Coming to Spain for family illness reasons does not make an individual a resident
A Murcia high court judgment concluded that a taxable person does not become resident in Spain where their temporary stay in Spain is for family reasons.
The Personal Income Tax Law provides that an individual is resident in Spain, among other reasons, if they spend more than 183 days there in any calendar year. Sporadic absences do not count (in other words, if the taxable person leaves Spain for a few days, those days are not subtracted from the period of time they spend in Spain), unless they evidence tax residence in another country.
This rule has given rise to unreasonable situations, such as that of the taxpayer in the Murcia high court judgment rendered on September 24, 2018 (appeal 195/2017).
This individual had been residing in Thailand with his family uninterruptedly between 2007 and 2017, inclusive, although, by mistake, for a few years they continued filing personal income tax returns instead of nonresident income tax returns. After the individual realized the mistake and filed the relevant correction returns, the tax authorities accepted that the individual’s residence outside Spain, except in 2010, when, as a result of the death of the individual's mother, he had to return to Spain to manage the estate, and spent more than 183 days in Spain that year.
The taxpayer produced to the tax authorities certificates of tax residence in Thailand for all the years, including 2010, because the Thai authorities interpreted the absence from Thailand by reason of the death of the individual's mother as a sporadic absence.
Murcia High Court found in the taxpayer’s favor and made a number of interesting affirmations:
- Tax law is a public law and, therefore, mandatory, so the elements of tax obligations may not be left to the parties’ choices. As a result, although tax returns are presumed to be true, if a taxable person made a mistake by filing personal income tax returns instead of nonresident income tax returns, he has the right to prove that his residence was not in Spain.
- For the purposes of determining the tax residence of a taxable person in Spain:
- It is irrelevant whether the taxable person has properties in Spain, especially if the properties were acquired before moving to another country, because properties cannot be moved.
- Making contributions under the system for self-employed workers or paying for medical insurance do not provide justification that a taxable person’s center of vital interests is in Spain, because they are residual payments made only for health purposes.
- The ownership of bank accounts in Spain is not relevant either, if most of the financial assets are outside Spain.
- Electricity use at the principal residence during the time spent in Spain does not bring anything to the discussion, because that property was inhabited precisely in a sporadic absence with respect to residence in Thailand.
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