Wednesday, 1 December 2010

Residency – Making it clear

October 2011 - Update
The UK is planning new rules for UK residency with effect from April 2012. These will impact on British citizens who move and establish residency in Spain. When my research is complete I will give readers a full update.


Meanwhile, Spanish residency rules continue to apply with no change.


December 2010


In an unambiguous world where facts are facts and myths are myths, I would not need to write this article. However, this is Spain and British expats seem to be misled time and again. Please remember that I can also answer more personal questions if you email me in confidence.

  • Its not just about a form from the Comisaria or Police

  • Its not about Double Taxation Agreements

  • It is about where you pay your taxes


Two factors about where you live are important from the outset. I am only dealing with the rules for EU-citizens. Non EU-citizens have a more detailed procedure to go through.

NIE - Numero de Identificacion de Extranjeros

An NIE number is essentially a tax number for foreigners in Spain. You need one if you are going to buy a house or a car, if you are going to work for a Spanish company or if you want to apply for residencia (a residency card). If you are an EU citizen, you no longer have to apply for your NIE number, separately but you will be given one when you register as a foreign resident as detailed below.


Residencia

The rules on residencia cards in Spain have been changed several times in the last ten years mainly to give clearer cut rights to EU citizens living in another member state.
Briefly, if you are an EU citizen, you must now register at your local Oficina de Extranjeros which is usually in the local Comisaria or Spanish national police. You will need to complete a form and pay a fee, and you will be rewarded with a certificate which shows your name, address and NIE number.


Residency – paying taxes


However, just as important is the question of where you pay your taxes.
One of the myths which needs exploding is that the Double Taxation Treaty (DTA) between the UK and Spain or indeed any EU member and Spain is that citizens can choose where they pay there tax. That is wrong. The principle benefit of a DTA is so that you cannot be expected to pay tax twice on the same income or capital gain. It is NOT about choice.  
I have said this before on my Blog but it is worth repeating;
British expats in Spain fall into two clear and unambiguous groups;

  • Spanish Residents who are best described as people who have settled in Spain and spend 183 days or more per year in Spain. This group of people are required to pay their taxes in Spain.

  • UK Residents who spend less than 183 days per year in Spain. This group of people are liable, for their taxes, to HMRC in the UK.
  
Summary

There are lots of myths but you need to be sure that you are on the right side of the law. If you have chosen to live in Spain, I think you have chosen to pay taxes in Spain or at least to make a declaration. The DTA protects you from the UK also wanting a slice! Email me if you have specific questions, please