dual residence and fiscal residency

[cerro]

I am dual resident in UK [more than 90 days per year for last few years] and in Spain [more than 183 days per year]. According to my understanding of the UK/Spain Double Taxation Convention 1975, Article 4, I am fiscally resident in UK on account of having available accommodation in both countries and having my centre of vital interests in the UK [family, income from managed rental properties in the UK etc]. Consequently I pay tax in the UK as a UK resident and non-resident tax in Spain. Is this correct ? Do I need to register as being resident in Spain although I believe I am fiscally not resident in Spain ? Do I need to obtain a certificate of residence from HM Revenue and Customs to convince the Spanish tax authorities ?

[El Cid]

Yes, you will be deemed to be tax resident in the UK under the terms of the tax treaty.

You do not register for tax residency as such but if you spend more than 90 consecutive days in Spain then you have to register on the register of EU foreigners. This has nothing to do with your tax residency.

To avoid the unlikely event that the Spanish tax office might challenge your tax residency status a certificate of UK tax residence would be useful to have.

Sid

[Enrique]

Hi El Cid,
"and in Spain [more than 183 days per year]"
so how does that not equate to being Tax resident in Spain

[El Cid]

Because that is what it says in the treaty.

If you are tax resident under the rules of both countries, tie breaker rules come into effect and if your centre of economic and personal interests are in the UK then you are UK resident.

If all things are equal and they cannot agree your status, nationality takes precedence.

The situation often occurs as you can be deemed tax resident in the UK after only 90 days but 183 days in Spain so clearly you could qualify on both counts.

Sid

[Julie]

Now I am totally confused We would like to spend more than 6 months in Spain at times, but I thought that now we would have to spend 6 months in each place, because I don't want to get involved in the Spanish tax system, am I reading this right, that is not the cast, because we own properties in UK and our families are there, does that mean we don't automatically have to do our taxes in Spain as well as UK ? And we can stay in Spain for 9 months if we wish ? Sorry if I have got this all wrong

[Enrique]

Julie........that's the way I've been reading in on The Forum....confused too

[Julie]

I like to go over until I am fed up, so anything from a month to 12 month at a time, but I consider my home to be UK, and def don't want to get involved in the tax system in Spain as well as UK
Be nice to still have a choice, both places get plenty out of us in general spending

Hope someone Sid ja ja can tell us what it is that is legally ok.

[cerro]

Yes, you will be deemed to be tax resident in the UK under the terms of the tax treaty.

You do not register for tax residency as such but if you spend more than 90 consecutive days in Spain then you have to register on the register of EU foreigners. This has nothing to do with your tax residency.

To avoid the unlikely event that the Spanish tax office might challenge your tax residency status a certificate of UK tax residence would be useful to have.

Sid

Thank you Sid, that was very helpful, but where do I register on the register of EU foreigners ?

[El Cid]

It really isn't as simple as it might seem.

If you spend more than 183 days in Spain in one calendar year you will be deemed, by the Spanish taxman, to be tax resident in Spain.

However HMRC in the UK may, if you spend more than 90 days in the UK, deem you UK tax resident.

That is when the taxation treaty comes into effect and this is what it says about the situation.

Where by reason of the provisions of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:
(a) He shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);
(b) If the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(c) If he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
(d) If he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

HMRC can even argue that you are tax resident even if you spend less than 90 days in the UK.

http://www.blevinsfranks.com/EN/news/10 ... tegoryPK=0

For most people it isn't an issue. There aren't too many differences between the taxation in both countries. Usually it is a situation where wealthy people with worldwide income all over the world, want to avoid UK tax and HMRC don't want them to, hence they insist on the rules so that they can treat them as UK resident.

So, if you do spend more than 183 days in Spain then they will deem you to be tax resident. If you feel that you would be better off claiming UK tax residency for all the above reasons then you can take it up with both tax authorities to agree where you are resident. This could be a very long winded negotiation.

If you are trying to escape the UK taxman then he will apply the tax treaty rules and again you will have a hard time trying to change their view on your residency.

For most of us the normal rules apply. If you want to avoid being tax resident in Spain, only spent less than six months there. It would be unwise to exceed that period and rely on the treaty to get you off the hook unless HMRC really wanted you to remain UK tax resident.

Sid

[El Cid]

Thank you Sid, that was very helpful, but where do I register on the register of EU foreigners ?

At your local office of the Policia Nacional.

Sid

[Julie]

Its not a case of trying to avoid paying tax, its the messing about with it, Pay the accountant enough here without having to pay another one over there , We will just stick to the time limit from now on, don't fancy the multas

Thanks for the reply

[Enrique]

Thanks for that Sid,
Would be good to add that info to FAQ's as its always coming up...........

[cerro]

Thank you Sid. From my understanding of your last reply if I continue to spend >90 days in UK and >183 days in Spain, and despite being considered UK tax resident after applying the 1975 UK/Spain Double Taxation Convention tie breakers, the Spanish tax authorities might still consider me to be tax resident in Spain. So what is the value of the UK/Spain Double Taxation Convention ?

I really don't want to become embroiled in tax discussions with the UK and Spanish authorities. I wish to do what is legally required, but would prefer, if possible, to continue spending >90 and >183 days in UK and Spain, respectively.

At the moment I am not registered as resident in Spain because I am resident for tax in the UK and pay non residents' tax in Spain. I can register on the Foreigners Register as you recommended, but should I also register as a Spanish resident ? I am not sure whether Spain recognises the difference between physical residency and fiscal residency ?
Cerro

[El Cid]

Signing on the foreigners register does not imply tax residency, only the 183 day rule will do that.

If you exceed the 183 day rule you are deemed to be tax resident - it is not a question of registering.

If you wish to register as tax resident it is possible to do so using Form 030 but it is not mandatory.

A point that many people overlook is the fact that income arising in the UK is taxed in the UK irrespective of residency. The same applies in Spain. The exceptions to this are very limited and are covered by the treaty. The income concerned is pensions (except UK government pensions) royalties and interest. They will be taxed in the country of tax residence. Any other income is taxed in the country where it originates.

So, unless you have income from outside the UK or Spain residency isn't really an issue. However just because income remains taxed in the country of its origin doesn't mean that it isn't taxed in the country of tax residence. To avoid double taxation on the same income you are usually allowed to offset tax paid in the country of its origins against tax paid in the country of residence.

Also the UK residency rules are changing shortly. They have always been confusing and HMRC are about to issue a new Statutory Residence Test which will clarify the situation but in some cases you may be deemed UK resident if you spend even a few weeks there.

There is a lot of information if you Google for it but this article covers it pretty well.

http://www.globaltaxnetwork.co.uk/compa ... -test.html

If residency is a major concern to you, you need to consult a professional tax advisor.

Sid

[Martin Page]

I am in this exact situation .. and have given up asking for clarification from either country. Neither will give you a definitive certified answer. I have tried and tried again ....

Eventually I have 'interpreted' the rules myself , And I agree totataly with Sids breakdown. I have declared myself fiscally resident in the UK with the Spanish Hacienda despite haveing a residency bank Account. and I pay 'wealth' tax here, since All my 'income and business' is UK based and often taxed at source.

It is easier to beg forgivness than it is to get permission.... is the philosophy I have adopted for here im Spain !

This is particularly pertinant if you have assets outside the UK or Spain, since you have to declare ALL your world assets under Spanish legislation

[cerro]

Hello Martin.So did the Spanish tax authorities accept your claim of being UK tax resident even though, I presume, you spend more than 183 days in Spain ?
I don't understand why you need to pay wealth tax if you are fiscally resident in UK, or is it just wealth tax on your Spanish assets ?
I am becoming more and more confused !

[alpujarran]

Thank you Sid, that was very helpful, but where do I register on the register of EU foreigners ?

At your local office of the Policia Nacional.

Wouldn't cerro need private health insurance to do this? Seems a bit harsh when already paying into the UK system. Even worse, the UK payments might not even qualify for NHS treatment:

"Entitlement to Free NHS Hospital Treatment (PDF)
As entitlement to NHS hospital treatment is primarily based on UK residency, if you have been living outside the UK for more than 3 months in the last year, or 6 months if you are a pensioner living in another EEA member state, you may be charged for your healthcare unless:"

. . . with not many suitable "unlesses" to choose from.

maybe: "You can provide evidence you are a missionary overseas working for a UK based organisation."

[El Cid]

Wouldn't cerro need private health insurance to do this? Seems a bit harsh when already paying into the UK system. :

Yes, quite probably because if he insists that he is UK resident then they would not issue a S1 form which would be the normal route for someone who moves to Spain and been paying NI contributions.

You can't have it both ways.

Sid

[gus-lopez]

Wouldn't cerro need private health insurance to do this? Seems a bit harsh when already paying into the UK system. Even worse, the UK payments might not even qualify for NHS treatment:

" Payment of tax or National insurance in the UK in no way entitles a person to healthcare." As it is a residency based system , only feet on the ground.

Nor does owning a house paying rates, council tax etc.