Post by dracon on Apr 4, 2018 11:22:22 GMT 4
On 28 November 2017, the Spanish Supreme Court (hereinafter, "SC") ruled several appeals (No. 807/2017, 809/2017, 812/2017, 813/2017 and 815/2017), clarifying how the concept of "sporadic absences" foreseen under the Spanish Personal Income Tax Law (hereinafter, “PIT Law“) should be interpreted. The main controversy in the cases at hand was how to interpret the concept of sporadic absences while determining tax residence for scholarship students when, as part of their training, the students remained outside Spain for more than 183 days during a tax period.
In the light of article 9.1.a) of the PIT Law, it is understood that an individual is considered tax resident in Spain if he/she has his/her habitual residence in Spain. Under the aforementioned provision, this requirement is fulfilled by those individuals who remain in Spain for more than 183 days during a calendar year. While determining the period of stay in Spanish territory, sporadic absences will be taken into account, unless the taxpayer proves his tax residence in another country.
For the purposes of calculation of total stay in Spain (183 days) sporadic absences shall be included. Traditionally, the Spanish Tax Authorities have considered taking into account residence in another country only when an individual holds the corresponding tax residence certificate issued by the competent tax authority of that country.
The SC, on the basis of the prosecuted case, analyzes the controversy and makes the following clarifications:
Sporadic absences cannot be understood as "prolonged, long-term absence, for a period exceeding 183 days". In such cases, the loss of tax residence of the individual shall be considered.
Sporadic absences are intended to reinforce the main rule (permanence), so where the main rule is not fulfilled, it is irrelevant to verify the existence of any sporadic absence, since there is no legal framework for its consideration, i.e. they are not sporadic by definition.
The concept of sporadic absences does not depend on the will of the taxpayer nor the interpretation given by the Tax Authorities. The concept must meet the objective facts of duration or degree of intensity of the stay outside the Spanish territory.
In conclusion, the judgments of the SC are of great importance insofar as they help to clarify a concept that has aroused great controversy. These judgments set a criterion on the objective facts that must concur to verify whether an individual is considered tax resident in Spain, based on the degree of permanence in the aforementioned territory.
In the light of article 9.1.a) of the PIT Law, it is understood that an individual is considered tax resident in Spain if he/she has his/her habitual residence in Spain. Under the aforementioned provision, this requirement is fulfilled by those individuals who remain in Spain for more than 183 days during a calendar year. While determining the period of stay in Spanish territory, sporadic absences will be taken into account, unless the taxpayer proves his tax residence in another country.
For the purposes of calculation of total stay in Spain (183 days) sporadic absences shall be included. Traditionally, the Spanish Tax Authorities have considered taking into account residence in another country only when an individual holds the corresponding tax residence certificate issued by the competent tax authority of that country.
The SC, on the basis of the prosecuted case, analyzes the controversy and makes the following clarifications:
Sporadic absences cannot be understood as "prolonged, long-term absence, for a period exceeding 183 days". In such cases, the loss of tax residence of the individual shall be considered.
Sporadic absences are intended to reinforce the main rule (permanence), so where the main rule is not fulfilled, it is irrelevant to verify the existence of any sporadic absence, since there is no legal framework for its consideration, i.e. they are not sporadic by definition.
The concept of sporadic absences does not depend on the will of the taxpayer nor the interpretation given by the Tax Authorities. The concept must meet the objective facts of duration or degree of intensity of the stay outside the Spanish territory.
In conclusion, the judgments of the SC are of great importance insofar as they help to clarify a concept that has aroused great controversy. These judgments set a criterion on the objective facts that must concur to verify whether an individual is considered tax resident in Spain, based on the degree of permanence in the aforementioned territory.