Spain is, without a doubt, a country with high levels of taxation, so it’s very important for foreign citizens who plan to live in Spain to be up to speed on the fiscal, economic, and organizational effects that this can have on their specific circumstances.
In general, the Spanish Tribute System differentiates between direct and indirect taxes.
The Direct Taxes that might affect a foreigner in Spain are the following:
- The Tax on Income for Individuals (or IRPF, an acronym based on its Spanish name), which applies to taxable residents in Spain, or
- The Tax on Income for Non-Residents (IRNR), which applies to non-residents working in Spain;
- The Tax on Assets;
- The Tax on Inheritances and Gifts
Who counts as taxable resident in Spain?
The first, most basic thing to understand is that just being an administrative resident, that is to say, having a residency permit that authorizes you to reside in Spain for a specific period of time, does not automatically imply that you are a taxable resident.
Beyond that, determining whether or not you are a taxable resident is a rather complex subject. This concept is the subject not only of the internal laws of every country but also of bilateral agreements so as to avoid Double Taxation.
In conformity with Spanish legislation, individuals who have their primary residence in Spanish territory are considered taxable residents in Spain. And, as we shall see below, the law itself establishes two criteria for determining when residency can be considered “primary.”
The first criteria consists of considering all people who stay in Spanish territory for more than 183 days throughout the calendar year to be taxable residents of Spain. To determine this period of residence in Spanish territory, sporadic absences must be added up, except when the individual establishes their place of residence (for tax purposes) in another country. Unlike many other legislations, Spain’s tax law does not establish rules for computing fractions of a day, so all days should be counted as whole days.
The second criteria for considering a person to be a taxable resident of Spain is that the principal centre or base of their economic activities or interests is located in our country, either directly or indirectly. When it comes time to analyze this criteria, we are faced with an imprecise legal concept which must take into account not only the source of all of their income and the location of their property, but also their personal and family relationships.
In both cases, it is assumed, unless there is evidence to the contrary, that a person has their primary residence in Spanish territory when their non-separated spouse and their minor dependent children reside primarily in Spain.
Keeping in mind this important distinction between taxable residents and non-residents, we want to emphasize the fact that it is fundamentally important to adequately assess such things, taking into account one’s specific circumstances. At Almansa & Associates we have an experienced taxation rights department that can analyze your situation in detail and offer you the best option for your specific case.