Tax residency in Spain: the 183-day rule explained

The two tests in article 9

Article 9.1 of Ley 35/2006 says a taxpayer is habitually resident in Spain when either of two circumstances applies:

1. Presence. The person “remains more than 183 days, during the calendar year, in Spanish territory”. To count the days, sporadic absences are counted as days in Spain, unless the taxpayer proves tax residence in another country. A trip abroad for a long weekend does not reset the count; a documented residence elsewhere can.
2. Economic interests. The main centre or base of activities or economic interests, directly or indirectly, is in Spain. A person who spends fewer than 183 days here but runs a business from Spain, or earns most income or holds most assets here, can still be resident.

The law adds a rebuttable presumption: a person is presumed resident in Spain when the non-legally-separated spouse and dependent minor children habitually live in Spain, under the criteria above. The taxpayer can produce evidence to the contrary.

Days spent in Spain under unpaid cultural or humanitarian cooperation agreements with Spanish public administrations are not counted for the first test.

Spain’s immigration status is a separate matter. A visitor limited to 90 days in any 180 under the Schengen rules (see UK buyers after Brexit) can still become a tax resident through the economic-interests test, and a person with a residence card is not automatically tax resident.

When two countries both claim you

Each country applies its own domestic test, so you can be resident in both. The tax treaties then provide a tie-breaker. The UK convention (article 4.2) and the Canada convention (article IV.2) use the same ladder:

• the state where you have a permanent home available; if in both, the state of your closer personal and economic relations (centre of vital interests);
• failing that, the state where you habitually live;
• failing that, the state of which you are a national;
• if still unresolved, the two tax authorities settle it by mutual agreement.

The tie-breaker decides which country is the residence country for the treaty. The articles read for this guide are the UK and Canada ones; for any other country, check its convention at the BOE. Applying the tie-breaker to a real case is a legal exercise on the facts, not something a guide can do.

What changes when you become resident

Income tax

A resident is a taxpayer of the IRPF, which taxes income “irrespective of the place where it arose and whatever the residence of the payer” (article 2). That brings worldwide income into the Spanish return. Non-residents instead pay the non-resident income tax only on Spanish-source income, and a person who is an IRPF taxpayer is not an IRNR taxpayer (article 5 of the IRNR law). The flat 24% on gross rent no longer applies to you. Savings income, including a capital gain on selling a property, is taxed on a scale made of a state part (article 66) and a regional part (article 76) with the same bands: 9.5% up to €6,000, 10.5% to €50,000, 11.5% to €200,000, 13.5% to €300,000 and 15% above, for each part. Added together, that is 19% to 30%. Non-residents pay a flat 19% on the gain, so for a large gain the resident scale can be heavier. Whether a region may depart from the article 76 scale was not read for this guide, so check the regional tax agency.

Modelo 720: assets abroad

Residents must file an annual information return on assets located abroad. Article 54 bis of Real Decreto 1065/2007 covers real estate and rights over real estate abroad; article 42 bis covers accounts in foreign financial institutions. For property, there is no obligation if the values do not exceed, together, €50,000; if the limit is exceeded, all properties are declared. Once filed, later returns are required only if the joint value rises by more than €20,000, or if an asset was disposed of. The return is due between 1 January and 31 March of the following year (article 7 of Orden HAP/72/2013). Important: it concerns assets outside Spain, for example a house in the UK or Canada or a foreign bank account, not the Spanish home. The rules on penalties for late or missing returns were not read for this guide; ask the Tax Agency.

Wealth tax

Residents are subject to wealth tax on their net worldwide wealth (obligación personal, article 5 of Ley 19/1991). The allowance is €700,000 unless the region has set its own, and the main home is exempt up to €300,000 (article 4.Nueve). You must file if tax is payable or if assets exceed €2,000,000 (article 37). Regions can change the allowance and scale, so the result differs by region; non-residents are covered in wealth tax for non-residents.

Moving the other way

A resident who leaves Spain may elect to keep paying wealth tax as a resident by filing in the first year of non-residence (article 5.Uno.a of Ley 19/1991). Other consequences of leaving were not read for this guide.

Which professional to consult

A tax adviser who deals with international residence can build the day count and the treaty analysis; a gestor administrativo handles registrations and filings. Payotte does not rank them.