Spanish Taxation – Myths and Stories

Over many years of advising clients as an IFA in Spain, I have heard many myths and stories that people believe to be genuinely true. Here is a selection of the most popular.

• I pay my tax in the UK/France/Germany etc. My income is taxed automatically. We may have tax deducted at source in our home country but we still have to account for it in Spain too, as our worldwide income is assessed in Spain. This does not mean that you will pay tax twice. Spain has double taxation agreements with 103 other countries which means if you have paid tax in one of these countries, it will be credited against any tax due in Spain.
• choose to be UK/France/Germany tax resident and I complete a tax return in my home country. You may indeed have to complete a tax return in your home country when, for example, you have a property rented out in your home country. However, that does not remove the obligation to also complete a Spanish return too. Your residency is a matter of law, we cannot “choose” where we are tax resident if we meet the requirements in Spain.
• I won’t tell the Spanish I am here permanently. I will tell them it is just a holiday home, they will never know. It may have been possible to do this some years ago but not now. When we fly in or out of Spain we have to give details of our passport and this information is recorded. We have also had one case where the Guardia turned up at the door of a client with his water, electricity and phone records and saying they could see from these that he lived in Spain. If the Hacienda start an investigation, they also have access to your bank account and credit card information. With the advent of the double taxation agreements Spain can also seek similar information from your home country too.

We advise that you take advice from a properly qualified tax adviser in Spain. To find an adviser to assist you with the Spanish Tax Return or to see if you can reduce your income tax on your investments please contact Barry Davys