s Tax in Spain

Tax in Spain – Wealth tax – Income Tax – Capital gains – Inheritance tax

 

Spanish resident for tax purposes - Information for UK expats


If you live in Spain you probably think you are resident for tax purposes but that may not be the case. The general rule is that, in any calendar year, if you spend more that 183 days in Spain then you are resident for tax purposes. However there are caveats to this. If your 'centre of interests' were deemed to be in the UK then HMRC could argue that you are responsible for tax there.

 

Tax Spain

What are 'centre of interests'? Well, you could quite conceivably spend most of your time in Spain whilst still having a house in the UK, a business or job based in the UK, children in school in the UK and/or a spouse in the UK. If all these were the case then you would almost certainly be UK resident for tax purposes. You would also be liable to tax in Spain (in theory) if you spend more than 183 days here. In practice however there is a double tax treaty in existence between the UK and Spain which ensures you do not have to pay tax twice.


If you live in Spain and the majority of your 'centre of interests' are here then you will be deemed tax resident by the Hacienda (the Spanish tax authority) and be liable to tax on your world wide assets.

 

Inheritance Tax in Spain

Inheritance task risk in Spain

Rules determining liability to UK inheritance tax (IHT) differ from the above. A liability to IHT is governed by the 'domicile' rather than tax residency of the deceased. Traditionally 'domicile of origin' is a lot more difficult to change than residency. You acquire this when you are born. It comes from where your father considered his 'real or permanent' home to be (or your mother if your parents were not married). It remains with you throughout your life unless you change it to a 'domicile of choice'. In order to make this change you would have to prove that you had left the UK permanently, made a real home in another country and had no intentions of ever returning.


Another complicating factor is the way inheritance tax liability is determined in different counties. For example, in Spain the IHT liability falls on the beneficiary –and (subject to a small allowance) this can also include your spouse. In the UK however the liability is on the estate of the deceased and there is no IHT between spouses.


Although the double tax treaty mentioned above does not in fact cover inheritance tax there is another agreement between the UK and Spain called Unilateral Relief which could have an effect on how much IHT you (or your estate) has to pay.


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Please note that every care has been taken to ensure that the information provided is correct and in accordance with our understanding of current Spanish tax law Jan 2016. You should note however, that we cannot take on the role of an individual taxation adviser and independent confirmation should be obtained before acting or refraining from acting upon the information given. The Spanish tax law is subject to change. Legislation varies from country to country and the policyholder’s country of residence may impact on the above.

patrick.macdonald@blacktowerfm.com