10 Things You Need to Know About Being a Spanish Tax Resident
January 19th, 2013
The tax status of foreigners living in Spain has been subject to extensive debate and still today, is a question open to interpretation, particularly considering the ability of people to travel freely within the EU and more notably, the Schengen-space countries. This column is far too short to be able to explain in details all the intricacies of this interesting matter but the 10 points below will help understand, we think, the basis of the tax residency status.
- The distinction between tax domicile and tax residency is a concept more associated with Common Law systems, and almost ignored by Spanish laws.
- Tax residency is prima facie demonstrated by means of a Fiscal Residency Certificate, issued by the tax authority, which should confirm the taxpayer is fiscal resident in that country and that he is subject to tax on worldwide income.
- According to Spanish Courts however, this is not the sole means of proof; a fiscal residency certificate is not the only way to demonstrate residency for tax purposes; utility bills, bank statements, insurance policies, local taxes, civil registry or consular registrations etc. are all means to prove a certain tax status but, more importantly, is the fact of declaring, or not, income obtained worldwide in a particular country.
- The Spanish Income Tax Act states that tax residency in Spain will be determined by one or more of the following: spending more than 183 of a calendar year in the country, having the center of the economic interest or businesses in Spain and having the non-separated spouse, and dependent children, residing in Spain.
- The 183-day count ignores temporary absences except where the taxpayer demonstrates tax residency in another country, with a certificate as per point 2.
- Tax residency in more than one country is possible; double tax treaties signed by Spain generally stipulate where such taxpayers should be taxed.
- Where the taxpayer invokes tax residency in a tax haven, the Spanish Tax Office may request proof of physically being there more than 183 days, in addition to the documentary evidence as per point 2. Where a taxpayer of Spanish nationality changes his tax residency to a tax haven, the Spanish tax authorities will still consider him/her a tax resident in Spain for the next 4 years.
- Where a taxpayer has economic interests in more than 1 country, the tax authorities will take into consideration the weight of each as well as the intensity of social, political and family relationships in each of such countries, or having a permanent dwelling in -or nationality of- that country.
- Spanish authorities may apply for information from countries with whom a tax information exchange agreement has been signed; the UK is one of such countries.
- Double Tax Treaties are in place to prevent tax evasion, not to encourage it: this applies to the anomaly of using UK companies to avoid Spanish inheritance taxes.
Very interesting article. It seems like there are more requirements and possible penalties coming in for persons who Hacienda considers resident in Spain so its important to have residence status clear.
I have been resident in Spain in the past but now I am resident in the Netherlands but still have interests in Spain (a property on which we pay tax). I am sure I fulfill all requirements for non-residency but I am concerned about the requirement to be taxed on worldwide income in the new country of residence. The Netherlands and, I believe, some other countries offer incentves for high skilled workers which allow some tax free income (30% rule in Netherlands)and also the option to be “partially non-resident” and not declare worldwide assets and income. If I use this option will Hacienda determine that I am resident in Spain?
Peter,
You are right, the Hacienda is looking at collecting as much tax as possible which translates into making people declare here.
Your question is pretty specific and I would think that has already been covered by the DGT (Directorate General of Taxes) on one of their binding responses, in respect to Holland. The question here would be whether Spain would class these “partially resident” taxpayers as still Spanish residents.
The below link is the double taxation agreement Spain/Netherlands (in Spanish) and should give some clues about this situation but we will have it checked:
http://www.minhap.gob.es/Documentacion/Publico/NormativaDoctrina/Tributaria/CDI/BOE_Holanda.pdf
Hi
The issue about tax is ever more confusing me. My status is:
I am a retired police officer. My pension is taxed at scourse (In the UK).
It is paid into a UK bank account and then transfered every month into my Spanish bank account.
I have no other assets. No other worldwide income or assets. No property in the UK. No other income. I do not work in Spain.
I am registered as resident in Spain and own my Spanish house outright.
As I pay tax in the UK am I still needed to pay tax on the money I bring to Spain. If thats the case then I am paying tax twice, once to thew UK and secondly to Spain.
A simple answer, if there is one, would help me a lot
Thanks
Andy,
On the basis of the Double Taxation Agreement between Spain and the U.K, your pensions is to be taxed at source; you can see this by going to the following link: http://www.hmrc.gov.uk/manuals/dtmanual/DT17618.htm
hello,
I am an australian but also have dual citizenship in italy. I am self employed and pay tax in australia.
This year i will be based in spain but working all over the world. My income is paid into an australian account.
I have registered in spain and have an NIE, do i need to pay tax in spain as i will be paying rent, utilities etc? or do i just need to prove i pay tax in australia. My partner (australian) will also require an NIE but does this became more complicated regarding tax?
Thank you for your email.
There is a double taxation agreement between Spain and Australia in respect to taxes, of which I have the Spanish version (http://noticias.juridicas.com/base_datos/Fiscal/caustraledi.html#a2).
In principle, if you became a Spanish resident you would be taxed in Spain for the income obtained in Australia but if Australia, depending on the type of activity, taxed you at source, you would then be able to deduct this sum from the Spanish tax you would have to pay.
The NIE number is a fiscal number that you will need for the purpose of paying taxes, getting a mobile phone, hiring or buying cars etc.
The fact that you hold Italian citizenship would not alter the above unless you were resident of Italy. Obviously, being a EU citizen you are able to travel freely without hinders.
Your partner, being a non-EU, would need to become a resident, in principle, the moment she spends more than 3 months per 6 month period which is, in principle, a bit of a nuisance. The fact that she is Australian, however, means that her entries and departures are generally not looked into but also, unless she ran into trouble with the authorities, she would be left alone (I have had Israeli, Canadian and US customers living in Spain for years without having problems).
Again, the NIE number will merely help her comply with certain formalities but, unfortunately, it does not represent a valid document to spend more than 3 months per 6 month period.
Antonio
I am an australian citizen residing in spain with both a work and residents visa. My fiancee (australian citizen) is going through the process of applying for a non lucrative visa and one of the requirements is for her to show her means of living which would consist of a bank account with €25k. can i set up a non resident account for her in spain and transfer from my residents account without any tax implications.
thankying you in advance
Nick,
The non-lucrative permit main requirement is that the applicant has the ability to receive a regular income without having to work, as a result of an investment, dividend payment or any other source that entails not having to attend a workplace. In your case, the applicant can prove a regular payment but not that it is coming from a business owned by her.
The above is what the law says but it may happen that a particular Consulate has more flexible requirements and is content with showing a regular income, regardless where is it coming from.
Can a US citizen who has Spanish tax resdence reestablish his US tax residence with the 183 days, domicile, US family, US income, etc. and NOT have a legal separation from Spanish citizen spouse? If minor children move with the US citizen to the US is this sufficient to end Spanish tax residence?
Amy, in principle US residency is attained by applying for a residents’ status in that country. In addition to this, if children move to the US too, I would not believe that the Spanish tax authorities could challenge what is an almost legal certainty (US residency), irrespective of not being separated.
Hello Antonio
I’m an Australian who moved to Spain July 2012, married to a Spaniard in September 2012 and became a Spanish resident from December 2012.
I am not working in Spain but have obtained income through freelance work from Australian clients. So, my plan is to declare the income earned for the Australian tax year, (Jul 01, 2012 – Jun 30, 2013), for only the first 6 months until I became a Spanish tax resident. From then on, (Jan 2013-Dec 2013) declare any income earned from the Australian client as foreign income on my Spanish tax return.
Does this make sense and can I declare the Australian income as ‘foreign’, as I don’t think I need to be an autonomo for this type of income if its coming from outside of Spain. And will I be able to claim any expenses, ie. education, books, skype credits ect. not being an autonomo?
kind regards
Hi Liza,
If you are a resident for tax purposes in Spain and you are getting paid for your services, you do need to declare it Spain, regardless of where the income is generated (subject to Double Tax Agreement between Australia and Spain).
Also, in theory you would need to become an “autónomo” although you may be able to benefit from a reduced social security contribution if your income is not over a certain threshold.
hi,
My husband is american (has residency in spain) I’m, a french/american citizen. we are leaving in spain. Our company is based in america (internet based company)we are managing from here (from our home), should we pay corporate tax in the US. What about personal tax?
thanks
Hello Sylvie,
If you are resident of Spain then you should pay your taxes in Spain, subject to the Double Taxation Agreement signed with the US.
Hello Antonio,
I am enquiring as to my tax status in Spain, although I have been read a lot of information my situation is a little unique.
I intend to move to Spain in 2014 with a non EU partner who will need a residence card to stay in the country longer than 3 months. However I have read that if my partner is present in the country for such a long period (Over 183 days) then I will also be liable to pay full income tax. In the UK I make a tax return every year but pay zero tax due to working out of the country most of the year, I of course would like to keep it this way.
I will be working outside Spain and the UK for 8 months of the year. Also I will keep an address in the UK and most of my financials/salary etc will be kept through my UK bank and address.
I would greatly appreciate any advice!
Sean,
If you partner becomes a resident for tax purposes, and you formalize this relationship (civil partnership or marriage), there is a presumption that you could be resident in Spain. In the event that children were also involved, it would then become a legal rebuttable presumption, which is not your case.
A Tax Office that took the time and effort of investigating your case would probably reach the conclusion that it is, at the very least, anomalous. The Spanish Tax Office is unlikely to review your situation unless you had substantial dealings with Spanish-based companies.
Finally, I will add that EU border control are non-existent in the Schengen area and are, with respect to the UK and Ireland, pretty “porous” all of which makes it pretty difficult to control where individuals effectively reside.
Hello I have been searching everywhere to find a trustworthy answer to my question.
I am both Australian and Spanish and from 1st January 2014 a fiscal resident of Spain as I live here with my husband and kids. I am employed on a part time basis 25 hours a week by an Australian company and have the same entitlements like sick leave and paid holidays as those who live in Australia.
I get paid in Australian dollars into an AUD account here in Spain – so the question is I know I declare the income here in Spain but what about seguridad social? I am not autonomo I do not issue invoices I know you answered to a previous post that technically should be autonomo but why? And what reductions are you referring to depending on amount earned?
Thank you
Being a resident for tax purposes and being autonomo are two different things. The first you are clear about but the second will depend on whether you carry out a paid activity, personally and directly, and most importantly, habitually. And what does habitually means?
Well, that very concept (‘habitualidad’) is a cause of controversy as the Supreme Court states that on the main, a regular income will determine this, provided it exceeds the SMI (Salario Minimo Interprofesional).
Another Supreme Court ruling stated that a worker that had worked continuously for 6 years was not deemed subject to “autonomo” regime because he had not exceeded 75% of the SMI.
If you are working 25 hours a week for an Australian company, it is possible that you are deemed to be carrying out an activity habitually.
In terms of what % of tax you pay and where, I would refer you to the applicable Double Taxation Agreement Spain/Australia.
Hello Antonio,
I am confused with all the criteria I spend less than 30 days in Spain usually to visit immediate family. I have an apartment which I rent and unfortunately have a mortgage can’t sell, I usually live in Thailand where I own another apartment where i live the most of the year I am not required to declare my tax in Thailand as I work offshore am I obliged to declare my Tax in Spain despite not living there? Thankyou for any advice.
Hi Antonio,
I have dual Canadian/US citizenship, and my husband has dual French/US citizenship, we now live in the US but plan to buy a property and retire in Spain. The question is – if we live in Spain permanently – do we have a choice where to pay taxes on our US retirement income (from husband’s job), Social Security, and 401K savings withdrawals, – can we pay all taxes in the US, or will Spain charge the difference? Also, how 401K disbursements will be treated from Spanish tax purposes (pension income, savings, or else)?
Thank you.
Hello Elena,
A US citizen that becomes a resident for tax purposes in Spain will come under the DTA (Double Taxation Agreement) signed between the U.S.A. and Spain. In this document, article 20 deals with where pensions and Social Security benefits should be taxed.
Regarding savings, these will be taxed in Spain under the “wealth tax” rules. Currently, there is an allowance of 700k with an additional 300k for the habitual residence.
I would suggest you ran this past a USA tax advisor as the IRS, I am told, is not an organization you want to fall foul of!
Source: http://www.irs.gov/pub/irs-trty/spain.pdf
Hi Antonio, This is a very interesting thread and seems that some of my concerns are answered here. I have a Non residency bank account in Spain. I hold some cash, funds and equity in this bank account and I own several properties in Spain, mostly they are rented to students, sometimes to tourists. In the last 12 months I have spent 8 months in the UK. I have a UK company and declare tax on my earnings in the UK. I have never declared earnings in Spain, with the assumption that the income is less than the tax threshold. I´ve been doing this for several years and living between Spain and the UK, the exception this year that I´ve spent most of my time in the UK.
My bank is now asking for a certificate of residency which I assumed would be straight forward as I am a tax payer in UK and for the last 12 months spent most of my time there. However, it seems that HMRC would ask for details of my assets in Spain and pass these on to the hacienda. I´m not sure of the Spanish tax liability if I do this and wonder if I should close this bank account and move all my assets to the UK. But then if next year I spend more than 183 days in Spain am I seen as avoiding tax if I have a UK resident bank account. I´m not trying to avoid tax, just keep it simple and remain within the law but from year to year my residency is split between the 2 countries. I´m not sure what to do. Can you advise? Help?
Thank you.