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Is a Certificate of Financial Residence mandatory in Spain for foreign vendors?
Thread poster: Rafa Lombardino

Rafa Lombardino
United States
Local time: 22:31
Member (2005)
English to Portuguese
+ ...
Dec 19, 2006

I was wondering if a colleague working in Spain could explain a couple of things to me as far as business and payment practices in your country.

I have worked with Spanish agencies before and been paid without any problems, but a new client is now requesting a Certificate of Financial Residence in order to complete the payment transaction for two invoices for projects we worked on during October and November.

A Certificate template was sent to me and the following is required therein:
* name and address of the tax authority
* place and date
* for period from ... to ...
* name/surname/company name
* identification number / tax ID number
* is a resident of...
* with address of residence...
* and is subject to unlimited tax liability on his worldwide income within the meaning of agreement between the Government of ... and ... for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

I'd like to know whether anyone has had to fill in this document before your local tax authority in the US. As I said, both times I dealt with a Spanish agency, nothing like that was asked from us and I'm afraid most likely the IRS won't take the time to take a second look at this paperwork, since they do not issue this form themselves... You know how the IRS and other governmental agencies are... They get lost in their own required paperwork and will probably be confused by a foreign request...

Well, so far what I've tried to do is provide our Business Registration Form, which pretty much contains all the relevant information about our own business and was issued by the respective local authority when we registered our own agency in 2004. However, my client said that it isn't a valid document for their purposes in this case.

Well, it's the end of the year and pretty much I'm afraid this process of trying to get the IRS to cooperate will take too long... If you have any ideas, suggestions, or comments, please let me know how everything went when you yourself were dealing with a Spain-based agency.

Thanks!


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RobinB  Identity Verified
Germany
Local time: 07:31
German to English
Certificate of Fiscal Residence? Dec 19, 2006

Rafa,

I think this is more properly a "Certificate of Fiscal Residence", and I'm pretty sure it's come up before in ProZ forums. Can I suggest you search the forum database and see what you come up with?

I assume that other ProZ members who sell translations into Spain will know far more about this, but my overall impression is that the "Certificate of Fiscal Residence" is basically required only for unearned income, i.e. investment income, pensions, that sort of thing, as well as personal earned income (salaries, wages), as these are the areas of taxation covered by the relevant double taxation treaty to which the certificate refers in the first place.

Robin


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xxxLia Fail  Identity Verified
Spain
Local time: 07:31
Spanish to English
+ ...
is this to do with copyright matters Dec 19, 2006

Rafa Lombardino wrote:

I was wondering if a colleague working in Spain could explain a couple of things to me as far as business and payment practices in your country.

I have worked with Spanish agencies before and been paid without any problems, but a new client is now requesting a Certificate of Financial Residence in order to complete the payment transaction for two invoices for projects we worked on during October and November.

A Certificate template was sent to me and the following is required therein:
* name and address of the tax authority
* place and date
* for period from ... to ...
* name/surname/company name
* identification number / tax ID number
* is a resident of...
* with address of residence...
* and is subject to unlimited tax liability on his worldwide income within the meaning of agreement between the Government of ... and ... for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

I'd like to know whether anyone has had to fill in this document before your local tax authority in the US. As I said, both times I dealt with a Spanish agency, nothing like that was asked from us and I'm afraid most likely the IRS won't take the time to take a second look at this paperwork, since they do not issue this form themselves... You know how the IRS and other governmental agencies are... They get lost in their own required paperwork and will probably be confused by a foreign request...

Well, so far what I've tried to do is provide our Business Registration Form, which pretty much contains all the relevant information about our own business and was issued by the respective local authority when we registered our own agency in 2004. However, my client said that it isn't a valid document for their purposes in this case.

Well, it's the end of the year and pretty much I'm afraid this process of trying to get the IRS to cooperate will take too long... If you have any ideas, suggestions, or comments, please let me know how everything went when you yourself were dealing with a Spain-based agency.

Thanks!


Hi Rafa

Just about 30 mins ago I was exchanging frantic emails about the inconsistencies of the Spanish tax authorities...! Nobody ever seems to be able to provide a clear and definitive answer to some basis questions about tax here:-) Anyway....

I can't imagine why you would have to certify your residency to sell something to someone in Spain, and looking on the web, it seems that this might be to do with intellectual property rights. See http://descargas.aeat.es/normlegi/irpf/ordeha63.htm.

Alternatively it may be needed to prove you are NOT resident in Spain, for whatever reason.

I would ask the company precisely why they need it, and take it from there.



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Rafa Lombardino
United States
Local time: 22:31
Member (2005)
English to Portuguese
+ ...
TOPIC STARTER
Certificate of "Fiscal" Residence Dec 19, 2006

To Robin: Sorry about that... it's really "Fiscal," not "Financial." I got the message at around 6:30am here and was still trying to process the information.

To Lia: It shouldn't be about any copyright dispute, since we only signed a NDA and I'm pretty sure my agency's name is not going to be mentioned in the printed material. Therefore, if they only need to prove that I don't live in Spain (considering the "double taxation" concern), wouldn't the legal documentation that proves that my business has been registered with the San Diego County in California be enough???

I believe I'll have to call the local IRS and see what they can do about it before I go to their office and get a big headache. But, considering my previous experience with their "helpfulness," that's going to be a big hassle. That goes without mentioning that today is Dec. 19, our last business day is Dec. 22 and the first invoice was issued to our Spanish client in October...

Well, if anyone has any other ideas, I'd really appreciate your sharing with us.

Thanks Robin! Thanks, Lia!


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Parrot  Identity Verified
Spain
Local time: 07:31
Member (2002)
Spanish to English
+ ...
For what it's worth Dec 19, 2006

The treaty Robin refers to is this one: http://www.boe.es/g/es/bases_datos/doc.php?coleccion=iberlex&id=1990/30940

and you're covered by Article 15.

Otherwise, all mandatory Spanish tax forms (mandatory for us, that is) are headed "Modelo XXX", whereby XXX is a number. I really don't see why your registration isn't valid, but on the other hand, it may be a simple matter of bringing your registration to a local tax office (to show) and getting the paper stamped.


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Rafa Lombardino
United States
Local time: 22:31
Member (2005)
English to Portuguese
+ ...
TOPIC STARTER
Clarification Dec 19, 2006

Thanks for your help, Parrot!

I believe the article transcribed below is the one that applies to my case:

ARTICULO 15

SERVICIOS PERSONALES INDEPENDIENTES

1. SIN PERJUICIO DE LAS DISPOSICIONES DEL ARTICULO 7 (BENEFICIOS EMPRESARIALES), LAS RENTAS QUE UN RESIDENTE DE UN ESTADO CONTRATANTE OBTENGA DE LA PRESTACION DE SERVICIOS PROFESIONALES O ACTIVIDADES SIMILARES DE CARACTER INDEPENDIENTE, SOLO PUEDEN SOMETERSE A IMPOSICION EN ESE ESTADO. SIN EMBARGO, DICHAS RENTAS PUEDEN SOMETERSE A IMPOSICION EN EL OTRO ESTADO CONTRATANTE SI ESE RESIDENTE DISPONE O HA DISPUESTO REGULARMENTE DE UNA BASE FIJA EN EL OTRO ESTADO CONTRATANTE PARA LA REALIZACION DE DICHAS ACTIVIDADES. EN TAL CASO, SOLAMENTE PODRAN SOMETERSE A IMPOSICION EN ESE OTRO ESTADO CONTRATANTE LAS RENTAS IMPUTABLES A DICHA BASE FIJA.

2. LA EXPRESION COMPRENDE ESPECIALMENTE LAS ACTIVIDADES INDEPENDIENTES DE CARACTER CIENTIFICO, LITERARIO, ARTISTICO, EDUCATIVO O PEDAGOGICO, ASI COMO LAS ACTIVIDADES INDEPENDIENTES DE MEDICOS, ABOGADOS, INGENIEROS, ARQUITECTOS, DENTISTAS Y CONTABLES.


If I can understand it correctly, amid such "Spanelese":

... the income that someone (ME) residing in one of the contracting states (UNITED STATES) earned by providing professional (TRANSLATION) services or similar independent activities will only be subjected to the demands of that state (again, UNITED STATES). However, such income may be subjected to the demands of the other contracting state (SPAIN, in this case) if this resident (ME) has or has had a regular fixed residence in the other contracting state (SPAIN) in order to perform such activities...


I have never been to Spain, unfortunately... So, since I have never been a legal resident there providing translation services, my income is subjected to the US tax authorities, right?

Once again, the paperwork that proves that my business was registered in San Diego, California, US should be enough... Oh, I also forgot to mention that I sent the client a copy of the letter we received from the IRS when a Tax ID number was assigned to our business...

I'll call the local IRS office tomorrow, but I'm afraid they will not be of great help. That is, if they still have an office at the address they provide online, for the last time I went to that federal building, the office I was looking for didn't exist anymore...

Thanks for all your help!

[Edited at 2006-12-19 20:32]


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alicecommgap
Local time: 23:31
Afrikaans to English
+ ...
Fill out IRS form 8802 to get CERTIFICATE OF FISCAL RESIDENCE" Nov 16, 2009

Here is a page on the IRS website where you can get form 8802 and instructions on how to fill out the form in order to obtain the CERTIFICATE.

http://www.irs.gov/businesses/small/international/article/0,,id=122559,00.html


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