This article is most likely to be of interest to people planning on moving to Mallorca permanently or semi-permanently. You probably realise that, assuming you are an EU citizen, there are no barriers to living or working in Spain. But most people who have holiday homes here are tourists and remain residents of the UK or whichever country they spend most of their time in and becoming a resident of Spain will not be a consideration.
However, if you’re in Spain for a total of 183 days or more in any one calendar year, officially you’ll be classed as a resident for tax purposes – this is called becoming a ‘fiscal resident’. This 183 day allowance includes the days when you are travelling to and from Spain.
Being a ‘fiscal resident’ means you’ll be liable to pay Spanish tax on your worldwide income, whether you’ve already paid tax in the UK or not. There is a double taxation treaty between the two countries which is designed to ensure you do not pay tax twice, so the amounts will be adjusted accordingly and this is something for which you should seek advice from your tax advisor. The best solution is usually either to become a resident so you pay tax in Spain and not in the UK, or keep a careful tally of the days you spend in Spain and don’t go over the 183 day threshold.
NB. Not being a Spanish resident does not mean that you do not have to pay tax on income earned in Spain. If you earn money here, for example from a rental income, you have to pay tax on that income. Being here for 183 days or more simply classes you automatically as tax or “fiscally” resident.
There are a number of benefits to being a resident of Spain:
- Regarding inheritance taxes, as a resident if you leave your home to a spouse, child or close relative who is also a resident, you can probably avoid Spanish inheritance tax on 95% of the value of the property. There are conditions so you ought to seek the advice of your finance advisor relating to your own particular circumstance.
- If you are 65 or over and have lived in your home for three years or more you do not have to pay capital gains tax at all when you sell.
- You will be covered for full access to the Spanish healthcare system if you are a resident paying Spanish social security contributions or a resident pensioner receiving a UK state pension. (Bare in mind that if you become a Spanish resident or spend less than six months a year in the UK, you’ll lose your right to free NHS treatment.)
The process of becoming a Spanish resident
- The process for becoming a Spanish resident was simplified in March 2007. From this date you no longer require residence permits and can obtain residence status with just a quick visit to register at the National Police station.
- You should make an appointment in advance and make sure you take along your passport and a photocopy.
- If you’re registering for the first time you will also need to show your Empadronamiento, which is sometimes called the Padron Certificate. You can obtain this from the local Town Hall by taking the original of your sale or rental contract and your passport as identification. The Padron Certificate is to certify that you reside in the dwelling you wish to declare in the municipal census i.e. the local records of the inhabitants of the municipality.
- Once you’ve submitted the required documents you will be given a pay slip to take to the bank to pay the fee (this is approx €10). You then bring the payment receipt back to the police station where you will be issued with your certificate of residency (Certificado de Registro) and entered into the official register.
Non EU citizens
If you’re NOT an EU citizen you should contact the Spanish embassy in your home country BEFORE travelling to Spain to enquire about specific rules that apply to you. Regulations differ depending on the country concerned, so it’s important to check.
