The validity of residence certificates issued by other tax authorities for the purposes of a DTT.

In a Supreme Court ruling dated 12 June 2023, the Supreme Court carried out an exhaustive analysis of the validity of tax residence certificates issued by authorities of other States, and reached the following conclusions:

(i) The Administration and national courts lack jurisdiction to question the circumstances under which another State has issued a tax residence certificate, especially when there is a double taxation treaty (DTT) signed between Spain and that State. Consequently, such certificates are presumed to be valid.

(ii) A State signatory to a DTT cannot unilaterally determine the existence of a residence conflict, disregarding the specific rules established in the treaty to resolve such cases. In the presence of a residence conflict, recourse must be had to the rules provided for in the Convention, disregarding domestic rules that may include rules on this matter.

In particular, it is stressed that the “tie-breaker” rule concerning the “centre of vital interests” covers a wider scope than the concept of “centre of economic interests” set out in Article 9(1)(b) of the Personal Income Tax Act. The Court recalls that, according to the commentaries to the OECD Model Convention, when analysing the ‘centre of vital interests’, factors such as family and social relationships, occupations, political, cultural and other relevant activities, as well as the location of business or professional activities and the seat of administration of wealth must be considered. All these circumstances should be examined together.

As opposed to Spanish legislation, this analysis does not only take into account economic relations, but also the personal relations of the individual.

Determination of days in Spain for tax residency purposes

In the Resolutions of 28 March (4045/2020) and 25 April (4812/2020) 2023, the Central Economic-Administrative Court (TEAC) addresses the analysis of tax residence in Spain, for Personal Income Tax (IRPF) purposes. According to the Personal Income Tax Law, a taxpayer is considered to be habitually resident in Spain when he/she spends more than 183 days in Spanish territory during the calendar year. This condition of tax resident in Spain determines the obligation to pay personal income tax.

The TEAC establishes three categories of days relevant for this analysis:

(i) Days of certified presence: this refers to those days on which the subject’s stay, whether in Spain or abroad, can be accredited by unquestionable means of proof, such as passports, transport tickets or bank movements. In these cases, once presence in a territory has been accredited, even for a short period, the day in question will be counted automatically, without requiring additional proof of a prolonged stay.

(ii) Presumed days: These days are those for which there is no direct evidence of presence, but it is presumed that the subject has been in Spain, being a small number of consecutive days that elapse between two days of certified presence. These days will be considered as days of stay, unless certified presence outside Spanish territory is reliably demonstrated.

(iii) Days of sporadic absences: those which, in accordance with the literal wording of the law, are added to the days of effective presence (made up of the sum of the days of certified presence and the presumed days) to determine whether the stay in Spain exceeds 183 days.