Global Employer Services Newsletter September 2020

The impact of COVID-19 on tax residence in Spain

Criteria of the Spanish Tax Administration

The Spanish Tax Administration has stated that the permanence of individuals in Spanish territory during the State of Alarm due to COVID-19 will be taken into consideration for the purpose of determining tax residence in Spain for personal income tax purposes.

Specifically, to reach this conclusion, the Spanish Tax Administration has analysed a case of a married couple who arrived in Spain from the Lebanon in January 2020. The couple intended to stay in Spain for a three-month period but were unable to return to their country at the end of that period, due to the declaration of the State of Alarm in Spain by the COVID-19.

Given that the Lebanese Republic is a tax haven, the Spanish Tax Administration apply the residence rules established in the Spanish Personal Income Tax regulations and not in the international tax treaties signed by Spain.

In the aforementioned resolution, the Spanish Tax Administration concludes that "the days spent in Spain by the couple, due to the State of Alarm, would be taken into account, so if they stayed more than 183 days in Spanish territory during the year 2020, they would be considered Spanish tax residents"; although "they could return to their home country once the State of Alarm ends", which occurred on 21 June 2020.

This resolution has generated a great deal of controversy. Especially considering that from the beginning of 2020 until the end of the State of Alarm (in place from 15 March to 21 June 2020) is 174 days compared to the limit of 183 days established by the Tax regulation for a person to be considered a tax resident in Spain.

OECD criteria contrary to Spanish Tax Administration

The Spanish Tax Administration takes a criteria contrary to the one recommended by the Organization for Economic Cooperation and Development (OECD). In this regard, the OECD advocated excluding from consideration days taxpayers spent outside their home territory due to COVID-19 mobility limitation measures. Specifically, it recommended countries stop counting those days to determine tax residence, so that this temporary dislocation should not have any tax consequences.

The OECD considers the COVID-19 pandemic to be a force majeure that prevents people from moving between countries, as noted in its recommendation paper Analysis of Tax Treaties and the Impact of the COVID-19 crisis.

Tax consequences of being considered a tax resident

Individuals, who have spent more than 183 days in Spanish territory because of the State of Alarm in Spain due to the COVID-19, could be deemed as tax residents in Spain.

The fact that the Spanish Tax Administration considers someone tax resident is extremely relevant, since it has consequences on various taxes:

  • A tax resident in Spain is subject to the Personal Income Tax on all worldwide income for income tax and Wealth Tax Purposes.
  • In addition, these taxpayers could have to submit a report of assets and rights abroad. This tax obligation requires Spanish tax residents to report the assets and rights they hold abroad when their value (for each group of goods) exceeds €50,000.
  • Finally, the condition of tax resident could even mean the obligation to pay taxes on inheritance and gift tax for the goods and rights received in any country.

It should be noted that it may trigger an issue of double residency and therefore double taxation. That is, it can occur in cases where an individual is considered to be a tax resident in Spain because they have spent more than 183 days in Spanish territory due to the COVID-19 and, in turn, is considered to be a tax resident in his home country (assuming that the home country taxes worldwide income).

In these cases, to avoid the residence conflict and the consequent double taxation that could arise, it is possible to resort to the double taxation treaties signed by Spain, which could not be possible in the case of tax residents in a territory considered by the Spanish legislation as a tax haven.


In short, this is a very debatable criterion of the Spanish Tax Administration. This interpretation also clashes with the international recommendations that are being issued. Moreover, let us not forget that there is no approved regulation in this respect. Therefore, the criterion of Spanish Tax Administration is a mere administrative interpretation of a Spanish regulation that has not changed.

In order to avoid being considered a tax resident in Spain based on the days spent in Spain because of COVID-19, individuals will have to justify to the Spanish Tax Administration that their intention from the outset was to return to their home country, but that the State of Alarm prevented them from doing so. However, individuals could have to litigate and the burden of proof falls on them.

Carlos Lopez                                          

Ignacio Gridilla