In its recent sentence, the Supreme Court narrows the interpretation of the Law pointing at more objective criteria in terms of residence status. The court resolves over an intern from the ICEX (Spanish Institute of Foreign Trade), who signed a contract to work from October 1^st, 2010 until September 30^th, 2011, ie. one year in the commercial office of Spain in New York. The ICEX practiced the corresponding tax withholdings, but the employee understood that as a non-resident in Spain he had to file the 210 Form of the Non-Resident Income Tax, for which he requested the amounts withheld by the payer to the Spanish Tax Office.

The Spanish Tax Office refused the return requested by the employee and concluded that the tax payer had to be taxed in Spain for the Personal Income Tax because he could not prove his tax residence abroad. The employee complained to the Regional Economic-Administrative Court, but the latter agreed with the criteria of Tax Office. The employee submitted his claim to the Superior Court of Justice of Asturias and this, on the contrary, ruled in favor of the employee, so the Tax Office brought the matter to the Supreme Court, which finally ruled in favor of the intern.

"In such a case the sporadic or occasional would cease to be and prevail over the permanent, instead of complementing it."

The Supreme Court focuses on the notion and purpose of the sporadic absences referred to in Article 9 of the Personal Income Tax Law (PITL) and, according to the definition of the Royal Academy, concludes that sporadically cannot include extended time periods, which includes more than 183 calendar days, a limit that marks the difference between residents and non-residents. "In such a case," says the sentence "the sporadic or occasional would cease to be and prevail over the permanent, instead of complementing it." So, it can be set that the main aspect of Article 9 is the permanence and the sporadic absence is the accessory.

Therefore, the court argues that it cannot be said that an absence from Spain for more than 183 days is sporadic, since, in the opposite direction, accepting that would mean that the concept of habitual residence, based on permanence, could be accepted in Spain, and "it would be completely lack of sense and reason."

Do not take into account the intentionality of the taxpayer

Finally, the Supreme Court understands that the concept of "sporadic absences" must exclusively address the objective data of the duration of the stay outside of Spanish territory, without taking into account the intentionality of the taxpayer to settle occasionally outside of Spain. That is, what is relevant is whether the taxpayer spends more than half of the year outside of Spain -183 days-.

 

B LAW & TAX
Alfonso Garrido Picon

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