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Resident Vs Non Resident Tax Spain?

Do expats pay tax in Spain? – If you are a resident in Spain you may be liable to pay tax on income from anywhere in the world. However, if you are a non-resident, you’ll need to pay tax on any Spanish income. Spanish taxation can be complex if you are not familiar with the forms, or the rules for the payment of taxes in Spain.

What makes you a tax resident in Spain?

Individuals are resident in Spain for tax purposes if they meet at least one of the following criteria:

  • Spend more than 183 days in Spain during a calendar year. In determining the period of stay, temporary absences are included in the count, except when the tax residence in another country can be proven. Special anti-avoidance rules are established for tax havens. Temporary visits to Spain to comply with contractual obligations under cultural and humanitarian collaboration agreements with the Spanish authorities which are not remunerated are not included when calculating the 183-day residence period.
  • Have Spain as their main base or centre of activities or economic interests. It is presumed, unless proven otherwise, that a taxpayer’s habitual place of residence is Spain when, on the basis of the foregoing criteria, the spouse (not legally separated) and underage dependent children permanently reside in Spain. Spanish PIT law contains specific anti-avoidance rules regarding this matter.

Persons who do not meet any of the foregoing criteria are not resident in Spain for tax purposes. In such cases, Spanish-source income and capital gains in Spain are subject to NRIT. Under Spanish law, the concept of part-year resident does not exist. An individual is either resident or non-resident and is taxed as such for the entire tax year. However, in certain situations, a person may be resident for tax purposes in two different countries.

This could be the case, for instance, of expatriates working in Spain who are resident in both Spain and their home country. A person who is resident in another country may qualify for a relief or exemption of Spanish tax under DTTs between the home country and Spain.

In such situations, the relevant DTT should be consulted to determine the country where the person is resident ( see Double tax treaties [DTTs] in the Foreign tax relief and tax treaties section for furthe r information ). Most DTTs signed by Spain consider the following to be relevant when determining place of residence:

  • Permanent home.
  • Personal and economic relations (centre of vital interests).
  • Habitual dwelling.
  • Nationality.

See Exit tax in the Other taxes  section for a description of the exit tax regime .

How is non-resident tax calculated in Spain?

How is the tax calculated? – The tax is calculated on the cadastral value of the property (valor catasral), the equivalent to the UK rateable value. You can find your cadastral value on your council tax invoice (IBI/Suma). Currently, the tax is calculated at 1% of the cadastral value and then 24% of this figure.

  1. For example, a property with a cadastral value of 100,000€, tax is calculated at 1% of 100,000€ (being 1,000€), then 24% of 1,000€ = 240€ the tax payable;
  2. If the property is jointly owned, two separate returns must be submitted for each owner and who are responsible for 50% of the total tax due;

The tax year for IRNR is from January to December each year. By law, the deadline to submit the payment is 31 December of the relevant tax year. Any late submission or late payment will incur interest and late payment penalties. Submitting the non-resident tax return is a legal requirement for any non-resident who owns a property in Spain and that is not rented out.

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The Spanish tax authorities consider that even where no income is earned the property is still classed as a benefit and therefore income tax is due. As a registered owner of a property, it is your responsibility to ensure that the tax return is submitted and payment made.

Any unpaid taxes can be pursued by the Spanish authorities to recover the amounts due. Actions taken can include the freezing of Bank accounts and legal proceedings to recover funds There is a limitation period of 4 years following which the Spanish authorities will not investigate payments due.

How much is resident tax in Spain?

Non-resident income tax (NRIT) rates – For non-residents, income obtained without a PE is taxed at the following rates:

  • General rate: 24%. For residents in other EU member states or European Economic Area (EEA) countries with which there is an effective exchange of tax information, the rate is 19%.
  • Capital gains generated from transfers of assets: 19%.
  • Interest: 19%. Interest is tax exempt for EU residents. Double taxation treaties (DTTs) normally establish lower rates.
  • Dividends: 19% (DTTs normally establish lower rates).
  • Royalties: 24% (DTTs normally establish lower rates).
  • Pensions are taxed at progressive rates (between 8% and 40%).

Can I be a resident in Spain but pay tax in UK?

Double Taxation Liability – Each country has its own set of tax laws. As a business owner living and working in Spain you run the risk of dual residency tax disputes, whereby an innocent tax mistake leads to expensive legal consequences. If you qualify for tax residency in Spain, as well as the UK you may be liable to pay tax on the same income in both countries, known as ‘double taxation’.

  1. This may apply to you if you are resident in two countries at the same time;
  2. If for part of the tax year you are classed as a UK resident and non-UK resident for the remainder, then the tax year will be split;

Non residents may also be liable to pay tax on cash or investments located in Spain. If you live abroad for a short period of time, or you have a home in more than one country you need to understand how this affects your tax residence status. This defines which nation can collect tax on your income, and at which residence they will contact you to collect payment.

  • If you qualify for tax residency in Spain, you will be liable to pay tax on your worldwide income, meaning any income or gains you make in the UK;
  • Fortunately the UK has a double taxation agreement with Spain;

Double taxation agreements exist between the UK and many other countries to help those with foreign interests avoid paying tax twice on the same income. The rules within these agreements set out which country has the right to collect tax on different types of income.

  1. The statutory residency test (SRT) is used to define for how many days in the year a taxpayer is resident in the UK, for tax purposes;
  2. Most consider UKs SRT rules adequate to determine the tax residence status of a UK national;
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However Spanish tax authorities have ample capacity to challenge this under the double tax treaty rules. If you have spent more than 183 days per calendar year in Spain, then you are considered a tax resident in Spain by default. Prestige Business Management can help you define your tax residence status and plan your business activities to remain tax efficient.

Can I be resident in Spain and tax resident in UK?

As we have mentioned more than once on these pages, the UK’s decision to leave the EU has made living permanently in Spain much more complicated for Britons. Living in Spain after Brexit now requires individuals to apply for a visa or for a residency permit. Without a visa or residency permit, Britons are able to stay in Spain for 90 days out of every 180-day period, meaning that they could spend half of the year in Spain in two extended visits.

This is the ideal option for many, but if you don’t want to maintain a base in the UK and want to move to Spain on a full-time basis then you can no longer do this without securing the necessary documentation.

What does this mean for your residency status? Can you be a resident of Spain and the UK at the same time? And how will this impact your tax obligations in each country? Here’s everything you need to know: You Can Only Be a Resident of a Single Nation Whilst maintaining your UK residency when residing in Spain might be appealing, unfortunately this isn’t possible.

In fact, even before Brexit it wasn’t legally and officially possible to reside in both countries (though many people didn’t register as residents of Spain to enable them to do so). This is because, when the UK was part of the EU, the time individuals spent in Spain wasn’t monitored as it is now.

Because this freedom of movement (Under the EU Freedom of Movement Act) no longer applies to UK citizens, the amount of time Britons spend in the UK is being monitored: if you want to stay in Spain for longer than 90 days then you will need a residency permit or visa, and in applying for these you will give up your residency of the UK.

  1. You can only be a resident of one nation at a time;
  2. Wondering what this means in real terms? It means you would use your UK residency status, access to some UK benefits, and access to the NHS for any healthcare you might need;

Related: Browse apartments and villas for sale in Alhaurin De La Torre How to Become a Spanish Resident If you were living in Spain before the withdrawal period ended and the UK officially left the EU on 31st December 2020 then your rights to remain were protected by the terms of the Withdrawal Agreement and you should apply for a Tarjeta de Identidad de Extranjero (TIE) residency card : a biometric card that will protect your right to remain in Spain.

  1. If you possess any other type of residency card (a green card is a common example) then you are strongly encouraged to exchange this for a TIE card as soon as possible and protect your residency;
  2. If you arrived in Spain after 1st January 2021, or haven’t yet moved to Spain but are currently exploring your options, then your right to live in Spain is not protected by the withdrawal agreement, and you will have to apply to live in Spain like any other third party national;
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This can be an expensive and time-consuming process, but you will find it easier to secure a visa to remain in Spain if you don’t intend to work during your time in the country. The visas best suited to you in these circumstances are:

  • The non-lucrative residence visa , which requires you to show that you can support yourself financial for the duration of your stay in the country
  • The investors visa (or golden visa) , which requires you to make a significant investment in Spanish real estate to remain in the country.
  • The student visa , which allows you to stay in Spain for as long as you are studying at an official institution.

How Would Being a Spanish Resident Affect My Taxes? There is a key difference between being a resident and a tax resident of a country: it could well be that, for immigration purposes, you are a resident of Spain without having to be a tax resident of the nation. If this is something you are interested in exploring, then there are the criteria, as set out by the Spanish tax authorities, for being a tax resident in the nation:

  • “They have stayed longer than 183 days in Spanish territory over the calendar year. In order to determine the permanence in the Spanish territory, occasional absences are included, except if the taxpayer accredits their residency in another country. In the case of countries or territories labelled as tax havens, the Tax Administration can demand proof of stay in that tax haven over a period of 183 days within the calendar year.
  • They have their main base or centre of their activities or economic activities, directly or indirectly, in Spain.
  • They have a dependent not legally separated spouse and/or underage children who are usually residents in Spain. This latter situation accepts evidence to the contrary. “

What if I Wish to Remain a UK Resident? If you don’t wish to give up your British residency but still hope to spend considerable periods of time in Spain, or own property in Spain, then this is still possible. You can stay in Spain for 90 days out of any 180-day period without applying for a visa or residency permit. This means that you could spend two three-month chunks of time in Spain every year, which would be an ideal alternative for holiday home owners or ‘snow birds’ wishing to escape the bad winter weather in the UK.

  1. It is only if you wish to stay in the country for a period of longer than 90 days that you would need to apply for a visa;
  2. Have you always dreamt of retiring to Spain ? Whether you’re looking for golden mile properties in Marbella or bargain property in Andalucia, our local property experts are perfectly placed to turn your dreams into a reality;

Why not get in touch to find out more about how we can help you. Here at Right Casa Estates , we are the premier estate agents for the Costa Del Sol, primed to aid you in your property search.