Dual Residency between Spain and another country

It is conceivable that for assessment purposes you may be an inhabitant of more than one nation. This is known as dual residence.

If you are resident in Spain and another country you may be liable to tax your worldwide income in both, to check this you have to look at the double taxation agreement between the two countries to find out where you should pay tax.

If you have a dual residency between Spain and another country, then a double taxation agreement may prevent you from being taxed twice on the same income.

Double taxation

There is a risk that your income may be taxed twice if two countries have the right to tax your income because, for instance:

• You live in Spain but work in another country or vice versa.
• You are posted in Spain for a short assignment
• You are living and looking for work in Spain and have transferred unemployment benefits from your home country
• You have retired to Spain and receive a pension from another

In these situations, while you will always be subject to the tax rules of your country of residence, you may also have to pay taxes in the other country.

Fortunately, however, most countries have double tax agreements as indicated above.

• Under numerous respective expense assentions, the measure of duty you paid in the nation where you work will be counterbalanced against the assessment you owe in your nation of living arrangement
• In different cases, the wage earned in the nation where you work may be assessable in that nation only and excluded from taxes in your nation of living arrangement

Dual residence of a legal person

Article 4.2 MC.OCDE regulates the case of a legal person who has a fiscal residence in two countries. To solve this problem (which, in the end, can lead to a double taxation on the income obtained by that person), it establishes a series of rules:

1. Firstly, that person shall be deemed to be a resident of the State in which he has a permanent home at his disposal. The OECD Model Convention gives more priority to the “permanent” character of that dwelling than to the title it holds; Thus, the requirement would be met in both owned and rented homes. However, in the latter case, they can not have the character of permanent housing rented for holidays, short seasons, timeshare …
2. If that person has permanent housing available to him / her in both countries, he / she will be considered a resident of the country in which his personal and economic relations are closer (center of vital interests). It is a question of fact, in which different circumstances will have to be examined to determine where the center of vital interests of the person is: social and family relations, work, cultural activities, politics … The comments of the MCOCDE offer further información. It is important, however, to look at personal circumstances rather than to any other thing, taking as an example the case of a person who owns a property in a country in which he has always resided, and that acquires another property in another State, but maintains the first. Thus maintaining the environment in which he lives with his family, where he has always worked … This, along with other factors, may be indicative that this person has maintained the center of vital interests in the first State.
3. If, under both criteria, it is not possible to determine the residence of the person (either because he does not have permanent housing available to him in either State, or because he can not determine the center of his vital interests) the following paragraph of Article 4.2 establishes another criteria: you shall be considered as resident in the State in which you habitually live. The period of time to be taken into account in the comparison should be broad enough to be able to speak of habitual residence in one of the two States.
4. Finally, if none of the above criteria manages to determine the residence of the person, the criteria of nationality will apply. If, however, the person does not possess the nationality of either country, both States shall submit the dispute through a friendly procedure.

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