Tuesday, 7th July 2020

This Month's Magazine
Yearly taxes for non residents in Spain

Yearly taxes for non residents in Spain

Part one of a two part article by Susan Gracia offering advice from SG&G Abogados

The way in which individuals or corporate bodies pay tax in Spain varies depending on whether or not they are resident in Spain. ItÂ’s important to understand what is defined as tax residency in Spain.

Individuals shall be deemed to have their principal residence in Spain if they spend more than 183 days per calendar year in Spain. Occasional absences shall be taken into account to calculate the period of residence, except when it can be proven that their tax residence is in another country.

In the case of countries or territories classified as tax havens, the Spanish tax authorities may request proof of residence in the tax haven for 183 days per calendar year. Calculation of the period of residence shall not take into account any temporary stays in Spain as a result of obligations arising from cultural or humanitarian collaboration agreements entered ino with the Spanish public administration with no payment involved.

They also deemed to be resident in Spain when their main or central place of business is directly or indirectly located in Spain.

Unless there is evidence to the contrary, an individual shall also be deemed to be a resident of Spain if his or her legall spouse and dependents have their principal residence in Spain.

Any individual of Spanish nationality who can prove he has changed his country of residence to a tax haven shall continue to be liable for Personal Income Tax (IRPF) in Spain for the tax period in which the change of residence occurs and the following four tax periods.

An individual shall be deemed to be a resident or non-resident for the entire calendar year, given that a change of residence does not give rise to an interruption of the tax period.

Proof of tax residence
Tax residence must be proven by means of a certificate issued by the competent tax authority in the country in question. Such certificate is valid for one year. An individual may have a residence permit or administrative residence in a country and yet not be deemed to have tax residence there.


Residence under Tax Conventions
Bearing in mind that different countries may have different ideas, an individual may occasionally be deemed to be a resident of two countries. In such cases the following points are internationally agreed to overcome the problem of dual residence:

  • The individual shall be deemed to be a resident in the country in which he/she has a permanent home.
  • If he/she has a permanent home in both countries, he/she shall be deemed to be a resident of the country with which he/she has the closest personal and economic ties (centre of vital interests).
  • If the situation cannot be determined in this way, he/she shall be deemed to be a resident of the country in
    which he/she usually lives.
  • If he/she habitually lives in either countries or neither of them, he/she shall be deemed to be a resident of
    the country whose nationality he/she holds.
  • Finally, if he/she is a national of both countries or neither of them, the competent authorities shall endeavour to settle the question by mutual agreement.

1. Income from employment
In general, income earned by non-residents for work carried out in Spain shall be subject to tax on the full amount at the general tax rate of 25%.

  • Special cases:
    A rate of 8% shall be applicable to income earned by individuals who are non-residents of Spain (provided they are not liable to pay IRPF) and employed by Spanish diplomatic missions and consulates abroad, so long as specific regulations contained in international treaties to which Spain is a party are not applicable.
  • However, if work is carried out entirely abroad and the income obtained by the aforementioned individuals is subject to personal income tax in another country, the income shall not be deemed to be obtained in Spain and shall therefore not be subject to IRNR.
  • A rate of 2% shall be applicable to income earned by non-resident individuals in Spain by virtue of specific duration employment contracts for foreign seasonal workers, in accordance with Spanish labour regulations.

2. Income from economic activities
In the case of income from economic activities carried out in Spain by non-residents without a PE, the tax base shall be calculated based on the diff erence between the gross income and the following expenses:

  • Staff costs
  • Cost of supplies
  • Utilities

A general rate of 25% shall be applicable to the resulting tax base. Income from economic activities shall be deemed to include income from services rendered, from freelance professional activities and artistic and sports activities.

(Please note that rules and tax rate change frequently, therefore you must always consult a professional expert).

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