Brexit has brought the issue of residence into the spotlight, so it is worth taking a look at the Spanish residence rules and what you need to do.
It is very encouraging for expatriates that the new UK Prime Minister, Theresa May, continues to confirm her commitment to secure the rights of British nationals living in EU countries. However, nobody knows exactly what a post-Brexit world will look like, so if you were considering taking actions it may be best to act now, under rules we understand, rather than risk doing so later when the rules may become more difficult.
So if you intend to live in Spain post Brexit but have not yet officially registered your presence, you need to get this sorted now.
Tax residence in Spain
There are three situations that could make you resident in Spain for tax purposes:
- You spend more than 183 days in Spain in a calendar year, whether or not you take out a formal residence permit. Temporary absences are ignored unless you can prove that you are habitually resident in another country for more than 183 days.
- Your ‘centre of economic interests’ is in Spain (even if you spend less than 183 days a year in the country).
- Your ‘centre of vital interests’ is in Spain. So if your spouse and/or your dependent children live here, you are presumed Spanish tax resident even if you live and work in another country, unless you can prove otherwise.
It is possible to fulfil the domestic tax residency rules of two countries. The UK/Spain double taxation treaty sets out a list of ‘tie-breaker’ rules to establish where you should be paying tax. This is independent of the EU and not affected by Brexit.
If you are a resident of Spain, you are liable for income, capital gains and wealth taxes on your worldwide assets and subject to the Spanish succession and gift tax rules. You will generally have to submit annual income and wealth tax returns, as well as Modelo 720 to declare overseas assets over €50,000.
It has always been important to establish where you should be paying tax and fulfil your obligations. It is even more important now with Modelo 720 and automatic exchange of information. The Spanish tax authorities will now receive information from banks and investment companies abroad, detailing your financial assets and income. For peace of mind make sure your affairs are in order.
The Spanish taxation regime may not be as taxing as you think, especially for retirees with investment capital. There are compliant tax-efficient arrangements available in Spain that can make a considerable difference to how much tax you pay. Seek specialist, personalized advice from a firm with a long history of advising British expatriates in Spain.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalized advice.
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
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This article was written on the 05th of October, 2016.