About Tax Residency in Spain

About Tax Residency in Spain

About Tax Residency in Spain 650 488 Vortex Coworking

The first thing we must define is the concept of tax or fiscal residency, a concept that has nothing to do with residency in Spain when it comes to immigration purposes or related to your residence permit.

Fiscal residency is the condition that a foreigner or Spanish national acquires in the eyes of the Tax Agency when living for a prolonged period of time during the year in Spain and/or when having economic interests in the country, a fact that will create the obligation to pay a series of taxes and paying them at certain percentages.

As we will see below, being classified as a tax resident or as a non-resident has important consequences; since in many cases you will pay fewer taxes and lower percentages provided that you are a non-resident, hence becoming a very interesting alternative for many foreigners.

Then, when is a person considered a tax resident in Spain? According to article 9 of law 35/2006, the Spanish Tax Agency considers anyone to be a tax resident if she meets any of the following three conditions:

She stays more than 183 days a year in Spain.
She has the core of her economic interests directly or indirectly in Spain.
Her spouse or child habitually lives in Spain.
Let’s look at these three points in detail to understand exactly what they mean:

Staying more than 183 days a year in Spain
This is the most commonly applied rule and the most important one. If at the end of the year (counting from January to December), you add up all the days you have been in Spain and those are more than 183, you are a resident for tax purposes, a fiscal resident. In addition, it is not necessary that those days are consecutive, the computation works independently of that fact.

Keep in mind that temporary absences do not count and can’t be excluded. That is to say, if for example you leave the country for a weekend or go on vacation for half a month, those days are still counted as a period of time lived in Spain, with the same weight for the total of 183 days.

Having the core of your interests in Spain
This point is key, as you may end up spending less than 183 days a year in Spain but still be considered a resident for tax purposes. When will this happen? Let’s take, for example, the situation of an employee who, due to working reasons, travels a lot all over the world, and it is quite difficult to count how long he has actually been in Spain, reaching less than 183 per year.

However, as the reason behind his frequent trips have to do with the Spanish company he is working for, with headquarters and all its offices in Spain, this employee has the core of his interests in the Spanish territory. Therefore, he is a fiscal resident in Spain.

Spouse and children in Spain
Finally, we find the case in which both your spouse (not legally separated) and/or your children under 18 years old (if you have them) live habitually in Spain and depend on us.

It is the typical situation in which the father or mother is living in Spain while taking care of the child (a child attending a Spanish), while the other member of the couple spends the year traveling for work. This situation will make the Tax Agency consider us as tax residents, and although evidence against this is admitted (which is many times taken into consideration and accepted) it will be very difficult to prove otherwise. However, there is one exception that will make it much easier to prove that you are not a fiscal resident in Spain, which we will explore below: the tax residency certificate.

Obtaining a tax residency certificate from a third country
There is a specific type of proof that allows you to justify yourself before the Tax Agency and avoid being considered as a resident for tax purposes, thus avoiding the payment of many taxes in the Spanish territory. A proof issued by your country of origin or country in which you have your main economic interest that has the aim to justify that you are really a resident there, and therefore you should not be taxed as a fiscal resident in Spain.

In the case in which an individual can obtain the so-called tax residence certificate in his country, then the Tax Agency will not consider that person as a tax resident, even if she is in Spain 183 days a year. This certificate works according to the regulations of the agreement between Spain and that third country, generated through a double taxation agreement.

In addition, it is valid only and exclusively for one year. This means that it is valid just for the year in which you request it, and you will need to solicit it year after year to continue participating in this exception (if you wish to do it and your situation applies). However, most European countries have the same tax criteria as Spain, so if you live in the Spanish territory for more than 183 days per year you will most likely not be granted the certificate.

Certificates from EU countries or the United States are always accepted by the Spanish Tax Agency, although those from Asian or Middle Eastern countries usually generate more difficulties.

Now that we can perfectly understand in which cases you will be considered a tax resident in Spain and in which cases you won’t let’s explore what the implications are in both situations in our next blog Tips for Vortex Members: tax implications according to tax residency status.

Remember that if you have any doubt about your taxes or you need personalized tax advice to know when, how, and what taxes you should pay according to your particular case, as well as the possible deductions and bonuses that will allow you to save money, do not hesitate to contact our partners Gestion Valenciana, a group of expert lawyers and accountants in Valencia