First, it is essential to understand that to be considered a resident of Spain an individual must have Spain as the center of his/her economic activities and be a taxpayer, and that is also the case if he/she is a Spanish citizen and travels abroad, but benefits financially from income earned in Spain.
This also applies to someone who stays for more than 183 days a year in Spanish territory (most of the year) and when the legally separated spouse and dependent minor children of the taxpayer, usually reside in Spain.
In the case of an individual who has moved to Spain and has set his/her fiscal residence here (complying with any of the previous cases), he/she is a taxpayer for the Income Tax Return for Individuals (IRPF, for its acronym in Spanish) and must pay taxes in Spain for its worldwide income (“you must declare in Spain the income you get anywhere in the world”). This situation should not affect the Convention of international double taxation signed between Spain and many countries.
Thus, the differences that could arise must be solved thanks to the agreements signed between countries that explain very well the regulations to be followed, establishing in which nation should the taxes be paid. Spain has signed about 90 agreements of this kind.
If you are unable to find a solution this way, the best thing to do is to contact the tax authorities of one or both countries involved to clarify the steps to follow.
Currently, determining the place of residence of some people is a little difficult since it is not easy to justify their main residence considering the increasing labor mobility.
What should not happen is an individual who does not appear as a resident or taxpayer in any country, because even though he/she may travel constantly, the individual in question must have a domicile.
Regarding taxpayers from the United Kingdom
Pensions arising from services rendered to the government (such as local authorities, teachers, police service, fire service and civil service) must pay taxes only in the UK and not in Spain. Nevertheless, it is worth mentioning that the double tax treaty between the UK and Spain states that such income is considered to establish the effective tax rate on your other taxable income. In other words, your progressive tax rate will be higher for the remainder of your general income and this is called “exemption with progression.”
Income obtained from private pensions, however, being an income arising from a previous employment in the private sector, will only be taxed in Spain.
Income originated from ownership of real estate in the United Kingdom, “can be taxed in both Spain and the United Kingdom” and the same causes the taxpayer in question to apply for “the international double taxation deduction” in the Spanish income tax return statement.
If you live in La Axarquía, in municipalities such as Benajarafe, Canillas de Aceituno, Competa or Torre del Mar, you can contact us for accounting or solicitor services related with fiscal residence and taxes in Spain.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
(Legal and Tax Help | Accountant | Lawyers – Solicitor in La Vinuela) Velez-Malaga and Torre del Mar (Málaga – Andalusia).
Author: Rosana Tejada
Biographical Info: Rosana Tejada Crespo is a tax advisor holding a Master’s Degree in International Taxation. She specialises in companies and freelancers, tax regulations concerning foreign employees (Beckham Law), non-resident tax, inheritance tax and Spanish income tax. She is one of the founders of Legal & Tax Help (2000), which comprises a group of English speaking solicitors, economists and architects.