tax residence certificatesIn a recent Sentence, the Spanish Supreme Court (SC) has determined that the authorities of a signatory country of a Double Taxation Agreement (DTA) cannot deny or judge the effects and validity of a tax residence certificate, signed by a competent authority of the other country, which specifically states that it is issued to the effects of the DTA.

  • In the relevant case, the Spanish National Court had previously considered that the tax residence certificate issued by another country was only an indicative element in favor of the tax residence in such country, determining that the taxpayer was only resident of Spain without recognizing the existence of a conflict of residence.
  • It also highlighted that the tax residence certificate of the United States would be issued to all US nationals only for nationality reasons.
  • It must be recalled that DTAs remit to the domestic regulations of each signatory country to determine the meaning of the expression “resident of a Contracting State” thus meaning that it is any person that, because of the domestic regulations of the State concerned, is subject to tax in such State because of the domicile, residence, place of management, constitution or any other similar criterion.
  • And, given that the residence is determined according to the domestic criteria of each Contracting State, cases of double taxation may arise. In such a case, the DTA establishes the rules to take into account for the purposes of solving such conflict.
  • The Spanish SC determines that:

    i. In order to analyze the existence of a conflict of residence between two Contracting States, the validity of a tax residence certificate, issued by the tax authorities of the other Contracting State according to the DTA, must be presumed. Its contents cannot, therefore, be rejected due to having subscribed to such DTA.
    ii. Consequently, the national administrative or judiciary organisms are not competent to judge the circumstances in which the other State has issued a tax residence certificate for the purposes of a DTA.
    iii. This is the reason why, in the case of a conflict of residence, it is necessary to apply the rules foreseen in the DTA to resolve it. This requires an autonomous interpretation in relation to domestic regulations containing similar concepts.

  • This Sentence provides an important clarification that will lead the Spanish tax authorities to admit the tax residence certificates of the other Contracting State of a DTA and to resolve conflicts of residence according to the tie-breaker rules established in such DTA.

Publicado el 11-2023 por PBS