Many doubts about tax residence come up with people who live in Spain and another country.

Where should they declare taxes and what do they have to declare etc etc? Residence has a special significance, because being resident in one country or another will determine whether you will pay taxes in one or both countries. The first criterion to follow is the length of stay in Spain. According to this rule, it is said that a person is a Spanish resident if he has been in Spanish territory more than 183 days (just half a year). However that is one criterion, but not the only one, because we should also look at where his main economic activities or interests are based. However, it is also important to look at tax residence from the "Double Taxation Agreement" point of view. These double taxation agreements were created to resolve a number of problems that come up between countries when it is time to pay taxes.

Nowadays, in practice, we can say that there are two tax paying possibilities for a non resident person: general application of internal rules or to have a look at what the "Double Taxation Agreement" says. If however, the non resident is an EC citizen, European Community Law should also be studied as it has supremacy above the own Member States Law. Therefore, European Community Law is above both internal taxation and international double taxation agreements. In practice, there are complicated cases as a person can be considered a tax resident in both countries following all their National standards. In that case, international double taxation agreements solve the double residence conflict in favour of one or another tax payer jurisdiction.

Therefore:
1st A person will be considered resident of a country when he has a permanent dwelling at his disposition. If he has a dwelling in both countries, he will be resident of the country within which he has the closest personal and economic ties.

2nd If the country, where the person has most of his vital interests can not be specified, or if he does not have a permanent dwelling at his disposition in that country, he will be considered resident of the country where he usually lives.

3rd If he usually lives in more than one country, or does not reside in any of them, he would be considered resident of his native country.

4th If he were a native of more than one country, or if he did not usually live in any of them, the competent Authorities of the countries in question would solve the problem by common consensus. Once the residence is set, different treaties decide whether to tax the resident’s obtained income by exclusive residence’s state law or by shared sources states laws.

EXAMPLE: Internal State C’s legislation considers Mr. K a tax resident in that State, based on criterion of remaining in the territory for more than 183 days and because he is a native. But, at the same time, the Spanish Tax Office has proved that Mr. K has his main economic interests’ in Spain. Mr. K, for job reasons, often travels and he has an apartment in Barcelona. In this case, we have to consider that both Spain and State C have formed an Agreement to prevent double taxation.

Result: There is a dual residence state to be agreed upon by criterion of both States internal legislation. For that reason, we have come to bilateral rules, and as he only has one permanent dwelling in Spanish territory, Mr. K has to declare himself as a resident in Spain. If as in Barcelona, he also had a permanent dwelling at his disposition in C, he should still be considered resident in Spain based on the criterion of his vital interests. A person must must be able to prove to the Spanish Tax Office that he is a Fiscal Resident in Spain in order to obtain the benefits applicable within the "Double Taxation Agreement" agreed between Spain and his country of origin.If you habitually reside in Spain, it is essential to become an Income Tax Payer. It is immaterial what nationality you are, Spanish or foreign, if you live in Spain you must pay Income Tax on your worldwide income, that means, total earnings and income, regardless of the place where they come from and wherever the payer lives. That means, if a person is resident in Spain and has income in other countries, he must declare all of it in Spain.