How you become a tax resident in Spain

If you move to Spain permanently for six months or more you will almost certainly become tax resident and be obliged to pay income, capital gains, and wealth taxes on your worldwide assets and be subject to Spanish inheritance and gifts tax rules. By Blevins Franks.

You will become tax resident in Spain under Spanish rules if:

a) you spend more than 183 days in the calendar year in Spain. These days do not have to be consecutive, and temporary absences from Spain are ignored unless you can show habitual residence in another country for more than 183 days in the year.

OR       b) your ‘centre of interests’ is in Spain, e.g. the base for your economic or professional activities is in Spain.

OR      c) your spouse is resident in Spain and you are not legally separated, even though you may spend less than 183 days there (unless you can show habitual residence in another country for more than 183 days in the year).

The tax year in Spain ends on 31st December. You are either resident or not resident for the whole tax year (subject to any residence elsewhere under treaty rules).

So, the date from which you become resident will largely depend on the time of year you arrive in Spain.

If you arrive in Spain in the first six months of the year with the intention of staying there indefinitely, you are likely to be regarded as tax resident for the full calendar year. However, if you move directly from the UK, then it is likely that, because of the UK/Spain Tax Treaty, you will be regarded as UK resident up to the date you leave the UK and resident in Spain thereafter.

If you move to Spain in the latter half of the calendar year, then you are likely to find that you are regarded as non-Spanish resident for that year, on the basis you have not spent 183 days there during the year.  However, if you have made previous visits to Spain and these have been significant or frequent, the Spanish authorities could deem you to be resident in Spain from an earlier date, and regard any subsequent time spent outside of Spain as a temporary absence (unless you were clearly resident at that time in another ‘tax treaty’ country such as the UK).

UK/Spain Double Tax Treaty

The UK/Spain Double Tax Treaty has a tie-breaker clause that comes into operation if you are resident both in the UK under the UK rules and in Spain under the Spanish rules.  The purpose is to determine in which country you will ultimately be regarded as tax resident – it cannot be both.

The agreement works as follows:

  • If you are dual resident in practice, you are deemed to be tax resident in the country in which you have a permanent home available to you.
  • If you have a permanent home in both countries (or neither), you are deemed to be resident in the country where your ‘centre of vital interests’ lies. ‘Vital’ means the whole pattern of your life.
  • If this test is indeterminate, you are deemed to be resident in the country in which you have an habitual abode (a place where you spend most of your time during the tax year), but if this is not clear you are deemed to be resident in the country of which you are a national.  UK nationals will at this point be regarded as UK residents.

If you are thinking of making a permanent move to Spain it might be worth giving some careful consideration as to the timing of your move. As the UK tax year runs from 6th April until the following 5th April, you could, for instance, leave the UK near the end of a tax year, move to another country for a few months, or travel, and be in Spain for the latter part of the year for less than 183 days. This way you can avoid becoming Spanish tax resident for that tax year.

It is always best before making the move to Spain to take professional tax advice from a specialist who knows both UK and Spanish tax legislation.

The above are summaries of complex issues and usually specific advice should be sought.