Tax residency in Spain: understanding the concept

Tax residency is directly linked to tax obligations: as one of the most important legal aspects, it determines which taxes and in what amount a taxpayer must pay.

In Spain, tax resident status is assigned by the Tax Agency (Agencia Tributaria) to foreign nationals who stay in the country for a significant part of the year and/or have economic interests there. This entails obligations to pay certain taxes and submit informational returns. Separate criteria apply to determine tax residency for legal entities.

Tax residency of individuals in Spain

The determination of tax residency in Spain is governed by Article 9 of the Personal Income Tax Law (Ley 35/2006 of 28 November).

If an individual is considered a tax resident of Spain, they are required to declare and pay taxes on all income earned both in Spain and worldwide.

Criteria for determining tax residency of individuals in Spain

An individual is considered a tax resident of Spain if any of the following conditions are met:

• The individual spends more than 183 days in Spain during a calendar year. Temporary absences are counted unless the person proves tax residency in another country (typically with a tax residency certificate). In offshore cases, the Spanish tax authorities may require proof that the person actually stayed there for at least 183 days. Trips to Spain under cultural or humanitarian agreements carried out free of charge are not counted.
• The main center or base of economic activity or interests is located in Spain, directly or indirectly. This refers to where most investments are concentrated and where business management is carried out. It is not necessary to prove that assets in Spain exceed all others globally—only that they are greater than in any other single country.
• The Spanish tax authorities may also consider a person a tax resident if their legal spouse (without legal separation) and dependent minor children reside permanently in Spain.

Spanish citizens who prove residence in an offshore jurisdiction for more than 183 days remain subject to personal income tax (IRPF) in the year of change and the following four tax periods.

An individual is considered a tax resident or non-resident for the entire calendar year, from January 1 to December 31, since a change of residence does not interrupt the tax period.

How the 183-day period is calculated

The calculation of time spent in Spain often raises questions. Are arrival and departure days counted? Are short trips abroad excluded?

According to the tax authorities, any day in which a person is physically present in Spain counts as a day of stay:

• no minimum number of hours is required;
• overnight stay is not required.

Even if a person proves they were abroad on the same day they were also in Spain, that day still counts as a day in Spain (“1-1 principle”).

Transit days through Spanish airports also count as days in Spain if customs or immigration control is passed.

Double taxation agreement

Double taxation treaties (DTTs) signed by Spain refer to each country’s domestic legislation to determine tax residency.

Since countries may apply different criteria, a person may be considered a tax resident in two countries simultaneously.

In such cases, treaties generally apply the following rules:

• Tax residency is assigned to the country where the individual has a permanent home.
• If a permanent home exists in both countries, residency is determined by where closer personal and economic ties exist (center of vital interests).
• If this cannot be determined, residency is assigned to the country of habitual residence.
• If the person resides habitually in both or neither country, nationality is considered.
• If nationality does not resolve the issue, competent authorities decide by mutual agreement.

Proof of tax residency status

Tax residency is confirmed by a certificate issued by the competent tax authority of the relevant country. It is valid for one year and must be renewed annually.

Within the EU, most countries apply similar criteria to Spain. Therefore, if a person spends more than 183 days in Spain, it is unlikely they will obtain a certificate from another country.

A person may have a residence permit in a country without being its tax resident. A certificate from another country confirms that the individual should not be taxed in Spain as a resident. With such a certificate, Spanish tax authorities will not treat them as a tax resident, even if they stay more than 183 days.

Tax residency of legal entities in Spain

A legal entity is considered a tax resident of Spain if any of the following conditions are met:

• It is incorporated under Spanish law.
• Its registered office is located in Spain.
• Its place of effective management is in Spain (where business decisions and control are exercised).

The Spanish tax authorities may treat an offshore company as a Spanish tax resident if:

• its main assets consist of property or rights located in Spain;
• or its main activities are carried out in Spain.

This rule does not apply if it can be proven that effective management is carried out in another country for genuine economic reasons.

If a double taxation treaty applies, a company is considered a tax resident only in the country where its place of effective management is located. As with individuals, residency is confirmed by a certificate valid for one year.