What Are The Benefits Of Becoming Tax Resident In Spain?
The question is asked very often and incorrectly assumes that the individual has a choice. The basic answer is that a person who spends more than half the year in Spain is obliged to register as tax resident and declare their worldwide income and assets to the Spanish authorities. The obligation to submit the returns is upon the individual however, and some choose to ignore the issue altogether. It may well be beneficial to submit tax returns as a resident and I have set out a couple of examples.
Taking Spanish IHT as an example, where the deceased and beneficiary have been tax resident in the Valencian region for at least 5 years, and are close relatives such as spouses or parents/children, in most cases the Spanish inheritance tax payable will be significantly reduced. The amount of inheritance tax payable is calculated according to the relationship between the deceased and the recipient although it is not possible to set out the various different bands in this article. A tax return has to be completed and sent to the Spanish tax office and the necessary taxes paid. This reduction can only be applied where the deceased and beneficiary have submitted the returns. Possession of a residencia card or the new green residencia certificate is not sufficient – only tax returns as a resident will suffice.
A person aged over 65 who is tax resident can normally obtain significant Capital Gains Tax benefits when they sell their property in Spain. Again, only by submitting the returns can this allowance be applied.
A very common oversight is to not file a return because the individual understands that they are below the tax threshold in Spain. People often say to me ‘my UK pensions are taxed at source so I cannot file a return in Spain’. This is totally wrong. The individual can, and very often should, complete a Spanish return including the UK pensions (which will not be taxed twice) and if necessary submit a nil return in Spain in order to demonstrate that they are tax resident here.
You can call Carlos Baos or myself on 966-426-185, or send an email to
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if you wish to discuss this or any other issue.
Marc White LL.B. (English Solicitor) C/Diana 19,2nd Floor, 03700 Dénia. © White & Baos 2009 – All rights reserved.
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