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If you are a foreigner, but you have opened your business in Spain, today’s post is of interest to you. Today we are going to talk about Double Taxation Agreements. This is a complex subject in which you may need help from an expert. That is why, from People Global Relocation, we explain you what Double Taxation Agreements are, who they affect, on which taxes they have effect, etcetera. We are going to focus on the specific case of the Double Taxation Agreement between Spain and the United States.

What is a Double Taxation Agreement?  

Double Taxation Agreements (DTA) are agreements between countries with the objective of avoiding double taxation. These agreements are intended to protect both individuals and companies against this possible problem and also to avoid tax evasion.  

What taxes are affected?  

In the specific case of the agreement between Spain and the United States, it affects the following Spanish taxes:  

  • IRPF (Personal Income Tax).  
  • IS (Corporate Income Tax)  
  • IRNR (Non-Resident Income Tax)  
  • IP (Wealth Tax)  

To these taxes must be added the corresponding U.S. income taxes.  

What is Tax Residency?  

In these cases, the first thing to do is to find out in which country we have to declare our income. Sometimes, this can be complicated for those who travel from one country to another and reside the same amount of time in both territories. For this reason, the Double Taxation Agreement between Spain and the United States establishes that a person will be a resident in Spain if:  

  • Spends more than half of the year in Spanish territory.  
  • His main economic activities are in Spain.  
  • His spouse and minor children reside in Spain.  

However, each country establishes its own requirements, so that sometimes it is possible to meet the requirements to be a tax resident of two countries at the same time. In these cases, the tie-breaker is as follows:  

  1. A person will be considered a resident of the country in which he or she has permanent property.  
  1. In case the previous step is not decisive, it will be considered in which of them the person lives more regularly.  
  1. If the previous step is not decisive, a person will be considered to be a tax resident of the country of which he/she holds the nationality.  
  1. If none of the above steps clarifies the situation, it will be up to the authorities to determine it.

Remember that at People Global Relocation we are at your disposal to help you with any questions you may have during your relocation and stay in Spain.  

You can also read other interesting posts in our blog:  

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