The Spanish General Directorate of Taxes (GDT) ignores the OECD recommendations of not taking into account the days of presence in a territory due to the state of alarm and computes them within the 183 days period that is used to determine the tax residence of individuals in Spain.
Thereby, individuals that, without the purpose of staying in Spain, have been obliged to remain due to the mobility restrictions, can qualify as tax residents in Spain, and be subject to Spanish taxation on their worldwide income.
The GDT sets a criterion that, if it is not reviewed, may oblige many individuals to modify their taxation in Spain in 2020.
✔ Spanish tax residence of individuals is determined, according to our domestic regulations, when one of the following two requirements are met:
- The individual stays in Spain for a period exceeding 183 days in a calendar year.
- Spain is the individual’s centre of economic interest.
In a recent binding consultation (1983 – 20 of June 17), the GDT resolves on a case of a married couple tax resident in Lebanon who arrived in Spain in January 2020 for a three months holiday trip but who, due to the state of alarm, were not able to go back to their country, at the time they filed the consultation at the beginning of June.
✔ The married couple declare that they do not habitually receive Spanish source income and that they do not stay in Spain for a period exceeding six months either. In other words, they are individuals who do not meet any of the Spanish legal requirements to qualify as Spanish tax residents. Their permanence in Spanish territory is due, exclusively, to the mobility restrictions imposed by the State of alarm.
✔ The General Secretary of the OECD in its document “Analysis of the Tax Treaties and the impact of the COVID 19” proposes the Tax administrations taking into account the exceptional circumstances of the pandemic and to carry out their physical presence proofs considering time periods superior to those established in their domestic regulations.
In relation to the permanence criterion for a period longer than 183 days, the GDT does not take into account the OECD recommendation and concludes that the days spent in Spain by the couple due to the State of alarm would effectively be taken into account. Consequently, should they stay for a period longer than 183 days, they would be considered as Spanish tax residents.
✔ It is worth mentioning that there is no Double taxation treaty currently in force between Spain and Lebanon. This would imply that, in the event the individuals qualified as tax residents in both countries, the conflict of residence would not be resolved in favour of just one of them.
Publicado el 08-2020 por PBS