Tax residency in Spain

These days, with the open borders of Europe, it is quite common for someone to have lived and worked in several countries within one year. So, a common question which is often asked, is: “Where do I file my tax return?” The answer to this is as follows:

Tax residence is a concept which allows knowing in which country a taxpayer is taxed, it usually coincides with the persons physical location. The issue of tax residence is fundamental when it comes to taxes such as personal income tax.

Individuals and legal entities which are tax residents in Spanish territory, will be taxed in Spain for their entire world income, including foreign sources of income. A natural person will be a tax resident when:

  1. He stays in the country more than 183 days during the calendar year (counting sporadic absences).
  2. The main nucleus of its activities or economic interests resides in Spain.
  3. The spouse, not legally separated and the minor children reside in Spain.

legal entity will be tax resident in Spain when it has been constituted in accordance with Spanish law or when it has its registered office or its effective address in Spain.

Fiscal Residence in Spain

The process of becoming a fiscal resident in Spain can be a complex one, and it is important to understand all of the requirements and the implications before taking the plunge. In this article, we will discuss what it is, who is eligible, and how to become a fiscal resident in Spain.

What is Fiscal Residence in Spain?

Fiscal residence in Spain is a legal status that allows a person to be considered a resident of Spain for tax purposes. This means that the person will be subject to the laws and regulations of the country, and it also means that the person will be eligible for certain tax advantages.

The advantages of being a fiscal resident in Spain include being able to take advantage of advantageous tax rates for income earned in Spain, being able to benefit from the double taxation treaties between Spain and other countries, and having access to a wide range of tax deductions and credits.

Who is Eligible?

In general, anyone who lives in Spain for more than 183 days a year is considered a fiscal resident. This includes those who are employed in Spain, those who own a residence in Spain, and those who are registered with the Spanish immigration authorities. However, there are certain exceptions for those who are not employed or do not own a residence, such as students and retirees.

In Spain, tax residence is not conditional on legal residence, nor vice versa, so those citizens who acquire the residence visa for investors (Golden Visa) must meet the requirements set forth in the tax regulations. However, those who meet the established requirements, may avail themselves of the special regime for posted workers (popularly known as the Beckham Law) and pay taxes only on their income from Spanish sources at lower tax rates.

Regarding the evaluation for the criteria for the determination of tax residence in the context of COVID-19, the DGT (General Directorate of Taxes – Not to be confused with the General Directorate of Traffic, even though they have the same abbreviation) has concluded that the days elapsed in Spain during the validity of the state of alarm must be counted for the purposes of computation of the 183 days.