Spanish tax residency

Fiscal and legal advice from Webster Asesores

Dear Sirs,

When we arrived in Spain about five years ago, we applied for our residence permit and soon after we obtained it.

Since then we have lived here full time and due to grandchildren arriving, we have decided to move back to the UK.

The estate agency asked us if we are resident in Spain, and we gave them copies of our residency papers, but now he is asking us if we are tax residents.

Because we are pensioners, we haven’t paid any tax in Spain, as any tax is deducted by the UK government. The Spanish authorities haven’t sent us any tax demand either.

It now seems that we are not residents for tax purposes, so we will have 3% deducted from the sale price and we might have to pay Capital Gains Tax. This will mean that we might not be able to sell out house as we were told that as residents and being over the age of 65, we wouldn’t be liable to pay any tax on the sale.

If we have known that we had to pay income tax in Spain, we would have done so.

ANSWER

When one becomes a resident in Spain, one is obliged to pay income tax in Spain. If you have any tax deducted at source ( such as the UK government), you need to inform them that you are no longer a tax resident in the UK, and prove that your tax residency is in Spain.

Your pension will then be paid to you without having any tax deducted.

Any person living in Spain for more than 180 days ( 6 months) in a calendar year becomes a Spanish tax resident. Even if they don’t have the residence certificate.

Therefore, at the moment you are considered to be a non- resident for tax purposes in Spain, simply because you haven’t filed any income tax.

You could file your income tax for the last 5 years, and this would mean that you will have to pay all the tax that you haven’t paid to date, and you will also receive a fine for late filing and payment.

You might be advised to ask a tax consultant to calculate the potential Capital Gains Tax that you might be liable for, ( as non- residents) as it may be less than you expect and you still might be able to sell the property and move back to the UK.

It is very important, when moving to a new country, to obtain good advice regarding one’s tax situation. Often enough, one only receives answers to the questions asked. Therefore, it is crucial that one makes a list of questions to hopefully cover your entire new tax liabilities.

We have heard many times “well, in the UK this or that doesn’t happen...”. You are not in the UK any more, and different tax and legal system is in place.

Obtaining good tax advice at the beginning, will possibly save you money in the end.