Working in UK, but resident in Spain, spending 6 months in UK and 6 months in Spain. Where do I pay tax? Case presented to tax advisor Philip Carroll.
Member´s employer in the UK taxes her, she wonders whether that is corrrect and what about NI contributions. Member confirms that has dependent family in Spain, a 20 yr old son at college.
Philip Carroll Okay, then this is my view of you situation. Firstly, as you are physically working in the UK then you will always pay tax on any income you receive there. In addition you should pay national insurance in the UK as well.
If you are spending 6 months in each country then it’s possible you may be resident in both. Even if you spend less than 183 days in either it may still be possible to be resident in both. In Spain you are deemed tax resident if you have dependent spouse and/or family. As far as the UK us concerned there is a Statutory Residence Test. There is a model you can complete online. It doesn’t display properly via a link so type “SRT tool HMRC” into Google and it’s normally the first or second option.
If you are resident in both then your tax residency is determined by the Double Taxation Agreement which states
Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);b) if the State in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
So, just to confirm you will always pay tax in the UK. If it determined that you are tax resident in Spain then you have to declare all your income (including from the UK) and claim credit for the tax already paid in the UK. If more tax is payable in Spain you will have to pay the difference. You will n0t receive a refund if it is less.
If you are not tax resident in Spain you need to deregister from the Hacienda using a Modelo 030. You can complete this form at any time, but they will probably ask for a Certificate of Fiscal Residency (under the DTA) from HMRV.