How can non-residence be accredited?

Non-resident status can be accredited by presenting a certificate of residency in another country issued by the tax authorities of that country.

The period of validity of these certificates is one year. However, the certificate's validity shall be indefinite if the entity subject to tax is a foreign country, one of its political or administrative subdivisions or local entities.

The way in which individuals and bodies corporate pay tax in Spain varies depending on whether or not they are residents of Spain.

INDIVIDUALS

Individuals shall be deemed to have their principal residence in Spain if they meet any of the following conditions:

• They spend more than 183 days per calendar year in Spain. Occasional absences shall be taken into account to calculate the period of residence, except when said individuals prove they have their tax residence in another country. In the case of countries or territories classified as tax havens, the Spanish tax authorities may request proof of residence in the tax haven for 183 days per calendar year.

• Calculation of the period of residence shall not take into account any temporary stays in Spain that are the result of obligations arising from cultural or humanitarian collaboration agreements entered into with the Spanish public administration with no payment involved.

• Their main or central place of business is directly or indirectly located in Spain.

Unless there is evidence to the contrary, an individual shall be deemed to be a resident of Spain if, in accordance with the aforementioned criteria, his or her legally non-separated spouse and dependent minor children have their principal residence in Spain.

Individuals of Spanish nationality who prove they have changed their country of residence to a tax haven (Appendix III) shall continue to be liable for Personal Income Tax (IRPF) in Spain for the tax period in which the change of residence occurs and the following four tax periods.

An individual shall be deemed to be a resident or non-resident for the entire calendar year, given that a change of residence does not give rise to an interruption of the tax period. Proof of tax residence Tax residence shall be proven by means of a certificate issued by the competent tax authority in the country in question.

This certificate shall be valid for one year. An individual may have a residence permit or administrative residence in a country and yet not be deemed to have tax residence there. Special cases Individuals of Spanish nationality, their legally non-separated spouses and minor children who have their principal residence outside Spain shall be deemed liable to pay IRPF if they meet any of the following conditions:

• They are members of a Spanish diplomatic mission, including the head of the mission and members of the mission's diplomatic, administrative, technical and service staff.

• They hold a post or are employees of a Spanish consulate, including the consul and the civil servants and service staff employed there, except for honorary vice-consuls or honorary consular officers and their staff.

• They are employees of the Spanish state belonging to a permanent accredited delegation or representation before international institutions or forming part of a delegation or mission of observers abroad.

• They are active civil servants working in an official post or job abroad, even if it is not of a diplomatic or consular nature. 5 However, this shall not apply in any of the following cases:

•If the individuals mentioned above are not active civil servants, or do not hold an official post or job, and had their usual place of residence abroad before becoming subject to any of the aforementioned conditions.

• If the usual place of residence of legally non-separated spouses and minor children was in another country before the spouse, father or mother became subject to any of the aforementioned conditions.

Furthermore, on the basis of reciprocity, foreign aliens who have their usual place of residence in Spain because they are members of diplomatic missions or foreign consulates in Spain, international organizations based in Spain, etc. shall pay Non-Resident Income Tax (IRNR) rather than IRPF. Residence Under Tax Conventions In all agreements signed by Spain, reference is made to each country's internal legislation when defining an individual's country of residence. Given that different countries may have different criteria in this respect, an individual may occasionally be deemed to be a resident of two countries. In such cases, the agreements stipulate the following general criteria to avoid this possibility of an individual being deemed to be a resident of two countries:

• The individual shall be deemed to be a resident of the country in which he/she has a permanent home.

• If he/she has a permanent home in both countries, he/she shall be deemed to be a resident of the country with which he/she has the closest personal and economic ties (centre of vital interests).

• If the situation cannot be determined in this way, he/she shall be deemed to be a resident of the country in which he/she usually lives.

• If he/she habitually lives in both countries or neither of them, he/she shall be deemed to be a resident of the country whose nationality he/she holds.

• Finally, if he/she is a national of both countries or neither of them, the competent authorities shall endeavour to settle the question by mutual agreement.

BODIES CORPORATE

A body corporate shall be deemed to be a resident of Spain if it meets any of the following conditions:

• IIt was incorporated in accordance with Spanish law.

• It has its registered office in Spain.

• It has its effective headquarters in Spain. A body corporate shall be deemed to have its effective headquarters in Spain if management and overall control of its activities are based in Spain. If there is a change of residence, the tax period shall end when this change occurs. Proof of tax residence A body corporate shall provide proof of its tax residence in a country by means of a certificate issued by the competent tax authority in the country in question.

This certificate shall be valid for one year.

OPTIONAL SYSTEM FOR INDIVIDUALS WHO ACQUIRE TAX RESIDENCE IN SPAIN BECAUSE THEY HAVE MOVED TO SPAIN AS A RESULT OF AN EMPLOYMENT CONTRACT

In accordance with the legislation in force as from 1 January 2004, individuals who acquire tax residence in Spain as a result of moving to Spain may choose to pay IRPF or IRNR during the tax period in which the change of residence takes place and for the following five tax periods if they meet the following conditions:

• They were not residents of Spain in the ten years prior to their new move to Spain.

• The move to Spain is the result of an employment contract.

• The work involved is actually carried out in Spain.

• The work is carried out for a resident company or body corporate or the permanent establishment (PE) in Spain of a body corporate that is not a resident of Spain.

• The earned income deriving from said employment relationship is not exempt from IRNR. Taxpayers who choose to pay IRNR shall, as a real obligation, be liable to capital tax. The regulations that develop the procedure for exercising this option are pending publication