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Tax residency in Spain and tax heavensTax residency in Spain and tax heavens

Refusal of residency for tax purposes in a tax haven (Andorra) if the taxpayer does not live in it according to Spanish tax law

09.03.2010

In a sentence dated 11/11/2009, the Tribunal Supremo decided that Spanish tennis player Arantxa Sánchez Vicario is a tax resident in Spain, therefore her worldwide income is subject to the Spanish personal income tax. In the case examined, the tax administration had reached the conclusion that the sportswoman could not prove an effective residency in the territory of Andorra, a tax haven according to Spanish legal regulations. Hence, a change of residency for tax purposes from Spain to Andorra could not be justified.

We must not forget that article 9 of the current personal income tax law states that the main criterion to determine residency for tax purposes in Spain is the effective residency in Spanish territory during a period of 183 days starting on 1 January. In order to change residency for tax purposes to a country such as Andorra, a person must be able to provide the administration with evidence of his/her effective residency in the territory of Andorra and prove his/her stay in Spanish territory has not surpassed the aforementioned 183 days. It is not enough to present a document issued by Andorran authorities confirming a person's residency for tax purposes in a tax heaven.

In addition, in accordance with article 8.2 of personal income tax, which applies only to Spanish nationals, the change of residency for tax purposes to a tax haven forces Spanish nationals to tax their income in accordance with Spanish personal income tax regulations during the year of relocation, and during the four subsequent years.

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