Becoming tax resident

For Americans moving to Spain, it is worth reading the US-Spain tax treaty. Depending on your circumstances, you might not become a tax resident of Spain, even if you meet any or all of the criteria that Johncar details above.

Note: this does NOT mean you can avoid all tax considerations in Spain- you might still need to file declarations or even tax returns (and owe taxes!) based on your individual situation.

But if you continue to have a permanent residence available to you in the United States, as well as having one in Spain, then the treaty specifies that you will be considered a "resident" of the nation where most of your financial interests are. If you keep most of your money in the US, then you will remain a resident of the US.

This has tax implications for a variety of things, so be sure to consult with a Spanish tax expert to be sure you stay within the law in Spain under this circumstance.

Hello Papa

This is the same tax treaty that Tressa is trying for when BREXIT completes.

There's actually a newer version of the US/Spain treaty that's been written and agreed upon, but it was under the Obama Administration and the US Senate needs to ratify it.

Unfortunately, given our internal political situation, the odds of it being ratified are about zero since it was under Obama that it was negotiated. It's a shame, it's not an ideological type of document and should be put into place to aid citizens of both nations, in my opinion.

Hopefully the UK can negotiate a similar treaty in time to keep the situation clear after Brexit- assuming Brexit still happens.

[i]
Hopefully the UK can negotiate a similar treaty in time to keep the situation clear after Brexit- assuming Brexit still happens.[/

The present agreement was only signed in 2013 so I would not envisage any reason to renegotiate it in the near future

Just read through the tax home part of the treaty, and depending on how one interprets the language, it does seem that under certsin conditions one could declare a tax home in the country where one's finsncial base is, under the condition that one has a habitual residence in that country. In my case in particular, I own a home in the US, and almost all my earnings are from the US. However, some of the terms in the treaty might make for a court case on interpretation. For example, if I own a home in the US, but it is occupied by someone else,; a tenant or family members, is it a habitual residence for me? As a retiree in Spain, I use the Spanish health care system as well as the rest of the Spanish infraestructure, and I feel that my taxes should be paid to Spain, even if the rate is higher than the USA.

Hi,
I'm thinking of moving to Spain. I have a property to sell in the UK which is my only residence. I will make a Capital Gain on the sale but won't have enough left to enable me to buy a property in Spain. My plan was to sell and then rent in Spain with some money left in the bank for a rainy day and to cover funeral expenses.
I am over 65 years old and was wondering if this would mean I am exempt from CGT in Spain?
If not would I be correct in assuming that if I sell my UK house in October 2018 I will need to wait until January 2019 before I start my move to Spain?
Thanks
John B

Digger as you said do not MOVE to spain until the January

If you have an OAP that will be sufficient income for residence status and you should qualify for health cover though DWP with a form S 1.  If in doubt call DWP and ask.  If you are covered then so too would be your spouse even if well under retirement age


In Spain if one is resident, has lived in a property for at least 3  years and are 65or over then in spain one is excempt from CGT.

Thanks johncar.
I've read so much conflicting advice and just wanted to be extra sure. It's a lot of money when one considers I am exempt from CGT in the UK if I remained in the UK. A lot of people were confusing me with the 183 day rule. I assume Spain uses Jan to Dec as it's tax year and not April to April as over here.
So really it's a question of timing and making sure I sell my home before the New year as I don't want to have to wait another year before I move, Besides there's all the uncertainty about Brexit if it ever happens.
I am single but good to know I could cover medical expenses for a spouse should the unexpected happen when I have some spare cash in the bank...haha.
Thanks once again.
John

I got married when I was 66 my wife is 32 years younger than me. That is how I know

digger79 wrote:

So really it's a question of timing and making sure I sell my home before the New year as I don't want to have to wait another year before I move, Besides there's all the uncertainty about Brexit if it ever happens.

The biggest thing worth noting (in my opinion) about Brexit is that it's important to have residency established prior to the end of the transition period. Right now, the draft agreement between the UK and the EU says that those people who had residency in the EU prior to that date (31 Dec 2020) will continue to retain rights as they have currrently; but after that date, the EU or member nations might decided to treat UK citizens differently.

If they do, then many things might change in terms of tax law, required income/resources to live in Spain, and so forth. Many UK citizens are shocked to learn that non-EU people need to show an annual income of around 26,000 euros a year for the first family member and then an additional 6400 euros per year for each additional family member.

When you do your planning, please do keep this in mind and ensure that you arrive long enough before that 31 Dec 2020 date that you can get the residency and so forth.

It appears digger will have the state pension for U.K. and thus probably will be qualified to get health cover via an S1 so he should be able to obtain EU citizen registration almost immediately.  So well before 29th March 2019

However digger you would be wise to open a bank account in spain at least 3 months prior to making an application and have your OAP paid directly by DWP into it.  That way you will be able to prove the income over at least three months with just a statement from the bank

Thanks and duly noted.

Thanks.

@PapaLima and Johncar
Hi again,
I have been having another thought about this. Are we talking about tax liability as a result of applying for residency? I mean what if I move over and then after a few months decide it's not for me?
For instance if I complete the sale of my only residence in the UK in October and then move to Spain in October with the intention of living there permanently but don't apply for residencia until January would I still be liable for Spanish CGT?
Obviously  I would need to have a bank account in Spain but could apply for a non resident account and switch over once I become a resident.
I could also delay form S1 until such time as I apply for residency and rely upon EHIC in the interim.

I know it might appear as semantics but don't MOVE OVER come to stay for a couple of months.  Then after 31 st dec if you decide to stay move here.   That way you will not be tax resident In the year you sold up in U.K

As you mention the S1 I assume you will be getting the OAP.  I suggest you have that transferred to your non resident bank account.

Firstly it is the very best exchange rate and you will be able to use your Spanish bank account statement to prove your income when you register on the EU Citizens Register

All the best
       john

digger79 wrote:

I have been having another thought about this. Are we talking about tax liability as a result of applying for residency? I mean what if I move over and then after a few months decide it's not for me?
For instance if I complete the sale of my only residence in the UK in October and then move to Spain in October with the intention of living there permanently but don't apply for residencia until January would I still be liable for Spanish CGT?
Obviously  I would need to have a bank account in Spain but could apply for a non resident account and switch over once I become a resident.
I could also delay form S1 until such time as I apply for residency and rely upon EHIC in the interim.

My understanding is that "tax residency" and "residency" (in the sense of becoming a registered resident as an EU citizen) are two different things, and that there's a multi-prong test for what it takes to become a tax resident.

This article (https://www.blevinsfranks.com/news/blev … ence-spain) from a legal firm that specializes in Spanish tax issues (and, more specifically, they have a lot of UK clients) seems to say that you wouldn't become tax resident in Spain until you've been living there more than 183 days anyway- so if you moved in October you wouldn't have anything to fear. In fact, if you moved in mid-July you'd be okay, because you wouldn't hit the 183 day issue.

But if you sold everything in the UK and wrapped it all up and moved, the Spanish tax authorities would probably have an argument that you qualify as tax resident under the "center of economic or vital interests" test, because of the move of most of your life.

So John's advice to stay out until the new year is probably a good idea; or, as he suggests, when you first come do NOT make it a permanent move (ie, don't register for residency). Keep your "vital (or economic) interests" in the UK, don't become an official resident, etc.

That would probably be the safest way to ensure that you do not appear on the Spanish tax authority radar. 

It's also worth noting that if you leave Spain (permanently, not on a short-term or temporary basis) prior to 183 days in a year then you wouldn't be tax resident for that year, either.

So, in theory, you could probably move in the second half of one calendar year (say, August of 2018) and then stay through May of 2019, and you wouldn't have more than 183 days in EITHER calendar year, and could then move away.

(Of course, if you stay over a certain amount of time in a row, you are supposed to register for residencia, which could be seen by the authorities as moving your vital interests even if you kept all of your money out of Spanish banks. Many, many Brits do not bother registering, of course; this is not what Extranjeria or the police would advise, and it's not what the "official" advice would be from organizations who help EU residents, but the facts of life are that many people live in Spain without going through formalities.)

In any case, coming late in the year and giving it a few months is not a bad idea. Transitioning to a new place to live, with a new language, etc can be difficult and lots of people wind up going elsewhere.

Papa you have totally misunderstood the info on the Blevins Franks web page

The 183 rule is but one rule.   

Note;     quote You are resident in Spain for tax purposes if any of the following apply:

1   You spend more than 183 days in Spain in one calendar year. This is whether or not you take out a formal residence permit. These days do not have to be consecutive. Temporary absences from Spain are ignored for the purpose of the 183-day rule unless it can be proved that you are habitually resident in another country for more than 183 days a calendar year,

2  Your “centre of economic interests” is in Spain, i.e. the base for your economic or professional activities is in Spain.

3   Your “centre of vital interests” is in Spain – i.e. your spouse lives here (and you are not legally separated), and/or your dependent minor children do. In this case you are presumed Spanish resident, unless proven otherwise, even though you may spend less than 183 days per year in Spain.

Johncar, you appear to have not read my post completely. In addition to the 183 day rule, I also pointed out:

But if you sold everything in the UK and wrapped it all up and moved, the Spanish tax authorities would probably have an argument that you qualify as tax resident under the "center of economic or vital interests" test, because of the move of most of your life.

I also pointed out that it is a "multi-prong" test, meaning there were more things that could qualify someone as a Spanish tax resident than only the 183 day rule.

Hi.
I am British and a UK taxpayer.
My intention is that I will buy a property in Spain and will still own other property in the Uk. I will keep a house in the UK for us to live in when we are there, it won't be rented out the rest of the time and we will pay UK tax on all our income. Possibly we might have a holiday rental unit or two in Spain and would intend to pay Spanish tax on those.
We will have a Spanish registered car mostly used in Spain and a UK registered car mostly used in the UK but will probably drive them back and forth.
We would buy medical insurance in Spain just as we currently do in the UK (only to avoid waiting lists here though)
Our income from our UK property should be sufficient but we also have capital held offshore, my understanding is that Spain would tax the actual capital should be become spanish resident for tax purposes whereas the UK (at present) only tax any income from the offshore capital ?
I had assumed that I would need to make sure that I didn't stay in Spain for more than 183 days in any calender year but was wondering how I would prove that as I also spend time in France and obviously there is no border as such.
In due course I will need an English speaking tax adviser in Spain, I speak enough Spanish to get by day to day but not nearly enough for tax or legal matters
Any advice on the above plan most welcome, the previso of course being Brexit !
Paul

It could appear you intend to live in spain making it your main home although you do not make it absolutely clear

If that is so then you will be taxable in Spain on your worldwide income   In that case the 183 day rule does not apply.

See the  DTA of 2013 between Spain and U.K.

If you clarify the position then I will be more specific

Thanks John for your speedy reply.
Its hard to say at this stage, I also have a boat in Greece and spend four to five months a year there. I would appear to the UK tax authorities to be UK tax resident as I would have a house here ,be on the electoral role and have business here in that I own and rent out commercial property in the UK and pay tax on that income ,although even now I'm not in the UK for 183 days most years.
I would have ‘centres of economic interest' in the UK,Spain and depending how drawing income from invested capital is viewed ,the channel islands as well . Although the UK financial interests are the largest
Paul

Hi it's me again.
I've been looking at income tax liability which was prompted by Pablo99's posts above.
Setting aside my house sale in the UK which wont happen until Xmas this year I am trying to work out my day to day living expenses for when I rent an apartment in Spain.
My total annual income which is a state pension plus a works pension comes to 16,500 euros. I understand that there is a personal allowance of 6700 euros for my age bracket. So does this mean I will be liable to tax on the 9800 balance at a rate of 24%? This is quite a hefty chunk and equates to nearly 200 euros per month leaving me with about 1175 to live on before rent.
I will have a rainy day fund of about 30k to dip into after the sale of my UK house but that will have to see me through until the grim reaper pays me a visit.
John

It Would appear you will pay 19% on that income

See. https://home.kpmg.com/xx/en/home/insigh … e-tax.html

Pablo

For most people it is fairly easy to determine between Spain and other countriues  where their centre of economic activities is.  For those confused between UK and Spain, HMRC and AEAT will liaise to determine their situation.  Thus no one can in effect be a legal tax nomad.

For sure if one is determined as resident in Spain then, subject to DTA's,  they are liable to tax on their worldwide income,  and if sufficient on their worldwide wealth too.

Between UK and Spain, Crown Pensions and income from property let in UK is only taxable in UK, however,  even then the C.P.  is 'taken into consideration' in Spain,  often meaning more tax to pay,   so it must be declared in Spain, and letting income from UK may be subjected to a top-up tax in Spain,

If tax resident in Spain, one is liable to imputed tax on all other properties gthey own, in addition to their main home in Spain,  That isso  whether they are located in Spain or elsewhere.   My wife owns a property in Philippines, we pay the imputed tax (second home tax) to AEAT (Hacienda) on that un-let property,     I have a lock up-garage in Spain separate from my main home,   I must pay the imputed on that.

Digger,

If you come to live in Spain in the calendar year in which you sell your UK property you may be liable to CGT in Spain.  If you do sell in that period, I strongly suggest you take good legal advice re that,  Common Sense / logic does not usually apply in Spain.


PS  Breixt may make UK nationals' tax liabilites even worse !

Johncar.
Thanks for your replies. I am hoping to sell my house before xmas but will delay coming over until January which will take care of the CGT liability.
Brexit is another kettle of fish and I think the UK govt are doing a wonderful job of doing nothing ha.
Presumably once I apply for official residence my taxable income will be treated the same as any other non EU resident currently living in Spain.