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When am I where resident?
One of the most important parts of a tax treaty is the article that describes the method of residency determination.
Most treaties have the following criteria (as much as possible in ‘ordinary words’):
1. A natural person shall be deemed to be a resident of the country in which he has a permanent home available (this may be both property and rent);
2.If he has a permanent home in both countries, he shall be deemed to be a resident of the country with which his personal and economic relations are closer (center of vital interests);
3.If it can not be determined in which country he has the center of his vital interests, or if he has a permanent home available to him in neither country, he shall be deemed to be a resident of the country in which he habitually resides;
4.If the person concerned is habitually resident in both countries or in neither of them, he shall be deemed to be a resident of the country of his nationality;
5.If he is a national of both countries or neither of them, the authorities of the countries shall settle the matter by mutual agreement.
And the ‘183 days term’?
The ‘183 days deadline’ does appear in national Spanish legislation. Spain considers a person as a tax resident in Spain if that person lives more than 183 days in a natural year in Spain.
In most tax treaties between countries the ‘183 days term’ is not mentioned. This is therefore not a criterion in the treaty.
It is although possible that someone stays more than 183 days in Spain, but can still be because of a tax treaty tax resident in another country.
An interesting and common example:
A practical example is a situation in which a person per 1 June (the year is then approximately 150 days old) permanently leaves for Spain to find a home. That he / she stays in a hotel during the search for a house, starts working from 1 July (exactly half of the year), only finds a home in August (after 210 days) and his / her partner and the children come over to Spain in early September (the schools start in Spain in mid-September). The house in the other country will be sold, but that can take months.
This example is not chosen by chance. Most emigrations – especially if children go along – take place around summer vacations, and this is a very common situation.
How does this case work out?
Both countries would like to receive a maximum tax:
• Spain because the person who came in June to Spain and started working in July has resided in Spain for more than 183 days and then becomes Spanish resident under Spanish national law.
• The other country will try to explain the Tax Treaty in its own favor.
Nice case! (The other country will normally win in this case.)
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