Tax residence in Spain for foreigners

Tax residence is not an intuitive concept nor does it depend solely on where one lives or how many days are spent in a country. It is a legal figure of a tax nature, with direct consequences on the applicable taxes and on the correct structuring of many notarial transactions. Therefore, it is advisable to pause and analyse what is meant by tax residence, when a foreigner can be considered a resident in Spain and, above all, how it should be correctly proven.

From a tax perspective, residence determines the applicable tax. It is not the same to pay tax as a resident as it is to pay tax as a non-resident, nor are the formal obligations or the scope of taxation the same.

Who is considered a tax resident in Spain is subject to the Personal Income Tax (IRPF) and is taxed on all their income, regardless of where it was obtained.

This difference affects the tax rate, the existence or not of withholdings, and the correct settlement of taxes in notarial transactions, especially in property acquisitions, asset transfers, or international succession planning.

Tax residence is a concept defined by tax regulations, independently of other administrative or civil elements. Its basic regulation can be found in: article 9 of Ley 35/2006, de 28 de noviembre, del Impuesto sobre la Renta de las Personas Físicas, in article 6 of Ley 5/2004, de 5 de marzo, del Impuesto sobre la Renta de no Residentes, and in article 8.1 of the consolidated text of the Corporate Tax Law, approved by Royal Legislative Decree 4/2004, of 5 March, without prejudice to the provisions of the agreements to avoid double taxation.

This means that it is not enough to have or not have a residence permit, to be registered on the municipal roll, or to have an address in Spain. Tax residence is determined by objective criteria, which must be analysed jointly and coherently.

Spanish regulations establish three main criteria to determine tax residency. It is sufficient for one of them to be met for a person to be considered a resident in Spain.

The 183-day rule is the best known, but it is also one of the most error-prone in practice. Sporadic absences are counted and are only excluded when tax residence in another State is proven.

This aspect is especially relevant for people who alternate their residence between different countries or who maintain economic interests in Spain, as often happens with real estate investments by foreigners.

Even without exceeding 183 days, tax residency may exist if the main centre of activities or economic interests is located in Spain. This criterion is usually analysed with special attention in entrepreneurs, displaced professionals or people with corporate structures, an issue that we also address when dealing with the taxation of income and economic activities in Spain.

The habitual residence of the spouse and minor children in Spain generates a legal presumption of tax residence, which can be decisive if not proven otherwise.

Tax residency must be proven in a clear and explicit manner, especially when the taxation of a transaction or the justification for applying withholdings depends on it. Not all documents have the same value or produce the same effects.

The tax residence certificate issued by the Agencia Estatal de Administración Tributaria is the only document that fully certifies that a person has the status of tax resident in Spain for IRPF purposes. It is, moreover, the only document provided for by the regulations to exempt from withholding tax.

The certificate is valid whether it is issued generally or refers to the application of a Double Taxation Avoidance Agreement, since what matters is that the AEAT certifies the tax residence in Spain. It should be remembered that only the Spanish tax administration can certify such residence; a certificate issued by foreign authorities only certifies tax residence in that other State and, therefore, the status of non-resident in Spain.

According to article 75 of the IRNR Regulation, the certificate has a validity of one year from its date of issue and must be valid on the day of the authorisation of the deed. Likewise, it is essential to verify that the NIF shown on the certificate matches that of the grantor.

Since the AEAT has a period of up to 20 days to issue the certificate, in urgent situations the IRPF declaration (model 100) of the last closed fiscal year may be provided.

This document does not legally exempt from withholding, so its acceptance is always at the discretion and under the responsibility of the buyer. It certifies that the transferor was a tax resident in the previous year, but does not guarantee that they are in the current year, its value as an indication decreasing as the calendar year progresses.

Therefore, the parties must always be warned that the appropriate document is the AEAT tax residence certificate, with model 100 remaining merely an exceptional solution.

Economic activity in Spain, ownership of a main residence or other elements of attachment may reinforce the consistency of the declared residence, but do not replace or equate to the tax residence certificate issued by the tax Administration.

In notarial practice, it is common to provide documents that do not prove tax residence in Spain and that, nevertheless, are confused with tax evidence. It is advisable to distinguish between those that are not even useful as an indication and those that, without proving tax residence, can only be considered as signs of attachment, always collectively and with caution.

The NIE on white paper has an exclusively identificative purpose. Being a perpetual and unchangeable number, it remains the same whether the foreigner is an occasional tourist or has been residing in Spain for years. Therefore, it does not prove tax residence, nor non-residence, and its possession is usually indicative that the individual is not a tax resident.

Neither do the AEAT census forms (030 and 036) prove tax residence, as they are limited to communicating an address for notification purposes and do not grant the status of taxpayer for IRPF.

These are documents that prove that the foreigner is or may be in Spain, but not that they pay taxes as a tax resident. None of them, considered in isolation, proves tax residency.

The obligation to withhold or not does not depend on nationality, but on tax residence. A citizen with a Spanish DNI may, for tax purposes, be considered a non-tax resident in Spain.

In practice, when dealing with a Spanish seller who declares tax residence abroad, two situations may arise, depending on the documentation provided.

The seller can prove their tax residence in another country by means of a certificate issued by the foreign tax authority. As it is a foreign public document, it must have a Hague Apostille (or diplomatic legalization, depending on the country) and, if applicable, a sworn translation, which must be incorporated into the original.

The consular registration certificate does not prove tax residence before the AEAT, although it can only be considered as a complementary indication.

It may happen that the seller states that they are fiscally resident abroad without providing a certificate, while also holding a DNI with an address in Spain. In this case, attention must be paid to the objective fact that the seller expressly acknowledges their status as a non-tax resident, for the purposes of article 25.2 of the TRLIRNR.

In this situation, it is necessary to warn the parties of the tax consequences and recommend the practice of withholding, as a protective measure for the purchaser. If it is later proven that the seller was a tax resident in Spain, they will be the one who can request the refund of undue payments from the AEAT.

This criterion responds to the necessary protection of the buyer: when the Spanish seller states that they reside abroad, their declaration constitutes an acknowledgment of non-residence that the purchaser cannot ignore, it being prudent to act accordingly in the absence of evidence to the contrary.