Have your cake and eat it?

A question or series of questions from our postbag answered by Barry Byrne

Q: Are there any non-resident, but second home owner’s ID cards to prove we are more than tourists?

Q: Can you be a part-time Spanish resident? Someone with all the rights and paperwork of a resident but who doesn’t live here enough of the year to have to pay Spanish Tax? I have a friend from Dublin recently moved here who says you can.Short answers: No; and No, if you are a recent resident (but read on).

Question One is quickly dealt with. In a word, No. Being fortunate enough to be in possession of not one but two homes affords us no special privileges. There is no card for that. You’re either a resident or not. You could go on the municipal register — the padrón — and claim this is your primary residence, but a renter can do that too. It doesn’t bring a whole lot of advantages (in Sóller, a discount on the tram). And Hacienda, the tax department, may begin to take an interest in you. Question Two leads us into a grey area. Is there a rare creature who has all the benefits of residency but none of the duties and responsibilities (ie tax obligations)?

This is a very contentious area and I would advise you to sit down with a pricey tax adviser — before Hacienda, the tax department, sits you down for a long chat. I have no easy answers here but I hope, at least, to raise some more precise questions. But, yes, there may be a chance that an individual or two slips into a space we might call Schrödinger’s residency. Generally it depends on where you are from, if you are in the initial five years of your residency or not, and — if you are British — on whether you got your residency before 2021.Firstly, some numbers. 183. If you spend 183 days in the calendar year in Spain, you are deemed to be tax resident in Spain. There is another criteria that can get you deemed tax resident, even if you spend no days here: that the centre or base of your economic interests lies in Spain. Or even that you have a spouse and / or children here

Scenario 1. You are already a resident, but are understood to be a temporary resident, ie. within your first five years of official residency. What’s more, you are an EU citizen. Or you are a British citizen who got their residency prior to December 31, 2020. (Or you are British and have applied before December 31 or subsequently but are protected by the Withdrawal Agreement – because you lived here prior to Brexit). Another number: the poorly defined six months. Note: it’s not 180 days. Just “six months”. If you are in your first five years of being a resident, an absence in excess of six months in the year outside Spain will render your residency null. But, strange as it may sound, you can actually be both present AND absent for more than six months a year. Imagine you stay from January 1 to July 2, and thus spend, in a non-leap year, 182 days. You technically would have spent six months inside Spain. And would not have hit the 183 days that make you a tax resident. Sounds like you have the best of both worlds, doesn’t it?

Not so fast. Because, while you have indeed spent in excess of six months in Spain, it is also true that the total of 183 days (which you have so carefully avoided spending here) is also in excess of six months. Hence, logically you have been absent for a period in excess of six months. And you lose your residency. But dodge the tax inspector. Now, you could gamble on studiously avoiding the 183 days — to keep Hacienda at bay — while hoping that border control never notices your absences. But you’d need to ensure and be in a position to prove those absences to Tax. And accept that you are in breach of the conditions of your residency. In the end, you are not gaining much, either, except that you bypass the 90/180 rule but replace it with a 182/365 rule instead, ie. you still only get to spend six months a year in Spain, exactly like a non resident, albeit you could spend them all here consecutively.

And you risk losing your residency at any moment.

What’s more, to get residency you need to be on the padrón, which is a statement that your Spanish home is your primary residence. Under Spanish tax rules, if your centre of financial or economic life is deemed to fall, on balance, in Spain, then you are also tax resident here. Even if you spend less than 183 days here. So you really need to be prepared to fight Hacienda on this one. And the consequences of losing could be onerous in terms of backdated tax bills and fines.I’m going to call this a No. It is technically not possible to viably be a resident and non tax resident, at least not after your first calendar year here, even though many slip through the cracks.

Scenario 2.Another scenario: you are British and apply, post Brexit, for a non lucrative visa and get a TIE (and not in exchange for the green residency). In this case you may not spend more than 10 months during those first 5 years away from Spain, with no absence of 6 consecutive months permitted. In this case you will inevitably become a tax resident. So that’s a No.

Scenario 3.Another scenario: you already have permanent residency, which means you have had it for more than five years. If you are an EU citizen you must not be absent from Spain for more than two consecutive years. In this case, one could feasibly be a tax resident elsewhere for a year or two and keep popping back. Post Brexit, if you are British, interestingly, “residence shall be lost only through absence from the host State for a period exceeding 5 consecutive years”. So, again, you can come and go and watch out that you don’t exceed the 183 days. So, let’s call this one a Yes, perhaps. So there you have it.

Please do not take any of this as real tax advice. Hacienda has a team of trained experts and sharp minds whose only purpose is to get tax out of you. And they have sweeping powers. Also, please realise that becoming obsessed with watching the calendar may not be a recipe for a happy life. There is actually little to be gained by trying to walk a dangerous tightrope between being a resident and a non-tax resident at the same time. You get to spend just ONE or TWO days extra a year here and risk the wrath of Hacienda. They may investigate you and freeze your bank accounts.

Most importantly, by becoming tax resident here you are contributing to the community that has welcomed you.

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