in Spain is the Tax Residency Certificate.
2. The issuance of an individual Tax Residency Certificate is subject to the applicant proving his/her residency in Spain.
3. Where the above certificate cannot be obtained, the onus of proving Spanish residency lies with the taxpayer who will be able to submit, in support of his claim, alternative evidence: Certificate of “empadronamiento”, children’s school enrollment applications, rental payments, water and electricity receipts etc…).
4. The Spanish Tax Office, based on the widely accepted judicial `principle of free evaluation of the evidence´, will determine whether the applicant is, or isn’t, a tax resident of Spain.

By experience, I will add a fifth item: a certificate of non-residency from the Tax Office of the country of origin. This is not mentioned but we have had it submitted on a prior case and adds considerable weight to the application.

Finally, it is worth noting that the Spanish Tax Office has not commented on the EU residency forms issued by National Police Stations; this is probably because its relevance is relatively low.

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Some of you may have been advised by your bank that you need to provide them with a non-resident certificate or have the account frozen. The measure is still confusing as different lenders are applying existing legislation (a mixture of 1991, 1997 and 2007 sets of regulations) differently and whilst some are requesting the certificate electronically, from the appropriate government offices (at a charge of around 15 to 20 Euros), every year, others have requested that the bank account holder provides a hard copy obtained at the Police Station within 15 days from being notified failing which their bank account will be frozen. In these cases the certificate is valid for 2 years after which date the bank will request it electronically.

It does seem however that with the inevitable tightening of money laundering controls all banks and savings banks will eventually request it and therefore it may be wise to apply for a hard copy and send it to the bank.

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