According to the Spanish Law all individuals who are living in Spain for more than 183 days a year are tax residents in Spain and have to pay taxes in Spain for their worldwide income.
Many foreigners living in Spain permanently, (for more than 183 days a year), do not pay any taxes in Spain, or submit annual income tax returns. Some do not submit annual tax returns out of ignorance of the law, and others because they are afraid of paying high taxes. Everyone should be aware that ignorance of the law is no excuse, A Tax return should be submitted annually, and taxes should be paid when applicable by all tax residents in Spain.
Up to date, the Spanish Inland Revenue has not been controlling the situation of those foreigners living permanently in Spain, despite the fact that authorities are aware of this important group of people. Now the situation has changed, due to the financial crisis, the Spanish Government intends to tighten up its control of all foreigners living in Spain to ensure that they pay taxes in Spain where due, and thus avoid thousands of people receiving free health services without paying taxes and without having the legal right to get them. The Spanish Government has decided to be stricter with the legal requirements that allow people to get Spanish health cards. Unlike in the past, now it will not be enough to just register with the local Town Hall (called “Empadronamiento”) in order to get treatment.
Therefore, NOW is the time to formally become a tax resident in Spain by submitting your annual income tax return for the tax year 2017, This should be done during the months of May and June 2018.
There are many good reasons for doing this. It will enable foreign residents to:
- -Confirm to the Spanish tax authorities without doubt, that they, the tax resident, is living in Spain, and paying taxes when applicable.
- -Have the legal right to receive a health card which allows access to the Spanish Public health system.
- -Avoid the 3 % withholding tax when a real estate property is sold. This tax is applicable to foreigners who sell a property and cannot prove that they are a tax resident in Spain.
- -Benefit from the inheritance tax advantages and allowances applicable to tax residents in Spain (i.e. no inheritance taxes between spouses on the main home).
- -Be considered a tax resident in Spain, thus avoiding the income tax applicable to non-resident foreigners who are owners of a real estate property in Spain (tax form 210).
It is important to mention that most foreigners living in Spain are pensioners with low monthly pensions, so they should be aware that they probably will not have to pay any income tax in Spain as the result of their tax return would most likely be zero. However, it is still recommendable to submit an annual tax return, (even if the result is zero and no tax has to be paid), to enable them to be able to take advantage of the above points.
CONCLUSION: If you are foreigner living permanently in Spain (for more than 183 days a yea) we would recommend that you submit an annual income tax return during the months of May and June for the tax year 2017. By doing this, you will confirm to the Spanish Tax Authorities that you are, without doubt, a tax resident in Spain, you will avoid any potential problems or fines, and will have all the legal rights that the Spanish Laws recognizes are due to all individuals residing legally in Spain and duly paying their taxes here.
For further advice on this matter or to arrange a no obligation meeting to discuss your particular circumstances in detail, please contact us
Jose M. Lopez-Avalos
Tel. (00 34) 952 901 225
Fax.(00 34) 952 901 226