Russia

Tax residents in Spain with income from Russia

(The content of this document is merely informative and has been prepared for informative purposes. For more information, you can consult directly the Personal Income Tax Law and the Spanish-Russian Convention to avoid double taxation).

I.- Tax residence

A natural person is resident in Spanish territory when any of the following circumstances occur:

• They have stayed longer than 183 days in Spanish territory over the calendar year.

  To determine this period of permanence, sporadic absences will be counted unless the taxpayer proves his tax residence in another country (through a certificate of tax residence issued by the tax authorities of that other country). In the case of countries or territories labelled as tax havens, the Tax Administration can demand proof of stay in that tax haven over a period of 183 days within the calendar year.

• They situate the main base or centre of their activities or economic activities, directly or indirectly, in Spain.

• They have dependent not legally separated spouse and/or underage children who are usually resident in Spain. This latter situation accepts evidence to the contrary.

II.- Personal Income Tax

If a natural person, as described, turns out to be tax resident in Spain , they will be taxpayers for the Personal Income Tax (IRPF) and you must pay taxes in Spain for your worldwide income , that is, you must declare in Spain the income you obtain anywhere in the world, without prejudice to the provisions of the Convention to avoid international double taxation signed between Spain and the country of origin of the income.

The agreements list some types of income and establish, with respect to each of them, the tax powers that correspond to each signatory State:

• In some cases, exclusive power for the country of residence of the taxpayer,

• in others, exclusive power for the country of origin of the income and,

• Finally, in some cases, power shared between both countries, both being able to tax the same income, but with the obligation for the taxpayer's country of residence to arbitrate measures to avoid double taxation.

The personal income tax tax period is the calendar year. A person will be a resident or non-resident throughout the calendar year since the change of residence does not imply the interruption of the tax period.

The income tax return of natural persons who are tax residents in Spain is submitted in the months of April, May and June of the year following the year of accrual. The Personal Income Tax regulations regulate limits and conditions that determine the obligation to submit the tax return, which must be consulted every year. Exempt income is not taken into account to determine the obligation to declare.

Example: Taxpayer, tax resident in Spain, whose only income in 2019 is a pension from Russia, caused by having worked in a company in said country (Spain has the exclusive power to tax it as it is a pension derived from previous employment in the public sector . Treatment in the Convention is explained below). If the pension exceeds the amount of 14,000 euros per year, taking into account the limits and conditions of the obligation to declare related to the 2019 financial year, you would be obliged to submit a personal income tax declaration corresponding to 2019, since the payer of the Russian pension is not obliged to make withholdings on account of Spanish personal income tax.

Spanish-Russian agreement

(The text of the Agreement can be consulted at https://sede.agenciatributaria.gob.es in the following route: Home > Regulations and interpretative criteria > International taxation)

In a simplified manner, taking into account the provisions of the Agreement between Spain and Russia ( CDI ), taxation for tax residents in Spain the most commonly obtained income from Russian source would be:

Pensions:

Understood as remuneration that has its cause in a previously held job, they have different treatment depending on whether they are granted for services provided in the public or private sector.

• Pension received due to dependent work provided to the State, political subdivision or local entity (article 19.2 CDI) . Its treatment is:

  1. Generally, these pensions will only be taxed in Russia.

     In Spain they would be exempt, although the exemption would be applied progressively. This means that, if the taxpayer were required to file a personal income tax return for obtaining other income, the amount of the exempt pension would be taken into account to calculate the tax applicable to the remaining income.

  2. However, if the beneficiary of the pension residing in Spain had Spanish nationality, the aforementioned pensions would only be taxed in Spain.

• Pension received due to previous employment in the private sector (article 18 CDI) : These pensions will only be taxed in Spain.

Income derived from real estate (article 6 CDI):

Income from real estate property located in Russia can be taxed in both Spain and Russia. The resident taxpayer would have the right to apply the deduction for international double taxation in Spain in personal income tax.

Dividends (article 10 CDI):

Russian-source dividends are subject to taxation in Spain, in accordance with its domestic legislation. These dividends may also be subject to taxation in Russia, if this is the State in which the company paying the dividends resides and according to its internal legislation, but if the recipient of the dividends is the beneficial owner resident in Spain, the tax thus required in Russia will have a maximum limit of 15% of the gross amount of the dividends, or 10% of said amount when said dividends are exempt from taxation in Spain. The resident taxpayer would have the right to apply the deduction for international double taxation in Spain in personal income tax up to that limit.

Interest (article 11 CDI):

Interest from Russia is subject to taxation in Spain, in accordance with its internal legislation. However, these interests may also be taxed in Russia, the country from which they come and in accordance with its domestic legislation, but if the recipient of the interest is the beneficial owner residing in Spain, the tax required in Russia cannot exceed 5 percent. 100 of the gross amount of interest. In Spain you would have the right to apply the deduction for international double taxation in personal income tax up to that limit.

Remuneration of members of boards of directors of companies resident in Russia (article 16 CDI):

They can be taxed in both Russia and Spain. The taxpayer would have the right in Spain to apply the deduction for international double taxation in personal income tax.

Capital gains:

• Derived from real estate (article 13.1 CDI) : Gains obtained from the sale of real estate located in Russia may be subject to taxation in both Spain and Russia. The taxpayer has the right to apply the deduction for international double taxation in Spain in personal income tax.

• Derived from shares or participations in companies whose assets consist mainly , directly or indirectly, of real estate located in Russia ( article 13.2 CDI ): Gains derived from the sale of those shares or participations may be subject to taxation in both Spain and Russia. The taxpayer has the right to apply the deduction for international double taxation in Spain in personal income tax.  

• Derived from movable property that belongs to a permanent establishment or a fixed base (article 13.3 CDI): profits obtained from the alienation of movable property belonging to a permanent establishment or a fixed base that a resident of Spain owns in Russia for the conduct of business activities or the provision of independent personal services, including profits derived from the alienation of the establishment permanent or fixed base, may be subject to taxation in both Russia and Spain. The taxpayer has the right to apply the deduction for international double taxation in Spain in personal income tax.

• Derived from other types of goods (article 13.5 CDI) : In general, gains derived from the sale of any other type of property other than those mentioned above can only be taxed in Spain, provided that this is the State of residence of the transferor. An example of this type of capital gain would be that derived from the sale of shares of a Russian company.

In addition to those mentioned above, the Agreement lists other types of income (business profits, professional services, remuneration for salaried work, artists and athletes, public functions, other income...), the treatment of which can be consulted in its text.  

III.- Obligation to provide information on assets abroad

People residing in Spain must inform the Spanish tax administration about three different categories of assets and rights located abroad:

• accounts in financial institutions located abroad
• securities, rights, insurance and income deposited, managed or obtained abroad
• real estate and rights over real estate located abroad

This obligation must be fulfilled, using form 720, between January 1 and March 31 of the year following the year to which the information to be provided refers.

There will be no obligation to report on each of the categories of goods when the value of the set of goods corresponding to each category does not exceed 50,000 euros. Once the informative declaration has been submitted for one or more of the categories of assets and rights, the presentation of the declaration in subsequent years will be mandatory when the value has experienced an increase of more than 20,000 euros compared to that which determined the presentation of the last declaration. .

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https://sede.agenciatributaria.gob.es