Residency Status

One of the most common questions we are asked by clients is whether or not they should become Spanish tax residents.

The accurate answer to this question requires a review of the personal circumstances as there are a number of factors that should be taken into account, such as where owned assets are located; income arises; and what long term plans have been made.

The disadvantages of becoming a Spanish tax resident have almost become a myth as there are a number of misconceptions commonly made regarding the high taxation burden in Spain. That is true for some types of income, and net assets are also taxed unlike in the UK.

However, for certain sources of income the tax regime in Spain can be quite advantageous when compared to the UK. Therefore, in certain cases, there may well be taxation advantages to becoming Spanish resident. Ultimately, whether or not a person has his or her tax residency in Spain will depend on legislation. The following paragraphs will provide you with an overview of the rules in general.

Residence in Spain

A person can be considered to have their habitual residence in Spain if:

  • He or she spends more than 183 days in Spanish territory in the same calendar year. Sporadic absences are also counted within the period, unless tax residence can be proven in another country. Furthermore, if the country of residence is considered a tax haven the burden of proof rests with the individual.
  • The main sources of income and activities originate in Spain. Furthermore, the person will be presumed resident in Spain if the spouse and dependant children reside in Spain.

For many cases, these rules are very clear when determining the tax residency of a person. However, for many others, there are factors which may contribute to doubts. Many people now live in the Costa del Sol with their families, whilst spending much of their time abroad and having most of their economic interest abroad.

In any case, we can carry out a study of your particular circumstances which may help you decide where your tax residency is most likely to stand up to scrutiny and the taxation implications of your particular circumstances.

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