Spanish tax residence rules and the problems caused by the Covid-19 travel ban (updated 31/05/2020)


We have received numerous enquiries from concerned individuals who have found themselves forced to remain in Spain due to the travel ban that has been in force since 14 March.

Many persons divide their time between Spain and other countries, taking care not to exceed staying 183 days in Spain, as this could cause them to become tax resident. Tax residence in Spain usually requires an individual to pay tax in Spain on their worldwide income, capital gains and wealth.

As a general rule, if a person has a home in Spain and stays 183 days or more, they would be considered tax resident in Spain, regardless of whether that person has a home in another country and has been treated as tax resident by that other country.

This could apply regardless of whether there has been an event outside the control of the person that has forced the stay in Spain, e.g. the Covid-19 travel ban.

In our opinion, as unfair as this might seem, a tax inspector might have sufficient justification to raise tax income and wealth tax assessments for the year in question, leaving it to the individual to appeal the assessments in the tax tribunals. The tax appeal process could easily take five years, during which time tax assessments have to be paid.

Our analysis of the situation, originally published in March, has recently been mirrored by other leading tax specialists particularly in areas with a high density of expatriates. Press articles have also just emerged accusing the Spanish Government of going against the best practice of The Organisation for Economic Co-operation and Development. The OECD has issued guidelines requesting that Governments throughout the world relax tax rules so as not to treat as tax resident, individuals who have been stuck in a country accidentally because of Covid-19 lockdowns. The UK, Ireland and Australia have already announced that they will follow these OECD guidelines but Spain has not responded. Tales are emerging of panicked individuals adopting extraordinary tactics to exit Spain any way they can.

Apart from the considerable cost involved, the tax appeals process is especially stressful for foreigners, as they feel vulnerable being exposed to a judicial system that they do not understand and trust. Experience has taught lawyers handling such appeals never to say that winning a case is certain, which adds to the stress. Tax inspectors offer deals with lenient interpretations and minimum fines and many individuals accept, unsurprisingly, giving up their rights of appeal. The system is designed precisely to achieve this.

Our advice is, if at all possible, try to find a way to exit Spain. We are aware, for example (as of today 26 May 2020) that there are four British Airways flights each week between Gibraltar and Heathrow. A few flights out of Spain are now available out of Málaga, Mallorca and Madrid and fast trains to France have been available throughout. Driving can also be an option but see this warning about driving back to the UK with a Spanish registered car.

It is permitted to travel from Spain to Gibraltar Airport, as long as the person has a printed boarding pass and all other necessary documents. A taxi to the border is also recommended as taxis seem to be allowed to pass unhindered by the police.

Individuals should assume that all days spent in Spain will count towards the 183 day limit, regardless of Covid-19 lockdown problems.

It should be noted that this area of tax law is relatively complex because of the effect of any double tax treaties that might apply and professional advice is always recommended.

Spence Clarke & Co specialises in the provision of Spanish tax, legal, audit and accountancy services, mainly to foreigners with interests in Spain. Our cross-border knowledge helps clients adapt to the Spanish system with the minimum of doubt and disruption. If you have any questions about this article or any other matter contact us, with no obligation, to see how we can help you.