A return home gets planned around the removal van, the doctor and the grandchildren, and hardly ever around the tax calendar. That is a pity, because the year you come back is the only one you can actually plan: from the following 1 January you are inside the system, and any decisions left untaken take themselves, usually against you.
The rule that decides everything: the year is not split
In Spain you are tax resident for complete tax years. Either you are resident for the whole year or you are not. Residence by months does not exist, and that is the source of almost every misunderstanding in the year of return.
You are resident when any one of these circumstances applies: you spend more than 183 days of the calendar year in Spanish territory; the main centre or base of your activities or economic interests is here; or (a presumption that can be rebutted) your spouse, from whom you are not legally separated, and your dependent minor children habitually live in Spain.
| You arrive on… | Days left in the year | Result under the days-present test |
|---|---|---|
| 15 March | 292 | Resident that same year |
| 1 July | 184 | Resident by one day |
| 5 July | 180 | Not resident that year, unless one of the other tests applies |
| 20 October | 73 | Not resident that year, unless one of the other tests applies |
Between 1 and 5 July there is no human difference at all and a complete tax difference: in one case you declare your worldwide income for all twelve months in Spain, including the six you spent abroad; in the other, you declare nothing here beyond Spanish-source income. And be careful, because the days are counted by presence in Spanish territory, with their own rules on occasional absences: it is not the date on the removal company's contract that counts.
Your foreign pension, from 1 January
If you turn out to be resident in the year you return, you are taxed here on your worldwide income for the whole of that year. The pension you received in January, while still living abroad, goes into the Spanish return just like December's. That is not a quirk of the Spanish system: it follows from the tax period being the full calendar year.
The other country, meanwhile, will apply its own domestic rules. Some allow the tax year to be split when someone leaves, and then the overlap is small. Others do not, and that is where the double taxation that has to be removed through the treaty appears. Checking which of the two applies to you, and on what exact date the tax year of the country you are leaving starts and ends, is the first calculation we do.
A foreign government pension does not vanish from your return
If you come back receiving a pension paid by another state for services rendered to that state, the treaty will normally reserve the taxing right to that country. That does not mean the pension stays off your Spanish return. Most treaties remove double taxation through an exemption that still counts that income when working out the rate applied to everything else. Put another way: you pay no tax on it, but it pushes up the rate on everything else. Leaving it off the return because "it is taxed over there" is a filing error, not an option.
Modelo 720 appears in the first year
Being tax resident switches on the reporting obligations for assets held abroad, and when a retired person returns that usually touches almost everything he or she owns: the account the pension is paid into, the pension plan left open over there, the flat kept in the other country. Modelo 720, the Spanish information return on foreign assets, is filed in the year following the first year of residence, between 1 January and 31 March, and only if the thresholds for each block are exceeded. How those blocks are grouped is in the three blocks and the €50,000 threshold, and how the form is filled in, in how to fill in Modelo 720.
The obligation starts with tax residence. The years you lived abroad do not create outstanding returns in Spain, and there is no past to regularise that was never within the rules. What does have to be done well is the first year, because it sets the starting picture against which the following years are measured.
And the wealth tax changes scale
As a non-resident you were taxed only on assets located in Spain. As a resident you are taxed on a personal basis, which means on your worldwide wealth: the house over there, the account over there and the pension plan over there all go into the base. Whether you have to file depends on the thresholds and on the Spanish region where you live, which carries a lot of weight in this tax. It is developed in who has to file a wealth tax return.
What about the inbound workers regime for someone coming back?
It is the question we always get, and the honest answer disappoints many people. The special regime in article 93 of the Spanish personal income tax act (the IRPF), commonly known as the Beckham regime, requires a qualifying reason for the move: an employment contract, international remote work, becoming a company director, an entrepreneurial activity with a favourable report, or carrying out certain professional activities. Retirement is not one of those reasons. A pensioner who comes back to Spain to live, without working, does not qualify for the regime just because he or she spent many years abroad.
It is a different matter for someone who comes back and is still working, even part-time: there it is worth taking a careful look, and the time condition of not having been resident in the five previous tax years is usually met without effort. The deadline for opting in is short and it is a hard cut-off, so if anything of this kind applies to you, read Modelo 149 before you settle in, not afterwards, together with the Beckham regime page.
The days that count, and the ones that do not
The 183-day test looks like arithmetic and is not entirely so. To count the days you look at presence in Spanish territory, and occasional absences are added to that count unless you can prove tax residence in another country. That clause puts evidence at the centre of the matter: whoever claims not to have been resident here must be able to show where he or she was resident.
The key evidence is the certificate of tax residence from the other country, which is why we insist so much on requesting it in time. After it come plane tickets, housing contracts, utility bills showing real consumption, children's schooling and banking activity. A passport full of stamps is not enough and, inside the free-movement area, stamps barely exist.
You can be tax resident in Spain without setting foot here for 183 days: it is enough for the main centre or base of your activities or economic interests to be located here. On top of that, there is the presumption of residence when your spouse, from whom you are not legally separated, and your dependent minor children habitually live in Spain. That presumption can be rebutted, but the burden of proof is on you. When both countries claim the right, the tie is broken with the treaty rules, which we explain in the dual residence conflict.
What is worth deciding before your residence changes
There are no tricks, and we do not sell any. What there is, is a fact: residence is measured in complete years, and that turns the date of certain transactions into a tax fact. These are the ones we have most often seen arrive too late:
- Cashing in a foreign pension plan. Who taxes it and how depends on whether you are resident here when it is paid out, and on what the treaty says about that type of income, which is not always the pensions article.
- Selling the home in the country you are leaving. The treatment of the gain, and each country's main-home exemptions, depend on the timing.
- A portfolio with unrealised gains. Selling before or after the change of residence changes the country that taxes the gain, and also the acquisition cost that is carried forward.
- An exit tax in the country you are leaving, if it has one. Not every country lets you leave for free, and that is checked over there, not here.
None of those decisions is taken for tax reasons alone, and none of them always works: the tax point is set by the law, not by what suits you. We put both scenarios into numbers and warn you of the risk in each; the decision, with that information in front of you, is yours.
The first year, in order
A well-handled return looks like a checklist: establish your residence for the year with the days and the tests in hand, tell the foreign payers about the change, request the Spanish certificate of tax residence when the time comes (we explain it in the certificate your payer needs), prepare the worldwide income return with whatever double taxation credits apply, and check whether Modelo 720 and the wealth tax apply. What does not work is improvising in June.
If you would like us to look at it with your real dates, the pensioners form asks only what is needed: when you arrive, where from, what you receive and what you own abroad. With that we tell you which tax years are at stake and what it costs to handle them, without promising you an outcome that depends on two tax authorities.