Foreigners are increasingly moving to Spain’s Balearic Islands but not paying their fair share of taxes as residents, the country’s tax authorities have warned.
The Spanish tax authorities are monitoring a growing number of foreigners moving to and living in the Balearic Islands without paying income tax as residents.
This is according to Ana Julia Fernández, the agencia tributaria delegate on the islands, who has highlighted the renewed work carried out by tax inspectors to identify these sorts of fraudulent tax arrangements.
The agency is carrying out inspections to try and prevent this, local media reports, as well as to crack down on Spanish nationals falsely claiming residency in other countries where they don’t live in order to gain tax advantages.
Among wealthier Spaniards, this is often done in neighbouring Andorra.
READ ALSO: Renewed calls for Mallorca to ban non-residents from buying property
However, though the agency is aware of an increase in foreigners not paying their fair share of tax in the Balearics, the increased inspections do not necessarily imply a wider crackdown, Fernández stated. “The tax agency is not going to catch people out… we encourage voluntary compliance,” she said.
When the Spanish press pushed for information on the nationality of the increasing number of offenders, Fernández replied that this information cannot be shared publicly: “At the tax agency it is essential to respect the principle of the right to preserve the confidentiality of personal data,” she said. Nor were any figures released.
According to Spanish tax law, the authorities consider anyone to be a tax resident if they live in Spain for 183 days or more a year, their main economic interests are located in Spain, and/or their spouse and children live in Spain.
Non-EU citizens can only legally stay in Spain for 90 days out of every 180 days, so it’s unlikely that many Brits or Americans, for example, meet the 183-day rule unless they have other visa or residency arrangements.
Advertisement
Some, whether EU nationals or not, may claim to be non-tax resident but try to live in their second home for longer than 183 days. In this case, the tax authorities look for evidence and often turn to energy companies, for example, to cross reference bills and see when the property has been in use.
Fernández emphasised that the inspection department is also in charge of monitoring international transactions that reduce the tax yield in Spain by transferring profits to low-tax jurisdictions.
For this year’s income tax declaration campaign, the authorities have focused in particular on tourist rentals in the Balearic Islands and the agency is now notifying landlords of queries with regard to rental income for the year.
READ ALSO: La Renta – The important income tax deadlines in Spain in 2025
