Personal Income Tax prepayments made before a change of residence may be deducted from Non-Resident Income Tax

The moment of a change in tax residence creates a complex tax transition between Personal Income Tax (IRPF) and Non-Resident Income Tax (IRNR). One of the most frequent questions concerns the treatment of amounts already withheld or paid on account during the months prior to losing residence in Spain.

What the DGT has resolved

The DGT has clarified that IRPF prepayments made from the beginning of the fiscal year until the date the change of residence is proven are considered withholdings or payments on account for IRNR. The criterion establishes that, if these payments correspond to income subject to non-resident tax, these amounts can be deducted directly from the IRNR liability resulting from the declaration of such income.

This criterion is based on the application of the Recast Text of the Non-Resident Income Tax Law (TRLIRNR) and the IRPF Law, allowing the taxpayer to maintain the traceability of payments made during the year of the change.

What it means for you

If you are an individual who ceases to be a tax resident in Spain, you do not have to treat the IRPF payments made in the preceding months as undue payments to request a separate refund. If the income received before the change of residence is subject to IRNR, those previous payments function as a credit that reduces the final tax debt in your non-resident return.

This avoids the need to process refunds for undue IRPF payments, provided that the requirement is met that the income in question is subject to taxation under the non-resident regime.

What is advisable to do

It is necessary to accurately document the exact date of the change of tax residence to determine the application period for each tax. It must be verified that the income on which IRPF withholdings were applied is effectively income subject to IRNR in order to correctly apply the deduction in the corresponding annual return. Each international mobility situation requires an analysis of the income received to ensure that the offset is applied to the appropriate concepts.