Moving to Andorra didn’t help avoid taxes
A heated dispute has erupted in Spain between a retiree and the tax authorities. After ending his career, the man decided to change his place of residence and in late 2017 registered in Andorra. However, the Spanish tax authorities doubted the authenticity of his move and demanded he pay over €104,000. Their reasoning: according to inspectors, his main interests remained in Spain.
It all started when the tax office in Lleida discovered the retiree hadn’t filed an income tax return for 2018, despite having earnings taxable in Spain. The man maintained he had lived in Andorra since the end of 2017, where he first rented and then bought a home. But the audit revealed he still owned property in both Spain and Andorra. This prompted a more thorough investigation.
Economic and family ties proved decisive
The retiree insisted his move was genuine and presented papers confirming his property purchase in Andorra. However, the tax office argued that owning foreign real estate does not prove a change of tax residency if a person’s primary interests and family remain in Spain. The investigation showed that while he had permanent homes in both countries, his business activities and close relatives were still based in Spain.
As a result, the ‘center of vital interests’ principle was applied. This criterion takes into account where one’s family, property, and main sources of income are concentrated. The Catalonia Regional Economic-Administrative Court sided with the tax authorities, noting that the retiree failed to prove his economic interests and personal ties had become stronger with Andorra than with Spain.
Legal proceedings and final decision
Ultimately, the retiree was assessed a tax debt of €60,864.23 and fined €43,273.86. The court decision emphasized that, despite owning property in Andorra, the man did not provide evidence that his economic interests and personal ties had shifted there. He then attempted to challenge the decision in court, arguing that his interpretation of the law was justified and asking for the fine to be overturned.
However, the Catalonia High Court (Tribunal Superior de Justicia de Cataluña) upheld the findings of the tax authorities. The judges relied on the center of vital interests criterion, which determines tax residency based on the location of one’s family, property, and main income sources. It was established that the retiree received a pension from Spain exceeding €34,000, withdrew nearly €120,000 from pension accounts, and owned four properties in Barcelona and Lleida. His wife, daughters, and grandson also lived in Spain, and his spouse filed a tax return in the country.
Why the court deemed the retiree’s actions dishonest
The judges noted that the man failed to prove he genuinely maintained a tax residence in Andorra. His connections to Spain were evident, and his attempt to avoid taxation was deemed superficial. The court stated that mere formal registration in another country does not exempt one from taxes if their primary interests remain in Spain. Moreover, the retiree provided no documentation proving tax payments in Andorra or evidence of significant assets there.
The court’s decision emphasized that the retiree’s conduct was considered negligent and warranted punishment. The judges stressed that he was fully aware of all the circumstances determining tax residency, and failing to pay taxes anywhere cannot justify the actions of an experienced taxpayer.
Legal framework and consequences for taxpayers
The court ruling was based on Article 9 of the Personal Income Tax Law (Ley del IRPF) and the double taxation agreement between Spain and Andorra. The key factor was the center of vital interests—the location where the individual’s main personal and economic ties are concentrated. In this case, the court concluded that the retiree is required to pay taxes in Spain, despite being formally registered in Andorra.
This case serves as a clear example for anyone planning to change their tax residency. The Spanish tax authorities closely monitor where your family, assets, and sources of income are actually located. Simply changing your address on paper, without genuinely breaking ties with Spain, does not exempt you from tax obligations and can result in hefty fines.
