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News and Events on Spanish Laws and Taxes

20-30 % of Non resident tax declarations have errors or mistakes

A 2021 study by the Institute of Economic Studies (IEE) estimated that between 20% and 30% of the declarations of non-residents in Spain could contain errors.

In 2022 Civitas Foundation report noted that fines on non-residents for tax non-compliance had increased considerably in recent years.

Announcements from the Tax Agency: (“Agencia Tributaria”)

• The Tax Agency has carried out various awareness campaigns aimed at non-residents, warning about the importance of submitting the declaration correctly and avoiding errors.
• In 2023, the Agency launched a specific campaign on the consequences of not filing the non-resident declaration, including applicable fines.

Cases of tax fraud:

In recent years, various cases of tax fraud related to non-residents have been detected, such as the simulation of tax residence or the presentation of false declarations.

Common error types:

1. Errors in determining tax residence:

• Do not declare in Spain if the tax residence criteria are met.
• Declare in Spain when you reside in another country.

2. Errors in the income tax return:

• Not declaring all income obtained in Spain.
• Not applying the deductions to which you are entitled.
• Incorrectly calculate the tax base or the amount to be paid.

3. Failure to submit the declaration:

• Failure to file the non-resident declaration despite having the obligation to do so.
• Submit the declaration after the deadline.

Causes of errors in the declarations of non-residents in Spain

The causes of errors in the declarations of non-residents in Spain are diverse and can be grouped into the following categories:

1.Lack of knowledge of tax regulations:

• Complexity of the Spanish tax system: Spanish tax regulations can be complex and difficult to understand, especially for those who do not reside in the country permanently.
• Constant changes in legislation: Spanish tax legislation is subject to frequent changes, which can make it difficult for non-residents to keep up to date with the latest changes.
• Difficulty accessing clear and up-to-date information: Information on non-resident taxation can be difficult to find and understand, especially for those who do not speak Spanish.

2. Errors in determining tax residence:

• Complex tax residency criteria: The criteria for determining tax residency in Spain can be complex and raise doubts in some cases.
• Lack of individualized analysis: It is important to analyze each case individually to correctly determine tax residence.
• Confusion with tax residence in other countries: Non-residents may confuse Spanish tax regulations with those of their country of origin or other countries in which they have economic interests.

3. Errors in the income tax return:

• Lack of knowledge of the income to declare: Non-residents may not know what income they must declare in Spain, especially if they obtain income from various sources.
• Difficulty in calculating the tax base: Calculating the tax base in the non-resident declaration can be complex, especially in cases with income from different countries.
• Lack of application of tax deductions and benefits: Non-residents may be unaware of the tax deductions and benefits to which they are entitled, such as the deduction for investments in real estate or the deduction for double taxation.

4. Lack of rigor in the presentation of the declaration:

• Failure to submit the declaration on time: Submission of the non-resident declaration after the deadline may result in financial penalties.
• Failure to present complete documentation: The lack of the documentation required by the Tax Agency may give rise to requirements and delays in the processing of the declaration.
• Making errors when completing the forms: Errors when completing the declaration forms may be grounds for sanctions.

5. Lack of professional advice:

• Non-specialized advice: Seeking advice from professionals who are not specialized in non-resident taxation can increase the risk of errors.
• Lack of monitoring and updating: It is important to have continuous advice to stay up to date with changes in tax regulations and avoid errors in future returns.

Consequences of errors:

1. Economic fines:

• Fines for errors in the non-resident declaration can range between €150 and €30,000.
• In serious cases, it can even become a tax crime with prison sentences.

2. Surcharges and late payment interests:

• If the declaration is submitted after the deadline, late fees and interest will be applied.

3. Damage to reputation:

• A history of tax problems can damage the taxpayer’s reputation and make relations with tax authorities difficult in the future.

Recommendations:

1. Seek professional advice:

It is essential to have the advice of a tax expert to submit the non-resident declaration correctly and avoid errors.

2. Review tax regulations:

It is important to stay informed about the tax regulations applicable to non-residents in Spain to know the obligations and avoid surprises.3. Submit the declaration on time:

It is crucial to file the non-resident declaration within the established deadline to avoid penalties.

4. Keep documentation:

It is important to keep all the documentation related to the non-resident declaration to be able to prove the information declared in case of a requirement by the Tax Agency.

Conclusion:

It is important that non-residents in Spain take measures to avoid errors in their tax returns. These measures include:

Find out about Spanish tax regulations: Read the tax regulations, consult the Tax Agency website or search for information from reliable sources.
Seek professional advice: Hire a professional specialized in non-resident taxation to review the declaration and ensure its correctness.
Submit the declaration on time and with complete documentation: Comply with the established deadlines and present all the documentation required by the Tax Agency.
Stay updated on changes in regulations: Follow changes in Spanish tax legislation to avoid surprises in future returns.

By taking these measures, non-residents can significantly reduce the risk of making errors on their tax returns and avoid the negative consequences that this can entail.