The definition: low taxation and opacity, both at the same time
The OECD, which coined the concept in 1998, requires three features: nil or low taxation, absence of effective exchange of information and lack of transparency. All three must be present at once: a country with low taxes but which shares information with other administrations is not a tax haven under this definition.
That nuance separates Switzerland or Dubai from the idea of the classic tax haven. They tax little, but for years they have exchanged tax information automatically with Spain and the rest of the OECD, so they do not meet the opacity part.
The lists that matter: EU, OECD and the Spanish one
The European Union maintains a list of non-cooperative jurisdictions for tax purposes, which it reviews twice a year. It has a blacklist, with the non-compliant, and a grey list of countries that have committed to reforms. Being on it does not put the country outside the world, but it triggers defensive measures by member states, such as withholding taxes and special deduction rules.
In Spain, the classic reference is Royal Decree 1080/1991, which sets out the territories considered tax havens for the purposes of personal income tax and corporate tax rules. The tax authority's practice has been moving towards the EU and OECD lists, but the decree is still cited in assessments and files.
What happens if you operate with a tax haven from Spain
The law presumes that a taxpayer who establishes their habitual residence in a territory classified as a tax haven has their residence in Spain, unless proven otherwise. This is the presumption in article 8.2 of the Personal Income Tax Law, and it turns a tax move into a problem if there is no real activity behind it.
In addition, payments to individuals or companies resident in tax havens are declared non-deductible unless it is proven that they correspond to real transactions, and transactions with those territories are treated as related-party, with the adjustments that implies in corporate tax.
Overall, the design penalises structure without substance: if the activity has no economic reality, the deduction falls and residence is questioned.
Why Andorra and Dubai are not on the blacklists
Both went from being opaque territories to signing information exchange agreements. Andorra has a double taxation treaty with Spain and taxes companies at 10%; Dubai applies 0% personal income tax and, since 2023, a 9% corporate tax, with economic substance obligations and a register of beneficial owners.
That does not make them cost-free regimes: personal residence is earned with 183 days and centre of interests, and the Spanish tax authority still has something to say about the worldwide income of a Spanish resident. Taxing little transparently and with real activity is very different from hiding income in an opaque territory.
How to know whether a structure is legitimate or not
If all four answers point to the same thing, you are looking at legitimate tax planning. If the structure exists only on paper and the activity remains in Spain, the risk is not the tax haven label, but the lack of substance.
Key points
- Is there real economic activity in the country: premises, staff, decisions?
- Is the income declared there and the right amount of tax paid?
- Does the country exchange information with Spain?
- Is the structure explained by business or only by taxes?
