Tax residence in Spain: risks and solutions

In today’s increasingly globalized and mobile environment, accurately determining an individual’s tax residence has become crucial. There are instances where individuals might unknowingly be tax residents in Spain. This includes Spaniards who move abroad but retain ties to Spain (i.e., expatriates); those who come to Spain for business or professional purposes (i.e., impatriates); artists or athletes who frequently perform in Spain; or digital nomads (i.e., international remote workers – digital nomads -) who relocate or spend significant time in Spain.

Being a tax resident in Spain primarily means that one is generally subject to Personal Income Tax (“PIT”) on global income, as per Spanish law.

However, tax residence issues extend beyond this. Double tax residence can occur when two countries claim worldwide income tax residence for the same individual, necessitating reference to the Convention for the Avoidance of Double International Taxation between Spain and the other country, if available. Some individuals may also believe they lack tax residence in any jurisdiction. Additionally, international relocations involve other taxes, notably the “Exit Tax”.

Under Spanish law, an individual is deemed to have habitual residence in Spain, and thus tax residency, if: (i) they spend more than 183 days in Spain within the calendar year (January 1 to December 31); (ii) their primary economic activities or interests, directly or indirectly, are based in Spain.

Temporary absences are counted towards the 183 days unless the individual proves residence elsewhere. Assessing the base of economic activities or interests involves considering total wealth and income.

Additionally, if the taxpayer’s spouse (if not legally separated) and dependent minor children habitually live in Spain, the taxpayer is considered to have habitual residence in Spain. The administration often considers where minor children attend school and the individual’s personal and family environment, sources of income or wealth, and expenditure locations.

If staying in Spain for more than 183 days is unavoidable, it might be beneficial to consider the special regime for workers, professionals, entrepreneurs, and investors, known as the impatriate regime or “Beckham Law”, which offers more favorable terms than the general regime.

At Lullius Partners, our team of international taxation experts can help you navigate the risks of tax residency and find secure, reasonable solutions for your situation.

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