In today’s mobile world, many people spend time in Spain and other countries during the year. But does this make you resident for tax purposes in Spain or are you fiscally resident elsewhere? This guide explains how you know if you’re a tax resident in Spain.
There’s no doubt about it – tax is a complicated matter, made more complex when you spend a tax year in various parts of the world. As a resident in Spain, you’re liable for certain taxes at specific rates that you wouldn’t be liable for as a non-resident. And vice versa.
To help you find out if you’re a tax resident in Spain, we’ve put together this guide.
What does tax residency mean?
First things first and the definition of tax or fiscal residency. Being a tax resident in Spain has nothing to do with a residence visa or permit. Fiscal residency is a status that obliges you to pay a series of taxes in the country and the Spanish tax authorities (AEAT) define this status very specifically.
What is tax residency in Spain?
The AEAT uses three very clear concepts to define whether someone is a tax resident in Spain and if you fulfil any one of them, it considers you to be fiscally resident in the country.
- You spend more than 183 days a year in Spain.
- Your principal centre of economic interests (e.g., your job, business and/or other personal links) are directly or indirectly in Spain.
- Your family (spouse, partner and/or dependent children) habitually live in Spain.
How does the 183 days in a year rule work?
The Spanish tax year runs from January to December and if you have spent at least 183 days during those 12 months in Spain, you are fiscally resident in the country.
Do the 183 days have to be consecutive?
No, it’s the total that counts during the entire year.
What about if I go away for a holiday or short break?
Temporary absences, or sporadic absences according to Spanish Tax law, outside Spain, e.g., a weekend in Portugal or a couple of weeks in London, count towards your days spent in Spain. This is a matter to be reviewed carefully when counting days.
What about the centre of economic interest’s rule?
This rule prevails if your job or business has its focus in Spain, regardless of how many days you spend in the country. For example, if the company you work for has its headquarters or a large part of its business in Spain, your economic interests are also in Spain and you’re a fiscal resident as a result. This rule applies even if you spend more than 183 days of the year outside Spain on business trips for the company. It is also important to consider other personal or family links with Spain when looking at this rule.
What about the family rule?
The third instance used by the AEAT to determine whether you are a tax resident in Spain or not is to do with your immediate family. If your spouse or partner habitually lives in Spain, you are considered a tax resident. The same applies if you have dependent children who live in Spain. This is a presumption of residence which can be argued against if the issue arises, and you can demonstrate that the spouse is not resident in Spain.
This rule has nothing to do with the number of days a year you spend in Spain or where your main economic interests are. It’s purely family based.
How can I prove I’m not a tax resident in Spain?
In certain cases, a certificate of tax residency issued by the tax authorities in another country will exempt you from fiscal residency in Spain. The certificate is only valid for one tax year, and you must therefore renew it on an annual basis. It is important to know that being a tax resident in another country does not prevent you from being a tax resident in Spain.
Contrary to what many people believe, the double tax treaty does not prevent double tax residency. There are many people with double tax residence in Spain and the UK as the rules for tax residency are distinctly different in both countries. The Double Tax Treaty established the rules to avoid a particular income to be taxed twice and provides the protocol to avoid paying taxes twice by deducting the tax paid in one country on the tax return in the other country.
It is also worth noting that Inheritance Tax is not included in the Double Tax Treaty between Spain and the UK.
Can I be a tax resident in Spain, but pay non-resident tax rates?
Yes, there are some instances where you can be fiscally resident in Spain but pay tax as if you were non-resident. The tax law governing this is known as the Beckham Law. Most probable the new Digital Nomad Visa, due to become law in early autumn, will also contemplate this possibility.
“As you’d expect, qualifying conditions are strict and the non-resident tax rates are available for a limited period of time,” says Claudio Rodriguez, tax director at Del Canto Chambers. “However, this option entails considerable tax saving and is worth exploring.”
At Del Canto Chambers, we specialise in tax residency matters and are on hand to offer professional advice to suit your circumstances.
