In 2021, British nationals opting for Spanish residency increased by 4.4%, bringing the total number to less than 1% shy of its record in 2013. Despite the challenges of Brexit, the number of British becoming residents in Spain has increased by 9.5% since 2019. You may well be thinking of joining them or if you’re among them, interested in the implications of being tax resident in Spain or responding to an inquiry from the Spanish tax authorities, which seems to be on the rise.
“Deciding whether to become tax resident in Spain depends on your circumstances, your own and those of your family,” explains León Fernando del Canto, Head of Chambers at Del Canto Chambers. “You also need to bear in mind your financial situation and the type of residence permit or tax rule applying to you in Spain.”
He underlines that, as with all tax matters, fiscal residency is a complex matter and you should consult the professionals regarding your particular situation. However, when considering the pros and cons of Spanish tax residency, Del Canto answers the following questions:
If I have a Spanish residence permit, am I automatically a tax resident in Spain?
No, not automatically because a residence permit does not imply tax residency. However, to maintain all Spanish residence permits (except one – see below), you need to be in Spain for at least 183 days a year. And once you are physically present in Spain for a minimum of 183 days in a calendar year, you are classed as tax resident.
In addition, there’s the possibility that you may be classified as a Spanish tax resident according to how the Spanish tax authorities interpret your centre of vital interests or the way they count days (see below).
Are there any exceptions to this?
Yes, but just one. The Spanish Golden Visa, obtained through investment in Spain, has different residency obligations and does not require you to be in Spain for a minimum period every year.
What about the Beckham rule?
While the Beckham rule does not grant a residency permit, like the Golden Visa, it’s an anomaly for tax residency. It grants you a similar tax status to the UK non domicile for 5 years and with this tax exception you can be tax resident in Spain even if you spend more than 183 days a year there. Furthermore, according to Spanish tax law, you will be effectively classed as a non-resident taxpayer.
Again, however, conditions apply and you must be accepted to be permitted to apply this rule to your circumstances and secure a residence permit
What if my close relatives are living in Spain, but I’m not? Am I then classed as tax resident in Spain?
Usually yes. Under Spanish tax regulations, if your spouse (not legally separated) and dependent children (i.e. under 18) reside habitually in Spain, you are also assumed to live there. This assumption comes with subsequent tax residency obligations.
Note that Spanish law automatically presumes that your habitual place of residence is the same as your spouse and dependent children. To contest this presumption, you need to prove otherwise.
How do business interests count regarding being a Spanish tax resident?
Like family, Spanish tax law states that your tax residency is determined by your “centre of vital interests”, including where your main economic interests are. The place where you perform your main job or profession and the source of your business or trade must be considered carefully. This is especially important for the so-called digital nomads. Even the location of your investments counts in this respect.
What’s the tax year in Spain?
Unlike the UK, Spain considers the calendar year (1 January to 31 December) as its tax year.
How do the Spanish tax authorities count a day for tax purposes?
To be considered a tax resident in Spain, you must spend at least 183 days in the country. However, these are not full days but any part of a day. So, for example, if you travel to and from Spain, your departure and arrival days both count as full days even though you may have left Spain first thing and arrived late at night.
What about occasional absences?
The time you spend outside Spain, e.g. a fortnight in London, may be counted towards your 183 days in Spain. To avoid this, you must be ready to present a double tax treaty certificate confirming that you are tax resident in another country.
Note, however, that this position can be contested from a legal point of view. For example, recent case law (confirmed at the highest instance by the Spanish Supreme Court) has established that time spent outside Spain for over 183 days in a tax year excludes occasional absences. But, it also advocates careful examination of the duration and nature of the time spent outside Spain. We, therefore, believe that this legal concept is open to interpretation.
Does owning a home on the Costa del Sol, Ibiza o Palma have any tax residency implications?
For example, if you own a property in Marbella or Sotogrande, but only spend short periods of time there every year (i.e., considerably less than 183 days a year), the answer is no. If, however, you do spend at least 183 days in Spain or are classed as tax resident in Spain the situation changes regarding your primary residence.
Note that owning property on the Costa del Sol has tax implications even for non-residents, which in most cases will have an impact on your UK tax position. They include:
- IBI local tax, similar to council tax in the UK and paid annually.
- Non-resident imputed income tax, payable annually if you don’t let your property in Spain.
- Non-resident income tax, on income from property letting and due quarterly whether you have income for that period or not.
- Capital gains tax on profit made from the sale of any asset in Spain, including property.
- Inheritance Tax will be applicable in Spain and most likely in the UK as well.
- Wealth Tax will be most likely payable in Spain.
As can be seen in these FAQs, tax residency in Spain is complex and involves nuances that, if misunderstood, could put you on the wrong side of the taxman. With this in mind, and with the increased interest of the Spanish taxman in foreign residents, we highly recommend that you consult professionals qualified in UK and Spanish tax matters to establish the best option for you.