Recipricol Tax Agreement

[macgd016Participant]

I have been advised here in Spain that as a Resident I have to declare my worldwide income and assets here in Spain and pay my taxes here.  However, I have just read this:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/507409/spain-dtc_-_in_force.pdf

It seems to say that if you have property in Spain and the UK and your main income is from the UK you should be taxed in the UK, is this correct?

The relevant information is in Article 4 Resident:

a) he shall be deemed to be a resident only of the State in which he has a
permanent home available to him; if he has a permanent home available
to him in both States, he shall be deemed to be a resident only of the
State with which his personal and economic relations are closer (centre
of vital interests);

c) if he has an habitual abode in both States or in neither of them, he shall
be deemed to be a resident only of the State of which he is a national;

[Mark StücklinKeymaster]

You have to be very careful when it comes to Spain’s Modelo 720 Worlwide Asset declaration obligation because the fines are insane. Where do you spend more time (183 days plus each year), Spain or the UK?

[macgd016Participant]

I am resident in Spain but also have a house in the UK. My fiscal adviser here in Spain has had me declaring all of my property and income on my modelo 720 but reading this HMRC document regarding the reciprocal tax arrangements with Spain it looks as though, because I have a house in the UK as well, I can choose to pay tax in the UK instead of Spain.

[Mark StücklinKeymaster]

Just having a house in the UK isn’t the criteria for residency. Where do you actually live? If you just have a holiday-home in Spain and just come for holidays then you are not resident. But if you spend more than 183 days here a year then you are resident and need to continue declaring you modelo 720. It’s a pain in the proverbial but best not take a chance. I have to delare all my mother’s assets just because I have financial power of attorney for her. She lives in the UK. It’s crazy.

[macgd016Participant]

Hi Mark

I have and will continue filling in the modelo 720, however, this paragraph from the 2014 double tax convention that describes Residency:

a) he shall be deemed to be a resident only of the State in which he has a
permanent home available to him; if he has a permanent home available
to him in both States, he shall be deemed to be a resident only of the
State with which his personal and economic relations are closer (centre
of vital interests);

Very much seems to say that irrespective of how long one spends in Spain if all of your income comes from the UK and you have a home in spain and the UK your tax should be paid in the UK.  I feel sure that the Spanish authorities will not see it that way but that is what seems to be in the 2014 bilateral tax convention.  I think I will have to have a word with the HMRC and see what their take is on this.

I must say that having to declare your mother’s financial affairs is a bit harsh even by Spanish standards!!

[Author]

Posts