The main rule is that independently from your nationality, you become tax resident in Spain when you live in Spain for more than 6 months in a calendar year or when the centre of your vital interests is here in Spain. This is the critical moment when you start paying taxes in Spain for the worldwide income regardless where the income is obtained.
Where and how do you declare your residency?
There is no-one assigning the tax residency for you automatically. You or your advisors will apply the tax residency rules and make the tax declarations according to the facts. The country that is not happy with your declaration may ask you to prove that what you declared is true. Normally only the country that loses you as a tax resident, may have some issues. If you for example do not live in Spain for 186 days, but do declare here your taxes as a tax resident, Spain will most probably not object or conduct any tax inspections.
How do I prove my tax residency if asked to do so in a tax inspection?
If you need to prove that you are (or not) tax resident in a certain country, any proof is valid: stamps in your passports, a tax residency certificate from one country (other countries normally respect that), credit card statements to show where you spent your money, gym memberships, rental contract, utility bills in your name…
If your residency is in a tax haven (Andorra, Monaco, etc.), it is not enough to show that you stayed away from Spain for more than 6 months, but that you actually lived in the other country for 6 months.
How can I use my tax residency as a tax planning tool?
If you live and work permanently in one country, you have a house there, your family lives there, etc; there is nothing much you can do. Don’t get creative.
On the contrary, you may have some room for tax planning for example regarding the tax year when you are moving from one country to another. Should you move in June or July, before or after the 6 months term limit of that particular tax year?
Also, in a case where you travel a lot, work in different countries, have houses or family in many places, etc. you may have some room to choose in which country you want to declare being tax resident.
To make the right choice regarding the tax residency when it is not obvious and 100% clear, you of course need to know in which country you pay less. If you want us to help you to find out, our tax team is ready with their Excel Sheets to make the convenient comparisons so that you can make informed decisions.
