Financial and fiscal advice in the estado de alarma

With the tax return window already open, and enquiries concerning financial and fiscal matters during the estado de alarma already mounting, Blevins Franks say that they too are still receiving a high volume of enquires on certain subjects. So if anyone needs information or advice on the following matters, just contact Paul Montague, a BF Partner and regional tax and financial adviser. His email is on the image below.

11 Comments

  1. One subject that I suspect is of interest to many of your readers rather than just to me is whether there will be any leeway this year in Spain on the 183 day tax residency rule.

    Through google I found an article published in http://www.eleconomista.es entitled El Covid19 puede alterar las reglas de la residencia fiscal en los Estados?

    The article states that the OECD has asked Governments to clarify their position. At the date the article was written (April 4, 2020) the UK, Ireland and Australia had already pronounced on the issue but Spain had yet to do so.

    Should Blevins Franks receive any official notification about this, it would be good to know. At present, the 183 day tax residency rule means I can’t return to Tenerife until November 24th and I do SO want to come back in October!

  2. Feel free to make direct contact with me if you wish, for now, the first thing to remember is that If you do not complete more than 183 days during the calendar / tax year year 2020, then you have nothing to worry about. Days spent in Spain in 2019 are not rolled over into this year – the cut off point for “days spent” calculation purposes was the 31st December 2019 and cannot be brought forward.

    Otherwise, this is a slightly complex issue and recently I have discussed this with others in your position.

    Please find below some information that would be useful for you to understand what is currently going on in this sense:

    Unfortunately, the Spanish Agencia Tributaria has not published anything about these exceptional circumstances for residency purposes in the same way that HRMC did recently. Therefore, I am afraid that I cannot confirm that these days will be ignored from a Spanish tax perspective, because the truth is, I don’t really know yet.

    Here’s an article (in English) about this topic: https://www.linkedin.com/pulse/covid-19-spain-tax-residence-santiago-lapausa-gonzalez

    Finally, there’s another recent article about the same issue, published in Expansion and prepared by Cuatrecasas, one of the leading Spanish law firms:

    https://amp-expansion-com.cdn.ampproject.org/c/s/amp.expansion.com/opinion/2020/04/20/5e9d5005e5fdea283f8b4618.html

    It’s in Spanish but I have used the translation option so here you have the English version FYI:

    OPINION
    The impact of Covid-19 on the taxation of non-resident natural persons. Through this royal decree whose validity in principle was 15 days but which as of today has been extended for the second time, a whole series of severe restriction measures were introduced, not only for economic activity but also for the movement of natural persons, such as limitations to free movement, allowing them only to move, and individually, to carry out essential activities.

    Likewise, on March 16, the European Commission recommended the temporary closure for 30 days of the Union’s external borders for travel for people, a proposal that has been unanimously endorsed by all European leaders and that came in a context in which member states were already closing their own territories. In fact, days before the Spanish Executive had already announced at a press conference that, until the state of alarm was suspended, only Spanish citizens and foreigners residing in this territory, workers, would be allowed to enter Spain by land. cross-border, diplomatic or foreign personnel or to those accredited due to force majeure or need.
    Similarly, other countries (such as the United States and Argentina) have temporarily prohibited travel to or from Spain.

    The adoption of these measures has led to the confinement of the population in their respective homes for an indefinite time, to which must be added the quarantines required by the health authorities and the periods of hospitalisation in the most serious cases.

    This situation is especially complicated for all those workers who were posted to other countries to provide their services, where they resided fiscally, and who, due to the health crisis, have decided to return to Spain either at the request of the company or due to their desire to reuniting with his family as for all those whose plans to return to his residence abroad have been cut short and delayed for the same reason.
    Although the time when both will be able to return to the countries in which they reside fiscally is uncertain, we still do not know when or how the population will be confused and international transit will be restored, the tax effects of their presence. in Spain they are not: the days that these citizens remain in national territory may threaten their consideration as tax residents in their respective countries.
    In Spain, the tax regulations defining the tax residence of natural persons are set out in article 9 of Law 35/2006, of November 28, on Personal Income Tax. In accordance with the aforementioned precept, it is understood that the taxpayer has his habitual residence in Spain when any of the following three circumstances occur: (i) when he remains in Spanish territory more than 183 days during the calendar year; (ii) when the taxpayer’s center of economic interests is located in Spain and (iii) when, in accordance with the above criteria, the non-legally separated spouse and the minor children who depend on it usually reside in Spain (this being a presumption that supports evidence to the contrary).

    In view of the regulations, if the tax resident in a foreign country were to stay in Spain more than 183 days during the current year, the Spanish Tax Administration could consider him a tax resident in this country and make him pay as such.
    This situation is likely to generate discrepancies and disputes between taxpayers and the Tax Administration. Thus, while the former can be considered residents in the country in which they work and where they actually resided fiscally until 2019, the Administration can consider them residents in Spain for tax purposes during 2020. In turn, these discrepancies can lead to discussions between states about the effective tax residence of certain taxpayers. Given the risk that this implies, the tax authorities of some countries such as France, the United Kingdom, Ireland and Australia, with regulations similar to the Spanish in terms of criteria for determining tax residence.

    The Model of the Tax Agreement on Income and Wealth of the Organization for Economic Cooperation and Development (OECD) does not establish detailed rules in this regard, as the definition of tax residence is the exclusive competence of each State. However, we did find a mention of the computation of days of presence in a State in Commentary 5 to article 15, according to which said computation would include both the days of arrival and departure as well as any other (such as holidays and weekends). week), but sick days in a country should not be taken into account.

    Despite this, both the Spanish legislator and the Spanish tax authorities seem to have forgotten about this problem. Despite the large number of royal decrees and royal decree-laws approved since March 14 that deal with issues as specific as the suspension of administrative deadlines or the moratorium on the payment of taxes, the legislation of the Autonomous Communities or the recommendations and directives of the different public bodies, we do not find in any of these regulations any provision regarding the fiscal residence of natural persons.
    The issue, however, is not trivial: what is at stake is the taxation of the year 2020 of a large number of taxpayers, both of whom may be forced to tax as tax residents in Spain rather than as non-residents, such as of those who, being residents in Spain, must be taxed as non-residents, and this as a consequence of the measures adopted to face the exceptional health emergency situation that we are experiencing.

    For all these reasons, and until specific regulations are approved in this regard, a case-by-case analysis of the taxpayers affected by these measures is necessary, in order to ensure the maintenance of their status as tax residents in the country in which they correspond. and thus avoid disputes with the Tax Administrations, always very belligerent in these cases.
    In fact, similar problems may arise when determining the taxpayer’s habitual residence in an Autonomous Community, since this is also linked to the days of residence in said territory.
    Beatriu Puig Delgado, Anna Valls Portería, Florentino Carreño Vicente and Jaume Bonet León ; Cuatrecasas.

  3. Paul. Thank you so much for this information. I shall indeed get in touch with you. I will leave this closer to my return date to Tenerife as Spain may issue guidance over the next few months.

  4. Hi all,
    Janet, I have today been in discussion with Paul Montague of Blevins Franks to see if he has any more news of the immigration or tax residency rules in Spain, as effected by the Emergency restrictions – and UK citizens effectively being trapped into longer than anticipated, or wanted, stays in Spain.
    With many thanks to him and his company, here is part of his reply, which seems encouraging for those expecting to just stay less than 90 days, but quite diabolical for those of us wanting to avoid tax residency via the 183 day ‘rule’:-

    This refers to a new order published recently in Spain which related to immigration law only. It has nothing to do with tax residency.
    Extension of authorizations to stay and reside and / or work for foreigners in Spain due to COVID-19

    The BOE of May 20 publishes Order SND / 421/2020, of May 18, which adopts measures related to the extension of authorizations to stay and reside and / or work and to other situations of foreigners in Spain, in application of Royal Decree 463/2020, of March 14, declaring the state of alarm for the management of the health crisis situation caused by COVID-19.

    This covers the extension of temporary residence and / or work authorizations and stay authorizations, extension of the family cards of a citizen of the European Union, extension of foreign identity cards granted based on long-term residence, extension of stays of up to ninety days, extension of long-stay visas, etc.

    https://www.lavanguardia.com/economia/20200520/481296962912/prorroga-permiso-trabajo-residencia-extranjeros-coronavirus.html

    SUMMARY
    As you can see, unless the Spanish government/tax office says something otherwise in the future, the days spent in Spain as a result of the lockdown will be considered (and not ignored) for the 183-day rule and therefore these days can lead someone to be Spanish resident for the whole 2020 tax year, even though it was not his/her original intenti

  5. Author

    Thanks Dennis! I’m glad Blevins Franks are helping, I would not expect anything less, and Paul is a great adviser here. One of the best for this sort of detailed professional information on tax matters.

  6. Thank you Janet.
    I agree.
    Paul has been great thank you, and also Diana McGlone, who has great knowledge, and has today agreed my understanding.

    For clarification (if I may) to all ‘SWALLOWS’ (non-residents) who might still be in Spain & appreciate my opinion I would just like to emphasise this understanding of where we are at:-

    If you are still here you may well be getting ever closer to the 183 day stay limit (in the calendar year of Jan-Dec) at which point you will legally become a Spanish Fiscal Tax Resident….whether you want it or not!
    Also even if (like me) you want you avoid hitting that limit by getting a suitable flight home asap (if you can!) you may well find that you have just a very few days left to come back to Spain in the rest of this 2020 year….without exceeding the 183 total.
    Diana McGlone has kindly confirmed to me today that it is correct that there have been no announcements about extending the 183 day limit (because of the Emergency restrictions impact) and that she does not think there will be…

    So my ‘advice’ is to be fully aware (if you are not already) and take appropriate action as you feel necessary.

    I am now going to ask the British Embassy/Consulate if they will urgently lobby the Spanish Govt for a change.
    It just seems unjustifiable for us to be potentially to be forced into a Fiscal Residency situation just by virtue of having our existing stay extended beyond our reasonable control.
    Hope this may be of some help. Let us hope some sensible relief is forthcoming (and quickly!).. Thank you

  7. Author

    That’s super, Dennis, thank you so much!

  8. Regarding tax residency, I would have thought the “tie breaker” in the Double Taxation agreement between UK and Spain would prevail in the circumstances where you have spent 183 days or more in Spain. That is, if technically deemed a tax resident in both countries – priority is given to where you have a permanent home available to you: if you have one in both countries, then where is the “centre of your vital (=economic) interests” and if still not clear, then being a national of one of the countries will be the final decider. See the Treaty here https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/507409/spain-dtc_-_in_force.pdf
    Relevant section Art 4.2 (a) to (c)

  9. Doreen,
    Thank you for that; I will look at it for more info.
    However the point is we don’t even get into that area at all if we act as a normal ‘swallow’ and stay within the 183 limit, which we have done for 7 years.
    In theory at least, all UK swallows who have been been in Spain since Jan 2020, and can’t yet reasonably get back home, will all be trapped into tax residency consideration under the 183 rule very shortly,
    In my opinion, the health crisis is a cause of force majeure and, as such, it should not have an impact on the tax residence of those people whose movements have been limited against their will,
    Dennis

  10. Consulate have emailed me today to say that they are indeed taking up my suggestion that they lobby the Spanish Government to stand down this 183 day rule for the period people are trapped here against their will; let’s hope they make some progress, and soon.
    Dennis

  11. UPDATE
    I have today heard from Charmaine Arbouin (British Consul and Regional Operations Manager :-
    She states:- “Whilst Spain has not confirmed its intention to be flexible, it is worth remembering that Spain and the UK have a double taxation agreement which, in the worst case scenario, allows for you to reclaim any tax paid twice”.|
    I confess to being quite speechless.

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