It is very important that residency is correctly determined. Residents in Spain pay taxes on their income worldwide, but non-residents are taxed only on their income within Spain.
Non-resident status can be accredited by presenting a certificate of residency in another country issued by the tax authorities of that country. The period of validity of these certificates is one year.
What happens when we have to apply the internal laws of Spain and another country as an individual is a resident of both?
In these cases, the agreement or treaty between the two countries should be consulted, if one is in place. These treaties establish rules to prevent that a person is considered a resident of both countries from a taxation viewpoint. In general, these rules state that an individual is a resident:
- Of the country where he or she has a permanent residence. If he or she has a permanent residence in both countries, they are considered a resident of the country with which they hold the closest personal and economic ties.
- If the above criterion does not determine residence, the individual is considered resident in the country where he or she usually lives.
- If the individual lives habitually in neither or both, they are a resident of the country that gave them their nationality.
- If they have dual nationality of both countries, or of neither, the Authorities in question will resolve the case by mutual agreement.
When is an individual considered to be resident in Spain, and when non-resident?
An individual is resident in Spanish territory when any one of the following circumstances apply:
- They have stayed longer than 183 days in Spanish territory over the calendar year. In order to determine the permanence in Spanish territory, occasional absences are included, except if the taxpayer accredits their residency in another country. 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 within the calendar year.
- They situate the main base or centre of their activities or economic activities, directly or indirectly, in Spain.
- They have dependent not legally separated spouse and/or underage children who are usually resident in Spain. This latter situation accepts evidence to the contrary.
Individuals of Spanish nationality who accredit their new fiscal residence in a country or territory labelled as a tax haven will not lose their status as taxpayers for Individual Income Tax. This rule is of application during the tax period in which the change of residence occurs and for the next four tax periods.
Otherwise, where none of the previous situations applies, an individual is considered as non-resident in Spain.