Tax Residency

Tax Residency


Understanding where you are a tax resident is important since the country of residence would tax you on your worldwide income and gains. In Spain you are considered a tax resident if you spend 183 days in Spain during the Spanish Tax Year – the Calendar year, or if your main professional activity is based in Spain. You can also be considered a Spanish resident if your spouse and/or dependent children live in Spain.

In 2013, the UK introduced the Statutory Residency Test, which whilst complicated, provides more certainty. From now on there are three tests taken in sequence:

  • The automatic overseas test.
  • The automatic residence test.
  • The sufficient ties test.

The first test is absolute and negates all other tests, which means that you are a non-UK resident under this test, the other tests do not apply. If the second test applies then the third is ignored.

Are you paying Tax in the right Country:

Many people move to Spain and continue paying tax in the UK when they should be paying  it  here!  Some  people  simply  do  not  declare  themselves  to  the  Spanish Authorities  at  all  assuming  that  they  should  just  continue  paying  in  the  UK, particularly  if  they  have  only  one  source  of  income  –  usually  their  UK  pensions and  savings.  If  you  are  traced  by  the  Spanish  authorities  and  you  have  not  submitted appropriate Spanish tax returns or have (in good faith) under-declared your income because you are paying tax in the UK, this will be treated very seriously possibly as tax evasion, regardless of how innocently arrived at. Declaring that you have paid tax in  the  UK  on  income  which  is  actually  taxable  in  Spain  will  not  be  considered  a defence in Spanish Law.

While  you  may  have  been  working  in  the  UK  for  a  UK  employer  or  working  as  self- employed, you may still have a tax liability in Spain and you may have been paying social  security  in  the  wrong  country.  This  could  affect  your  healthcare,  state retirement pension and other social welfare benefits.

Double Taxation Agreement

The treaty between Spain and the UK means that the same income or gain is not taxed twice, but not all income or gains is taxed in both countries, which means that you could end up paying more tax than you need to. Where income or gains is taxed in both countries, although you can offset the tax due in Spain, if the tax due in the UK is higher you will not get a refund