What is fiscal residence?
Fiscal residence is a status that a person acquires in the eyes of the Tax Agency, which determines their obligation to comply with Spanish tax regulations.
When does someone acquire fiscal residence in Spain?
The law that outlines the requirements for determining whether someone is a fiscal resident in Spain is the Income Tax Law for Individuals (Law 35/2006, of November 28).
According to Article 9 of this law, a person is considered a fiscal resident in Spain and is considered to have habitual residence in Spain if:
- They have spent more than 183 days in Spanish territory.
- Even without having spent more than 183 days in Spain, their main economic activities are based in Spain.
- Even without habitual residence, their legally non-separated spouse and dependent minor children reside in Spain.
In addition, Article 10 of this same law (LIRPF) outlines cases where a person is considered a fiscal resident in Spain even if their habitual residence is abroad. This applies only to Spanish nationals who hold public positions requiring them to reside in another country (e.g., ambassadors, consuls, diplomatic staff, or other officials working abroad).
When is a person not considered a fiscal resident in Spain?
A person is not considered a fiscal resident in Spain if they do not meet any of the conditions mentioned in the previous section.
Does a "non-resident" need to pay taxes in Spain?
Contrary to what one might think, a non-fiscal resident may still need to pay taxes in Spain. They must pay taxes on income earned in Spain. These taxes are applied at a fixed rate and generally do not take into account personal circumstances or income earned abroad.
Can you pay taxes as a non-resident even while living in Spain?
Yes, there are situations where, even if you reside in Spain and meet the requirements to be considered a fiscal resident, you can still pay taxes under the non-resident regime. One example is individuals granted the Beckham regime. If you’d like to learn more about the Beckham law, you can check this section.
There are also other scenarios, such as individuals who are residing in Spain administratively but are not considered fiscal residents, like those who hold a tax residence certificate from another country.
In this case, based on the criteria that establish their tax residence in the other country, and in compliance with international agreements, it may be confirmed that, although the person physically resides in Spain, their tax residence is in another country.
So, what is the difference between being a fiscal resident in Spain and not being one?
As mentioned earlier, non-fiscal residents in Spain only pay taxes in Spain on income generated in the country, while income earned in other countries is not taken into account and must be declared in the country where they have their fiscal residence.
On the other hand, fiscal residents in Spain are fully subject to Spanish tax laws, meaning they must file an Income Tax return (IRPF) and possibly other tax obligations depending on their assets and income. They must declare and pay taxes on all income earned during the year, regardless of whether it was generated abroad.
What happens if a person meets the requirements to be considered a fiscal resident in two countries?
It is possible for a person to meet the requirements to be a fiscal resident in two different countries. To avoid conflicts, there are treaties to prevent double taxation.
These treaties aim to prevent a person from being considered a fiscal resident in two countries at the same time or, conversely, not being considered a resident in any country, a situation known as "tax statelessness," which is prohibited in Spain.
Each treaty has its own agreements, but generally, they follow the rules of the OECD Model Convention, which harmonizes tax laws between countries.
Common criteria used to determine fiscal residence in these cases, applied in the following order, are:
- Permanent home: Fiscal residence will be in the country where the person has a permanent home.
- Center of vital interests: If the person has a permanent home in both countries, they are considered a resident of the country where they have closer personal and economic ties.
- Habitual residence: If this is still unclear, the person is considered a resident of the country where they spend the most time (habitual residence).
- Nationality: If the person has habitual residence in both countries or neither, they are considered a resident of the country of their nationality.
- Agreement between countries: If none of these criteria resolve the issue, the authorities of both countries must come to an agreement.
How can fiscal residence in Spain be certified?
To certify fiscal residence in Spain, a certificate can be requested from the Spanish Tax Agency (Hacienda). This certificate is issued for fiscal years, which in Spain follow the calendar year, and can be used in other countries to prove Spanish fiscal residence.
If no Income Tax declaration has been submitted in Spain and you want to obtain this certificate, the Tax Agency may request additional information and evidence to prove the individual’s fiscal residence in the country.
Some possible forms of evidence include:
- Long-term rental contracts in the country,
- Utility bills for the main residence over several months,
- Receipts like gym membership fees to prove continuous residence in Spain, thus meeting the 183-day requirement.
Conclusion:
Both fiscal residents and non-residents must be registered with the Spanish Tax Agency to operate. However, their tax obligations differ:
- Fiscal residents: Must declare and pay taxes on all worldwide income.
- Non-residents: Only pay taxes on income generated in Spain.
If you are unsure whether you are a fiscal resident in Spain, you can always consult us by writing to ayuda@xolo.io or contact the Spanish Tax Agency for verification.