Recent developments in Spanish administrative practice and case law have reopened an issue that, for several years, appeared relatively settled within the Iberian context: the effective recognition by the Spanish Tax Administration (“AEAT”) of the Portuguese tax residence of individuals who have relocated to Portugal under the Non-Habitual Resident (“NHR”) regime.
Over recent months, several indications emerging from Spanish case law and, in particular, from the TEAC Resolution of 22 May 2025, reveal a significantly more aggressive approach by the AEAT towards taxpayers who:
- have formally transferred their residence to Portugal;
- benefit from the Portuguese NHR regime;
- but continue to maintain significant assets, bank accounts, economic structures, or strong personal and financial ties with Spain.
The issue is therefore no longer merely academic. The central question today is the following: can Spain disregard, for the purposes of the Portugal–Spain Double Tax Treaty (“DTT”), the Portuguese tax residence of an individual benefiting from the NHR regime?
The short answer is yes: the AEAT is effectively attempting to do so in certain cases. However, this does not necessarily mean that such a position is legally correct.
The core of the controversy lies in the interpretation of Article 4 of the Portugal–Spain DTT, which defines the concept of a “resident of a Contracting State”. The position recently adopted by the TEAC appears to be based on the premise that certain beneficiaries of the Portuguese NHR regime are not subject in Portugal to full personal taxation on their worldwide income and, consequently, should not fully benefit from treaty protection.
The flaw in this reasoning is evident.
The Portuguese tax system continues to be based on the worldwide taxation principle applicable to tax residents. Article 15 of the Portuguese Personal Income Tax Code expressly provides that Portuguese tax residents are taxable on their worldwide income, including income derived abroad. The NHR regime does not remove such comprehensive personal tax liability; it merely establishes specific rules providing for taxation, exemption, or relief from double taxation in relation to certain categories of income.
There is therefore a legally significant distinction between:
- a regime that limits taxation to domestic-source income; and
- a worldwide taxation regime granting specific tax benefits.
Confusing these two situations appears to constitute an oversimplification of the Portuguese regime.
Nevertheless, the real issue may not be legal in nature, but evidential.
Recent Spanish case law demonstrates an increasing focus on the so-called “effective centre of economic and personal interests”. In practical terms, this means that tax residence disputes are no longer determined solely by:
- tax residence certificates;
- registered tax addresses;
- or formal day-count tests.
Today, the analysis has become substantially more intrusive.
Bank accounts, the location of liquidity, use of payment cards, telecommunications, insurance policies, day-to-day expenditure, properties available for personal use, the place where wealth is managed, and even consumption habits have become highly relevant evidential factors.
The implicit message from the AEAT is relatively clear: it is not sufficient merely to change country on paper; taxpayers must genuinely relocate the centre of their economic and financial life.
This is precisely where many cases begin to weaken.
From a practical perspective, maintaining assets in Spain does not, in itself, create a problem. International mobility often involves retaining investments, real estate assets, or income sources in the country of origin. The risk arises when Spain continues to be:
- the centre of treasury management;
- the primary location of wealth management activities;
- the country where the largest bank balances remain;
- or the dominant economic environment of the taxpayer’s life.
The potential consequences are highly significant.
If the AEAT succeeds in arguing that the taxpayer remains a Spanish tax resident under Article 9 of the Spanish Personal Income Tax Act (“LIRPF”), Spain may attempt to tax the taxpayer on a worldwide basis, including income that would otherwise be taxable exclusively in Portugal under the DTT.
This issue is particularly relevant in relation to private pensions and certain financial products whose tax treatment depends directly upon the tax residence of the beneficiary.
Furthermore, there is an additional issue that is often underestimated: the mechanisms available to eliminate double taxation between Portugal and Spain are far from rapid or straightforward. In certain circumstances, taxpayers may face taxation in both jurisdictions for several years before the conflict is ultimately resolved.
Should taxpayers therefore abandon the NHR regime?
In our view, such a conclusion would be premature.
Firstly, because Portuguese law does not provide a clear and unequivocal mechanism allowing taxpayers to simply renounce an NHR status that has already been validly granted. More importantly, however, the central issue rarely lies in the regime itself.
The real question is the factual consistency of the relocation.
The solution is unlikely to be found merely by “changing regimes”. Rather, it will most likely require taxpayers to:
- strengthen the economic substance of their Portuguese residence;
- effectively relocate financial management activities to Portugal;
- reduce operational dependence on Spanish structures;
- and build a robust and coherent evidential record.
The debate surrounding international tax residence is evolving rapidly across Europe.
For many years, tax mobility was analysed predominantly through a formal lens. Today, tax authorities increasingly focus on:
- economic substance;
- consistency between assets and declared residence;
- and factual coherence.
Portugal continues to offer an extremely competitive tax framework for international residents. However, maintaining access to that framework now requires a level of evidential preparation and structural consistency significantly greater than that required only a few years ago.
The Tax Department of Belzuz Abogados, S.L.P. Portugal regularly advises on international taxation, cross-border mobility and the application of double tax treaties and remains available to provide specialised legal and tax assistance in relation to tax residence relocations, special tax regimes and international asset-holding structures.