How to find out if you are a tax resident in Spain and what taxes you have to pay
Do you know the importance of being a tax resident in Spain? This concept has direct effects on the taxes you have to pay in the country, one of the legal aspects that most affect your life in Spain. Tax residency defines what taxes you must pay and in what amount.
We explain everything you need to know if you are a tax resident in Spain or not, as well as the tax implications for each case.
What is tax residency?
The first thing we must clarify is the concept of tax residence, a concept that has nothing to do with residence in Spain for the purposes of foreigners or residence permits.
Tax residence is the condition in the eyes of the Tax Agency that a foreigner acquires when living for a prolonged period of time during the year in Spain and/or with economic interests in the country, a fact that will create the obligation to pay a series of taxes and pay taxes at certain percentages.
Being classified as a tax resident in Spain has important tax consequences, in many cases you will pay less tax and lower percentages if you are a tax resident than if you are a non-resident, so it can be an interesting alternative for many impatriate foreigners.
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When is a person considered a tax resident in Spain?
- That he/she stays more than 183 days during the year in Spain.
- He/she has the core of his/her economic interests directly or indirectly in Spain.
- If his spouse or children habitually reside in Spain.
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 the calendar year, from January to December), you add up all the days you have been in Spain and they are more than 183, you are a resident for tax purposes.
This amount is not calculated on a continuous number of days but on the total number of days you have stayed in the country, regardless of whether you have been on vacation or not. Keep in mind that temporary absences do not count.
Having the core of your interests in Spain
This point is key, as you may spend less than 183 days a year in Spain but still be considered a resident for tax purposes.
When will this happen?
Let’s give you an example: an employee of a Spanish company with Spanish headquarters and offices in Spain who makes frequent trips outside the country for work purposes and ends up spending more than 183 days per year, even if he spends more time outside the country he is still a tax resident in Spain since his core of interests is in Spanish territory.
Habitual residence of spouse and children in Spain
In the event that your spouse and/or dependent children live habitually in Spain, you are considered to be a tax resident.
How does this situation happen?
Here is an example: a Hungarian couple decides to move to Spain, the mother is a housewife and the child is only 3 years old but the father has a permanent job in the country of origin. The mother and the child move to Spain and the father stays in Hungary although he visits his family from time to time. In this case the father would be a tax resident in Spain because his wife and dependent child live in the country. Evidence against this being the case is admissible, it will be very complicated to prove that this situation does not really exist.
However, there is an exception that will make it much easier to prove that you are not a tax resident in Spain, which we explain below: the tax residence certificate.
Obtain a tax residency certificate from your country
A proof issued by the country of origin or in which you have your main economic interest to justify that you are really resident there, and therefore you will not have to pay taxes as a resident in Spain.
In the case that a person can obtain the so-called tax residence certificate in his or her country, the Tax Agency will not consider that person as a tax resident, even if he or she is in Spain 183 days a year. This certificate works according to the regulations of the agreement between Spain and that country, generated through a double taxation agreement, so it does not have the same interpretation in all countries.
In addition, it is valid only and exclusively for one year. This means that it is valid for the year in which you apply for it, and you will have to apply for it year after year to continue participating in this exception, if you so wish and your situation applies.
Tax implications according to tax residence
Taxes for non-residents
- Non-resident income tax
- Wealth tax
Non-resident income tax
Thanks to the double taxation treaties, the most usual thing is that the non-resident in Spain has to pay income tax as a non-resident only in what refers to real estate properties (without taking into account shares, money in the bank, etc.).
So, if you have a property in Spain, you will have to pay this tax. And we find 2 different situations:
- If the apartment you have in Spain is rented. In this case, you will have to declare quarterly the income on the rent, and you will pay 19% on it if you are from an EU member country, and 24% if you are not.
- If the apartment or house is not rented and you use it when you come to Spain (i.e. it is usually empty), then you will not declare anything on a quarterly basis. The only tax liability you will have will be on an annual basis, and you will have to pay an imputation of income.
In both cases you will have to declare your taxes by means of the form 210.
It is a personal and progressive tax, ranging from 0.2% to 2.5% depending on the specific value of the properties.
What if you have a mortgage? If you have mortgaged the property with the purpose of buying it, you will be able to subtract the outstanding amount from the total value. It is paid on an annual basis by means of form 714.
Taxes for residents
Finally, in the case of tax residents in Spain, the situation becomes slightly less favorable at the tax level.
First of all, residents have to pay income tax in Spain on all income and revenues generated worldwide. This makes their total taxation in the Spanish territory much higher, as this tax is levied on most of the activities, yields and profits obtained by the individual.
The exact percentage will depend on each particular case and it is not possible to apply generalizations, although we can say that it is a progressive tax ranging from 17 to 47%.
However, there is an exception that many foreigners can apply for: the so-called Beckham Law. Under this law, if you have not resided in Spain for the last 10 years, you can pay a flat rate of 24% on your income even if you are a tax resident.
In addition, wealth tax still exists for residents, although in this case the minimum limit for having to start paying it drops to €500,000 in the case of Catalonia (depending on the Autonomous Community this limit may differ).
In Centre Gestor we help you to know your rights and obligations as a tax resident in Spain
In addition to having the obligation to comply with the taxes that we have discussed throughout the text, you must do so in a timely manner and that is why from our agency we help you to know all the details to avoid penalties. Contact our team of professionals and tell us your case so we can advise you.