Spain - Residence and relocation

A few months ago, a Resolution of the General Directorate of the State Tax Administration Agency was published in the BOE, approving the general guidelines of the 2021 Annual Tax and Customs Control Plan.

The Treasury has focused on the control of natural persons and their tax residence in Spain, among others. One of the tax issues that will have the most relevance in the coming years is everything related to tax residence and its relocation based on purely tax interests.

“Big data” technology will be used, that is, tools with the capacity for massive data analysis, with which to try to detect relocated large assets whose tax residence pretends to be abroad when the Tax Agency considers that they reside in Spain.

Undoubtedly, the emergence of new technologies, as well as the new ways of generating income within the digital economy, are generating a relocation of tax interests that are posing a challenge for the tax authorities of all countries. For example, not long ago we heard a famous youtuber who has decided to move to Andorra to pay much less than what he would have if he were a resident in Spain.

The current tax regulations have become obsolete in the face of this type of situation and the tax authorities find it necessary to carry out an updating process in the face of an economic reality that demonstrates the need for new legal mechanisms in accordance with the provision of all types of services through new technologies.

The current tax residence determines the subjection to the tax sovereignty of a State and yet despite the unstoppable advances of the digital economy, as well as the efforts that the EU has been making for several years to adapt the concept of permanent establishment and tax residence to In modern times, the term of current fiscal residence is still being determined based on the link to a single type of space, the physical one.

For all of the above, tax advisors are faced with a reality that will undoubtedly generate many problems in the future, since at the beginning of the Resolution the following statement is made, which gives rise to many comments, since it only raises a presumption to begin with of guilt ("... that appear to be..."), an approach far from reality, which is none other than the problem of cumbersome and obsolete regulations:

“The Tax Agency will promote in 2021 a specific line for the reinforcement of the control of natural persons who appear to be non-residents in Spain. The possibility of a reinforced control through massive data analysis tools represents a novelty in the field of relevant 'delocalized' assets and marks a new impulse for the tax verification of this taxpayer profile "

At Balms Abogados we have a great team of professionals, ready to help those who need it, in order to avoid undesirable situations in matters of tax residence.