As a general rule, “Wohnsitz” (domicile) can be equated with the concept of “residencia”. If you have your domicile in Spain, you are, from an administrative and tax-law perspective, generally considered resident, i.e., a “residente”. However, it should be noted that your holiday home should not unintentionally become your main tax residence, because for people who become fully liable to tax without realizing it, the supposed “second home” can quickly turn into a tax trap.

In contrast to the administrative domicile, the tax residence (residencia fiscal) has far more extensive consequences, because as soon as you are considered a “residente” for tax purposes, you must declare and pay tax in Spain on both your worldwide income and your worldwide assets, and you must also fulfill the corresponding tax obligations (e.g., tax returns, Modelo 720, etc.).

National laws

Most national tax laws do not distinguish between citizens and foreigners, but rather between residents (persons subject to unlimited tax liability) and non-residents (persons subject to limited tax liability), since residence is generally established by the existence of the possibility of a domicile and/or a permanent home.

Under Spanish law—Article 9 of the Spanish Income Tax Act—you are therefore considered resident in Spain not only if you spend 183 days a year in Spain, but also if you have a permanent home available in Spain (owned or rented) or if the center of your vital interests is in Spain:

A) Staying in Spain for 183 days per year:

Even though a permanent stay in Spain may, at first glance, seem the simplest way to establish your residence, the removal of border controls makes it almost impossible for the Spanish tax authorities to prove this condition.

B) A permanent home in Spain:

If you have a permanent home in Spain (primary residence or holiday home), the Spanish tax authorities already presume that your tax residence is in Spain. Even if you spend fewer than 183 days in your holiday home, electricity and water bills, telephone bills, etc. may be enough to presume that your tax residence is in Spain. In such cases, as the taxpayer you must prove that it is effectively your holiday home, that your primary residence is in Germany, and that you pay tax on your income in Germany. 

C) The center of vital interests or the center of your economic interests:

This last condition can generally only be supported by presumptions. For example, it is presumed that the taxpayer has their residence in Spain if, applying the above criteria, their spouse (not legally separated) or their minor children have their residence in Spain.

Since similar presumptions apply under German law, your tax residence can only be determined unambiguously if you have a permanent home in only one of the two countries. Example: registered at a Spanish property you own and without any property in Germany that you can use yourself. In this case, your tax residence is clearly in Spain.

The conflict case and the DTA (Double Taxation Agreement)

However, if you have a permanent home not only in one, but in both countries, or if you are even registered with the local residents’ registration office in both countries, there is, both in Germany (under internal German law) and in Spain (under internal Spanish law), a presumption that you have your tax residence in the respective country. This creates a conflict case, which must be resolved by the Double Taxation Agreement (DTA), which prevails over national law.

In the agreement between the Federal Republic of Germany and the Kingdom of Spain for the avoidance of double taxation, the conflict case is resolved by Article 4(2). If, under paragraph 1, an individual is resident in both Contracting States, the following shall apply: 

a) The individual shall be deemed to be resident only in the State in which they have a permanent home available; if they have a permanent home available in both States, they shall be deemed to be resident only in the State with which their personal and economic relations are closer (center of vital interests).

b) If the State in which the individual has the center of vital interests cannot be determined, or if they have no permanent home available in either State, they shall be deemed to be resident only in the State in which they have a habitual abode;

c) If the individual has a habitual abode in both States or in neither of them, they shall be deemed to be resident only in the State of which they are a national.

d) If the individual 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.

In practice, however, this DTA article is reduced to sections a) and b), since both legal systems—as analyzed above in the case of Spanish law—refer directly to the habitual stay of 183 days and thus define the stay as the center of vital interests. Sections c) and d) are only applied in practice if you do not spend more than 183 days a year in any country.

In summary, tax residence is generally determined by staying more than 183 days per tax year in Germany or Spain, whereby, due to the presumption of appearance, in many cases the taxpayer must provide the proof.

Recommendation : in order to avoid a conflict situation, it is generally always advisable to be registered in only one country. In the event of moving to the other country, it is important to both register in the new State and deregister in the State of departure within the same half-year.

Certificate of tax residence : In practice, the easiest way to prove that you are not resident in a State is by means of a certificate of tax residence from your State of residence. Further information can be found in our article: Certificate of tax residence from Germany.

Consequences of having your main residence in Spain: 

If, based on the above criteria, your main tax residence is in Spain (“residente”), then in Germany—assuming proper deregistration—you will automatically be treated as subject to limited tax liability, since you must now tax your worldwide income in Spain. The resulting tax obligations can generally be summarized as follows:

A) Tax returns:  

All persons subject to unlimited tax liability in Spain (residentes) must file annual tax returns regardless of their citizenship. For private individuals, particular attention should be paid to the income tax return (RENTA) and the wealth tax return (Impuesto sobre el Patrimonio). For further information regarding persons subject to unlimited taxation in Spain (“Residentes”), please see the article: [Tax basics: “Residentes”]

B) Gifts and inheritances:

If you receive gifts or shares of inheritances, the gift and inheritance tax (ISyD), which varies depending on the Autonomous Community (Comunidad Autónoma), must be paid. Further information can be found in the article: [Where must Spanish inheritance be taxed?].

With regard to your own inheritance, it is also necessary to make an appropriate choice of law for inheritance. Information on the choice of law for inheritance can be found in the article: [The Spanish choice of law for inheritance].

C) Reporting obligation for foreign assets:

Since 2012, persons resident in Spain (residentes) have been required to report assets held abroad. This reporting obligation must be fulfilled by filing an ownership declaration separate from the tax return. Further information can be found in the articles: [Modelo 720] and [Modelo 721].

Recommendation : in order to avoid a conflict situation, it is generally always advisable to be registered in only one country. In the event of moving to the other country, it is important to both register in the new State and deregister in the State of departure within the same half-year.

Certificate of tax residence: In practice, the easiest way to prove that you are not resident in a State is by means of a certificate of tax residence from your State of residence. In our article Certificate of tax residence from Germany you will find detailed information on how to apply for this certificate.

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Our firm will be happy to help you analyze your specific situation, carry out the necessary administrative procedures for you, and assist you with filing the relevant tax returns. If you are interested or have specific questions on the topic, we are happy to assist you by email or by phone in German.

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