More than 80% of the recent enquiries we have received since the beginning of the year indicate that Mallorca is becoming a destination where more and more people want to live permanently.
This model of living is simply about being physically in a different place, while losing their economic centre of life, their relationships and part of their culture. Many see the opportunity to give their children a broader view of today’s global world. It was not so long ago that our islands were almost exclusively settled by people who were already retired and had sufficient income to maintain a certain desired standard of living, but in a more relaxed environment with a more temperate climate.
All this, which is very nice, brings with it the need to organise several things. Not only finding a property to live in, and this is what the real estate agencies on the island are taking advantage of, which have undoubtedly been set up more now than during the last real estate boom on Mallorca. They have to think about how they are going to pay their taxes and receive their pensions for the time they spend in our country as residents.
Our island is fantastic, not only because of its nature, but also because of the diversity of people, cultures and experiences it brings. It will be interesting to know if these people who come here will really adapt to our system or if they will continue to say “this is how it is in our country”…. Well, in Spain we do it differently and it will undoubtedly be necessary to adapt.
The double taxation treaties, which aim to avoid having to pay taxes in two different places for the same thing, in most cases clarify everyone’s situation by determining where you have to pay and what you have to pay for. What is really difficult to determine and clarify, however, is where a person is tax resident even though he or she spends more than 163 days on our island. In many cases, even though you enjoy this time, you will still be tax resident in your country of origin, either because you have your family there or because you have your place of business there. But what happens if we change our office and bring it to our island, even if our income is paid from our country of origin? We have to check in each individual case how great the risk is that the Spanish tax authorities will consider us to be tax resident in our country.
Another point that many do not consider is that if you become tax resident in Spain, you are no longer tax resident in your country of origin and therefore you have to pay differently in that other country than before, namely as a non-resident. You cannot be tax resident in 2 different countries, one or the other. However, sometimes things are not that simple, because depending on your wealth, it is easy to understand that your country of origin does not want to lose a good client like you to pay its taxes in another country, so it can lead to a complex and lengthy dispute between two countries to get the residency award.
Therefore, it is very important to plan the option of switching well and look for the best strategy for clean and clear tax efficiency.