This new obligation for residents to report their assets abroad valued over 50,000 must be declared by 30th April this year, (31st March on following years). This highlights the importance of ascertaining your Fiscal Residency. Your Residency dictates whether or not you have a requirement to complete this new tax form.
Residency criteria can be more complicated than people realise. Many people assume they are non residents when they are actually residents. Therefore, failing to complete this new report can have serious consequences.
Civil residency issued by the Foreign Office is not conclusive to prove you are resident.
The criteria followed by the Tax Office to determinate you are Fiscal Resident in Spain is (Art. 9 Spanish Income tax Law LIRPF):
- You spend more than 183 days in Spain in one calendar year. You become liable whether or not you take out a formal residency permit. These days do not have to be consecutive. (Temporary absences from Spain are ignored for the purposes of the 183-day rule unless it can be proved that the individual is habitually resident in another country for more than 183 days in a calendar year.)
- Or, your centre of economic interests is in Spain. i.e., the base for your economic or professional activities is in Spain.
- Or, your spouse lives in Spain and you are not legally separated even though you may spend less than 183 days per year in Spain
However, where there is a conflict to determinate fiscal residency, then the Double Tax Agreement has something to say:
If you have interests in Spain and the UK and spend time in both there needs to be a way of working out where you are “fiscally domiciled”.
The double tax treaty between Spain and the UK says that where there is a conflict:
- The taxpayer is resident in the country where they have a permanent residence available.
- If they have one in both countries, it is where the centre of their economic interests lies.
- If you do not have properties in none of the countries, or it is not possible to determinate the centre of their economic interests then you will be resident where you are based permanently.
- If you are based permanently in both countries, then you will be resident in the country where you have your nationality.
Some important issues to bear in mind:
- Tax residency can be a complicated issue than first appears, and you may be resident here even if you are careful about day counting.
- It is possible be tax resident in Spain even if you do not apply for your Residencia, issued by the Foreign Office. It is your responsibility to register for, and pay, tax if you meet one of Spains tax residence rules. People who meet the residence rules, but have not been paying tax in Spain, are now being pursued by the tax authorities.
- Residents should make a tax declaration even when theres no tax to pay. That way you can be sure you have proof of being a fiscal resident when you need it. It is pretty difficult to obtain a fiscal residency certificate without having presented an annual tax declaration.
- The Tax Authority can investigate to make sure that you really have been a resident. A resident in their eyes being a fiscal one.
- Fiscal Tax Residents are liable to complete and submit taxes in Spain, such as Income Tax Return, Wealth Tax and Inheritance Tax.
- A recent agreement has been signed among the five big EU countries to interchange fiscal information. (The UK, Germany, France, Spain and Italy)
You can also benefit of some fiscal advantages of being fiscal resident:
If it can be demonstrated that the deceased had his fiscal residence in Spain, and close relatives inherit, such as the spouse or descendants, with fiscal residence in Spain, they have 99% reduction in many Autonomous communities such as Murcia. Non residents pay according to a sliding scale with tax rate starting on 7.65% up to 34%.
If the vendor is a fiscal resident, and thereafter he is able to obtain a certificate from the Tax Office, the purchaser wont have to retain the 3% of the price in accordance with law 35/2006.
Fiscal Residents for the last three years and older than 65 years, and selling property, which has been the main residency during this time, do not have to pay the Income Tax on the profit obtained.
If the person is younger than 65 years and sells the main residency he does not have to pay the Income Tax on the profit if he re-invests the obtained amount of money in buying new property as a main residency.
To be certain that you are not liable to report your assets abroad you must obtain professional advice from a qualified professional company like Corral&Alcaraz who can ascertain your liability. Contact us today.