If you’re a Canadian citizen who plans to reside in Spain, you must be aware of the tax implications. To achieve this, some experts specialise in international taxation and offer a Canadian tax service that helps citizens determine tax implications.
These solicitors are experts in each country’s internal regulations and the double taxation agreement signed between Spain and Canada (Canada-Spain tax treaty). With their assistance, you can make sure you comply with the regulations as closely as possible while also optimising your taxes.
At Tejada Solicitors, we offer a comprehensive pre-move assessment for Canadian citizens planning to move to Spain as tax residents. In this analysis, we go over the tax implications for each citizen and the tax cost of the move. To achieve optimal tax efficiency, it’s essential to study this in advance.
Determining your tax residency is the first step in understanding your tax obligations in Spain as a Canadian citizen living there. You must use the Spanish, Canadian, and Spanish-Canada tax systems.
Article 9 of Law 35/2006, of November 28th, on Personal Income Tax, establishes the criteria for determining tax residency under Spanish domestic law. This statute, called LIRPF, provides a clear roadmap for identifying tax residency by outlining particular criteria in paragraph 1.
“A taxpayer is considered to have their primary residence in Spanish territory when:
They reside in Spanish territory for over 183 days within the calendar year. Any occasional absences will be considered in calculating this duration unless the taxpayer can demonstrate tax residency in another country.
Temporary stays in the country for unpaid activities conducted under cultural or humanitarian cooperation agreements with Spanish public authorities will not be included in the calculation.
Their main residence is in Spain, where their activities or economic interests are situated either directly or indirectly.
Unless proven otherwise, if the taxpayer meets the specified conditions, remains married to their spouse, and their dependent children reside in Spain, it will be presumed that the taxpayer’s primary residence is in Spain.
Article 9 clarifies that an individual’s tax residence is not solely based on spending over 183 days in Spain. Additional factors, including the location of their economic and family interests and official residence in another country, must also be considered.
As a Canadian citizen or resident living abroad, you must file the same tax returns as those in Canada, including Income, Estate, Gift Returns, and Pay Estimated Tax.
Looking to move to Spain? Tejada Law Firm reliably offers a Canada tax service led by a team of experts who will ensure this process is carried out carefully and confidentially.
Our team of lawyers specialises in Immigration, Property Conveyancing, and Taxation. They will advise you on all procedures and plan your case for the best tax and legal efficiency.
After the tax residency of the Canadian expatriate in Spain is complete, they will be subject to the following tax obligations:
These are the tax responsibilities for non-residents:
Agreements designed to prevent double taxation hold precedence over individual country regulations. Hiring a Canada tax service professional can effectively assist in navigating these agreements. Below are some income types deemed particularly relevant under the double taxation agreement between Spain and Canada.
According to Spanish domestic law, interest sourced from Canada may be subject to taxation in Spain. Generally, the authority to impose taxes on them rests solely with Spain.
Nonetheless, Canadian domestic law could impose taxes on this interest under specific circumstances. In these cases, the Canadian tax rate must not exceed 10% of the gross interest if the beneficiary is a resident of Spain. In such instances, you can claim an international double taxation deduction in Spain up to that limit.
Members of the boards of directors for Canadian corporations face taxation on their compensation from both Canada and Spain (Article 16 CDI). In Spain, taxpayers may claim a deduction for international double taxation.
Profits from selling real estate in Canada might be subject to taxation in Spain and Canada (article 13.1 CDI). Taxpayers are eligible to apply for a deduction for international double taxation.
Canada and Spain may impose taxes on profits derived from the sale of properties, shares or other rights that provide direct or indirect access to Canadian real estate (Article 13.4 CDI). Spanish taxpayers can benefit from the deduction for international double taxation.
To eliminate double taxation, please see Article 24 of the Double Taxation Avoidance Agreement between Canada and Spain.
“1. The following provisions in Spanish law prohibit double taxation:
(a) If a Spanish resident earns income potentially subject to Canadian taxes for reasons beyond citizenship, Spain permits them to subtract the taxes paid in Canada from their income tax.
On the other hand, this deduction cannot surpass the income tax amount calculated on the income earned in Canada prior to applying the reduction
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Canadian citizens living in Spain still have tax obligations to the CRA; some of the forms they may be affected by are:
Canadian citizens must pay taxes in Spain on their global income once they establish tax residency there.
Generally, they have to declare their income tax return in Spain when:
For instance, a Canadian citizen living in Spain who receives a State Pension of €10,000, a Private Pension of €6,000, or a single foreign pension of €16,000 must declare their income tax since the requirement to declare applies only to amounts exceeding €15,000.
In Spain, rental income surpassing €1,000 annually, along with dividend income, interest, and capital gains, are subject to withholding tax, with a cap of €1,600.
Rosana Tejada is a tax specialist at Tejada Solicitors who focuses on expat tax issues and provides a Canada tax service. Based on her knowledge, she emphasises that all expatriates aiming to benefit from the international double tax deduction must declare this, regardless of the situation.
As a non-resident, you must file a tax return solely for income earned in Spain. This includes rental income from properties in Spain, gains from selling Spanish assets, and Spanish inheritance and donation taxes.
For resident taxpayers:
For non-resident taxpayers:
Form 210: Non-residents—whether individuals or legal entities—earning income in Spain must submit Form 210. This income may consist of earnings from property rentals or financial profits.
Common Tax Forms for resident and non-resident taxpayers:
Inheritance and Donation Tax in Andalusia (Form 650/651): Residents and non-residents in Spain must pay taxes on inheritance and gifts. Residents are taxed on their global assets, while non-residents only pay taxes on assets situated within Spain.
Residents and non-residents are subject to the same rates and allowances.
Remember, the AEAT website posts deadlines and obligations for each declaration annually.
Non-Tax Residents:
Form 210: Depending on income type, the following deadlines apply:
Income from property transfers: This happens within three months after the first month of the transfer date.
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For Canadian tax residents in Spain
It’s crucial that expatriate residents in Spain planning to withdraw their pension plan are aware that opting for a lump-sum redemption grants a 40% reduction on benefits tied to contributions made before 2007. However, this reduction does not apply if the pension plan is withdrawn as a regular annuity.
If you choose to redeem your pension plan (or pension scheme) in a mixed form, with both capital and income, the capital portion can still qualify for the 40% reduction as long as you meet the specified criteria.
Hiring a professional for a Canada tax service is essential for personalised assistance regarding these issues, ensuring compliance and maximising tax benefits.
Spanish tax law allows tax deductions for long-term property rentals, whether local or international. Typical deductible expenses include insurance, community fees, mortgage interest, water and energy bills, municipal taxes, commissions from real estate agents, maintenance and repair expenses, and cleaning and laundry services.
Here is a summary of the percentages relevant to the rental tax deduction housing:
For residential rental agreements located in stress zones, as outlined by the new Housing Law and defined by each autonomous region, starting January 1st, 2024:
For more information on applicable reductions to rental incomes, we advise you to consult a Canada tax service expert specialising in international taxation.
Here is a summary of the percentages relevant to the rental tax deduction housing:
For residential rental agreements located in stress zones, as outlined by the new Housing Law and defined by each autonomous region, starting January 1st, 2024:
For more information on applicable reductions to rental incomes, we advise you to consult a Canada tax service expert specialising in international taxation.
Seniors over 65 can sell their main residence without incurring income taxes. Please keep in mind that if the spouse of the property owner is not also 65 when selling the home, only half of the capital gains will be excluded.
Gains from moving to another home (not the primary residence) are not taxed, provided they are used within six months to establish a life annuity insurance policy with a maximum payout of €240,000.
People under 65 who sell their main home and earn a profit won’t owe income tax if they reinvest the entire profit in buying another primary residence. However, the full profit must be reinvested in a new primary home within two years of the initial sale.
Tax laws classify a primary residence as a home that has been occupied for a minimum of three years prior to the transfer of ownership.
For both tax and non-tax residents of Spain who make capital gains from transferring property: when selling a property purchased between May 12th, 2012 and December 31st, 2012, a 50% tax discount on capital gains will apply.
Tax specialist Rosana Tejada from Tejada Solicitors Law highlights that the Spanish tax authorities will examine this exception closely. She emphasises the importance of careful planning and strict compliance with standard tax procedures to maximise savings. For further details about this exception, click here.
Since the beginning of my profession my primary focus has been on serving expatriates both residing in and outside of Spain…
At our law firm, Rosana Tejada specialises in assisting expatriates and non-residents of Spain. They possess extensive expertise in international taxation, particularly concerning issues related to international double-taxation treaties.
Tejada Solicitors is a law firm comprised of economists and lawyers with expertise in international tax law and property transactions.
We serve non-resident investors and expatriates interested in purchasing or investing in Spain. Each day, we encounter various challenges that we carefully evaluate from legal and financial perspectives. In every case, our goal is to tackle the numerous tax issues our clients might encounter. To provide customised solutions, we offer a Canada tax service that guarantees compliance and efficiency for Canadian citizens.
Do you need a professional help with canadian tax services in Spain?
Canadian citizens looking to invest or relocate to Spain should consult a Canada tax service professional. They should specialise in international taxation and the double taxation agreement between Spain and Canada to prevent double taxation.
Rosana Tejada advise Canadians considering expatriation to Spain on any visa (such as Non-Profit and Digital Nomad Visas) to align their immigration process with tax considerations. Unexpected issues can arise, making it essential to integrate both processes for a successful transition. Working with a trusted legal professional who offers Canada tax services can significantly streamline the integration of tax planning and immigration obligations, ensuring a more effective and efficient process.
Tejada Solicitors adopts a comprehensive strategy to handle your case. Our team, consisting of an immigration expert, a tax attorney, and a property conveyancing specialist, will conduct a detailed investigation of your situation. We aim to simplify the process, reduce stress, and facilitate your relocation to Spain. Rely on the expertise and assistance of our skilled legal team, knowledgeable in these intricate procedures.
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Article 80 of the Personal Income Tax Law (Law 35/2006) regulates the deduction to avoid international double taxation. When both countries have the authority to tax a particular asset, the country of residence has the responsibility to implement measures to prevent double taxation.
In addition, the double taxation agreement signed between Spain and Canada regulates how the taxing power is distributed between both countries for each type of income.
Yes, in Spain, the main types of income eligible for personal income tax relief for taxes paid abroad include, but are not limited to, interest income, rental income, and capital gains earned abroad. There are more sources of income on which deductions can be applied, but this requires a more complex study.
How to Move to Spain from Canada
Anyone who decides moving to Spain from Canada needs to complete a list of tasks and procedures. Verify our checklist for moving to Spain.
