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How to become a Tax Resident in Spain

While residents in Spain pay taxes on their income worldwide, non residents are taxed only on their income from sources within Spain. That is why residency is so important.

A. Residence of the individual

Individuals are deemed to be residents in Spain when they meet any of the following criteria:

  • They remain in Spain for more than 183 days during a calendar year. In order to determine the period of stay, sporadic absences are included in the count, except those where the tax residence in another country is proved. In the case of countries or territories labelled as tax havens, the Tax Administration can demand proof of stay in that tax haven over a period of 183 days in a calendar year. In order to determine the period of stay, temporary stays in Spain that are the consequence of contractual obligations in agreements of cultural or humanitarian collaborations performed free of charge with the Spanish Public Administrations are not included.
  • Their main base or centre of activities or economic interests is, directly or indirectly, in Spain. Also, it is presumed, except if proved otherwise, that a taxpayer has his usual place of residence in Spain when, using the above criteria, his spouse -not legally separated- and underage dependent children are permanent residents in Spain.

In addition, individuals of Spanish nationality who prove their new residency in a tax haven, will continue to be deemed residents in Spain for income tax purposes (Impuesto sobre la Renta de las Personas FĂ­sicas - IRPF), both in the taxable period during which they change their residency as well as in the four tax periods thereafter. However, this rule will not apply to individuals resident in Andorra who prove their status as wage-earning workers, provided that they comply with certain requirements. An individual will be considered either as resident or non resident for the whole calendar year, because a change of residency does not interrupt the taxable period.

Accreditation of fiscal residence

Tax residence is proved by a certificate issued by the competent Tax Authority of the country concerned. The period of validity of these certificates is one year. A person may have a residence permit or administrative residence in a State and not be considered a resident therein for tax purposes.

Special circumstances

Individuals of Spanish nationality, their not legally separated spouse and their under-age children, who have their usual place of residence abroad, will continue to be considered income tax (IRPF) payers if they are:

  • Members of Spanish Diplomatic Missions, including both the head of the mission and the members of the diplomatic, administrative, technical and service staff.
  • Members of Spanish Consular Offices, including both the head of the office and the civil servants or service staff with the exception of honorary vice-consuls or honorary consular agents and the staff under them.
  • Holders of State official positions or employment as members of delegations and permanent representatives accredited to international organizations or who form part of delegations or missions of observers abroad.
  • Active duty civil servants exercising an official position or job abroad which is not diplomatic or consular in nature.

However, these rules will not apply when:

  1. When defining a person as a resident of a State, all the Tax Agreements signed by Spain defer the question to internal legislation of each State. Bearing in mind that each State may establish different criteria, two States may consider a person as a resident of their own jurisdiction.
  2. In the case of not legally separated spouses or underage children, when their usual place of residence was abroad prior to the acquisition by the spouse, father or mother of any of the circumstances listed above.

Residency and Tax Agreements

When defining a person as a resident of a State, all the Tax Agreements signed by Spain defer the question to internal legislation of each State. Bearing in mind that each State may establish different criteria, two States may consider a person as a resident of their own jurisdiction.

In these cases, the agreements generally establish the following criteria to avoid the conflict of being deemed a resident of both States:

  1. A person will be deemed to be a resident in the State in which he has a permanent home available to him.
  2. If he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which he has the closest personal and economic relations (centre of vital interests).
  3. If the above criteria could not be determined, he shall be deemed a resident of the State in which he has a habitual abode.
  4. If the person has his habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national.
  5. Lastly, if he is a national of both States, or of neither of them, the competent authorities shall settle the question by mutual agreement.

B. Residence and entities

An entity is deemed to be a resident of Spain when it meets any of the following criteria:

  • It was incorporated in Spain.
  • It has its registered office on Spanish Territory.
  • Its effective chief office is located in Spain. An entity is deemed to have its effective chief office in Spain when the management and control of the sum of its activities is exercised from within the territory.

The tax period will end in the case of a change of residence. The Tax Administration may presume that an entity located in a country or territory labeled as a tax haven has its residence on Spain when its main assets, directly or indirectly, are property situated in, or rights to be fulfilled in, Spain, or whenever its main activity is undertaken in Spain.

On the other hand, the entity may prove that its direction and effective management are within that country or territory, and also that its incorporation and operations correspond with valid economic motives and substantive business reasons that differ from the simple management of securities or other assets.

Accreditation of tax residence

An entity may prove its tax residence in a specific country by means of a certificate issued by the Tax Authority in that country. The period of validity of these certificates is one year.

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