First, we must differentiate European and non-European citizens. Indeed, only European citizens may live in Spain and become aSpanish tax resident. People from other countries cannot live nor obtain the tax residence in Spain. What are the conditions to become Spanish tax resident? The Organization for Economic Cooperation and Development OECD considers 3 criterions to determine the tax residence of an individual.
- First, people are generally resident for tax purposes of the country where they have their main home. It refers to the place where they live on a long-standing basis.
- However, a person may have two homes in different countries. In such a case, he /she shall be a resident of the State with which his personal and economic relations are closer (family, professional activity, etc).
- Finally, if those two criterions cannot help to determine the tax residence of someone, the authorities consider the time spend in each country. In this view, the Spanish legislation declares that any people living in Spain more than 183 days a year is Spanish tax resident.
Any people meeting one of these conditions is resident for tax purposes in Spain. Then, he/she must pay Spanish social contributions. One cannot pay the contributions in another country than the one he is living in. For example, an English citizen that becomes Spanish resident cannot keep paying the social contributions in his home country.
What are the advantages of becoming tax resident in Spain?
A Spanish resident pays the income tax (called IRPF, Impuesto sobre la Renta de las Personas Físicas) as well as the employer’s contributions in Spain. While Spain is one of the most developed European countries, it offers an advantageous taxation system.
Indeed, a Spanish tax resident and business manager must pay employer’s contributions: In Spain, they are fixed – 254 euros per month – and do not depend on the salary. The Spanish taxation system points out to be a real asset when starting up a business.