Determining tax residence and the obligation to pay taxes is a recurring topic, especially when it involves taxpayers who claim to live abroad but, in practice, maintain their personal and economic life in their country of origin. The discussion gains relevance when pensions, assets and family connections are at stake, which help to define where, legally, a person should tax their income. This case talks about a retiree who was ordered to pay a tax debt to the Treasury for having moved country while he had his assets in Spain.
A pensioner was ordered to pay more than 104 thousand euros to the Spanish Tax Agency after trying to declare himself as a non-resident, despite maintaining his family and economic nucleus in Spain.
The Superior Court of Justice of Catalonia confirmed the decision of the Regional Economic-Administrative Court, which applied the criteria set out in the law to conclude that its “center of vital interests” remained in Spanish territory, contrary to the provisions of article 9 of the IRPF Law and the Double Taxation Agreement with Andorra.
Lack of income declaration
This case began when the Hacienda delegation in Lleida detected that the pensioner had not submitted the income declaration for 2018, despite having taxable income, according to the Spanish digital newspaper Noticias Trabajo. The taxpayer claimed to have moved to Andorra at the end of 2017, where he initially rented and then bought a house, thus trying to justify the lack of declaration in Spain.
The investigation, however, revealed that he had housing available in both countries and that the structure of his life continued to be anchored in Spain. TEAR confirmed that it had to pay 60,864.23 euros in tax debt, plus a fine of 43,273.86 euros. The organization highlighted that the retiree did not demonstrate that he had, in Andorra, more relevant family or economic connections than those he maintained in Spain.
Weight of the “center of vital interests”
The case progressed to the Superior Court of Justice, where the taxpayer sought to annul the fine, arguing that he had interpreted the law reasonably. However, the court ruled in favor of the tax authorities. He explained that, when a taxpayer has permanent housing in two countries, it is necessary to use the “center of vital interests” criterion, which corresponds to the place where personal, economic and property relationships are concentrated.
The ruling concluded that his most relevant income was in Spain, including a pension of more than 34 thousand euros per year, redemptions from savings plans worth almost 120 thousand euros and the ownership of four properties in Barcelona and Lleida. At the same time, his wife, daughters and grandson lived in Spain, and the wife herself declared her IRS there that year, according to the same source.
Lack of proof of tax residence in Andorra
The court highlighted that the pensioner was unable to demonstrate that he actually taxed in Andorra. It also considered that the lack of taxation in any jurisdiction revealed negligent behavior, especially since all the elements that determined Spanish tax residence were known to the taxpayer.
Thus, the decision that he had to pay both the tax debt and the fine imposed by Hacienda was maintained, according to .
What if it happened in Portugal?
In Portugal, an identical case would be analyzed based on the Tax Authority’s criteria for determining tax residence, in light of article 16 of the IRS Code (CIRS). As in Spain, the decisive factor would be the “center of life”, which includes the usual presence in the country, the location of the family, real estate assets and the source of income.
If a retiree claimed to live abroad but maintained a family, assets and pension paid by Portuguese entities, the AT would consider that he or she remains a tax resident in Portugal, being obliged to declare and pay IRS on all worldwide income. The lack of proof of effective residence in another country would also lead to the retroactive collection of taxes and the imposition of fines for non-compliance.
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