What is residency all about?

It’s easy to be confused by the various registration requirements for foreigners living in Spain. The mains ones are the NIE or número de identificación de extranjero, legal residency and tax residency which are completely different as we’ll see.
The NIE is the main Spanish personal identification number for foreigners. It must be obtained before starting any sort of employment; buying a car or house; starting a business or paying tax. You can have a NIE without becoming a Spanish resident.
A NIE may be issued to residents and non-residents of the European Union. When you apply for a NIE you must also provide evidence of why you need it, for instance, a contract of employment.
Residency is represented in the form of a document which includes your NIE. This makes you a legal resident of Spain and is required, for instance, in order to receive the local discount on internal flights.
Proof of your Spanish address must be provided through registration at your local town hall (Ayuntamiento) which will provide you with a certificado de empadronamiento, showing that you reside in the municipality.
Applications for a NIE or residency certificate can be made in Ibiza through the division of police which deals with foreigners, the oficina de extranjeros. Waiting times vary considerably. At the beginning of the summer season you can expect to queue for hours. So make sure your application is completed properly if you don’t want to repeat the process. You may also apply for a NIE at the Spanish Consulate in your home country, but this may take longer.
Tax residence is not the same as legal residence. Under Spanish law you are considered a tax resident if you spend more than 183 days in Spain in a calendar year. It is, therefore, determined by facts and circumstances which means in principle you cannot choose the country in which you are tax resident. Being tax resident in Spain means you have to report all your worldwide income to the authorities in this country. If part of your income is taxed in another country there will almost certainly be a treaty which provides relief from double taxation. Non-residents are taxed on certain parts of their income, notably that from their property and real estate in Spain.