Are you worried that you or your family are living in Spain without having declared formal residency?
Most countries have very strict rules to determine whether you are resident there or not and of course one of the main reasons for this is that residency normally dictates where you need to pay your taxes. Why is it that so many British expats have a hang up about declaring their true residential status in Spain? Do they think the tax regime is more onerous here? Do they think the authorities are going to pry into their personal affairs or is it that they just cannot be bothered and think that no one will care one way or the other?
If you haven’t established residency you need to know that under normal circumstances if you spend more than 183 days in Spain in one calendar year you are resident for tax purposes. You are also deemed resident if your centre of vital interests are in Spain i.e. you have a business here or work here. If your spouse lives in Spain and you are not legally separated you will also be deemed resident even if you personally spend less than 183 days in Spain.
This is the law and it doesn’t matter whether you have made a formal application for residency or not. The onus is on you to get it right to avoid being accused of tax evasion which can lead to financial penalties and possible criminal charges.
Britain has introduced its own residency test and you cannot be a tax resident in both countries. If there is any doubt then a tie breaker will be applied to determine your residency status. In exceptional circumstances you could spend more than 183 days in Spain and still be classed as a UK tax resident but the exceptions are few and far between.
You can of course claim to be a fiscal nomad but you need to ensure that you do not breach any country’s tax rules. HMRC and Spanish Hacienda do talk to each other so the idea that you can spend your time between UK and Spain and not be tax resident in either jursidiction will not get you very far.
Let’s face it, it isn’t that difficult for the authorities to find out where you are resident. We know Hacienda gathers information from utility companies to establsih patterns of residence when they are investigating individuals and driving a foreign plated car or sending your children to a local school is a bit of a give away.
If you are deemed to be tax resident in Spain then you are liable to pay tax here on your worldwide income, worldwide gains and worldwide assets. Shouldn’t you limit the damage by sitting down with one of our certified financial planners who can help you resolve your issues and ensure that the switch from UK to Spanish resident is as painless as possible.
Telephone 900 102 374 for an initial consultation to discuss your financial planning and residency requirements or email firstname.lastname@example.org.