Supreme Court amends Spanish tax residency rules

The criteria for residence for tax purposes varies considerably from jurisdiction to jurisdiction, and “residence” can be different for other, non-tax purposes.

For individuals, physical presence in a jurisdiction is the main test.

Some jurisdictions also determine residency of an individual by reference to a variety of other factors, such as the ownership of a home or availability of accommodation, family, and financial interests.

New criteria in Spain to establish tax residency for 2018

The Spanish Supreme Court, in a recent ruling of the 28th of November 2017 (only released now) has departed from the traditional understanding of the concept of physical presence the Spanish Hacienda was using to determine the place of effective residency for tax purposes.

According to the Spanish Tax Office, the main criteria of physical residence -more than 183 days spent in Spain- would not consider what they called “sporadic” stints in another country, as it was necessary then to prove effective residency in another country.

In addition, the Tax Office was introducing the subjective criteria element -what was the real intention of the taxpayer (?)- to determine effective tax residency.

The Supreme Court has now altered this notion and stipulated that residency for tax purposes, if determined solely in accordance to the effective time spent in Spain, will no longer be influenced or linked to an element of will or intention to reside abroad but to a simple day-count exercise (number of days in Spain vs. abroad), thereby eliminating the subjective component of the reasons for residing abroad in favour of the mathematical criteria.