American citizens who plan to reside in Spain should seek advice from experts specialising in international taxation, such as an American tax service, as they can help determine tax implications.
Attorneys specialise in knowing each country’s internal regulations and the double taxation agreement signed between Spain and the United States of America (US-Spain tax treaty). With their help, you can ensure total compliance with the regulations and optimise your tax situation.
At Tejada Solicitors, we offer a pre-move analysis to American citizens who plan to move to Spain as tax residents before their displacement.
We analyse the tax implications according to their situation and the tax cost of the move. Only by studying it in advance can you achieve optimal tax efficiency.
American expatriates living in Spain must use the Spanish, American, and US-Spain tax treaty systems.
To establish Americans’ tax obligations in Spain, the first thing to determine is their tax residence.
Under the Spanish domestic legislation, an individual’s tax residence is determined by the provisions of Article 9 of Law 35/2006, of November 28th, on Personal Income Tax. This law, known as LIRPF, outlines specific criteria in paragraph 1, providing a clear roadmap for determining tax residence.
“The taxpayer has his primary residence in Spanish territory when:
They stay more than 183 days during the calendar year in Spanish territory. Sporadic absences will be calculated to determine this permanence period in Spanish territory unless the taxpayer proves his tax residence in another country.
Temporary stays in Spain resulting from unpaid obligations under cultural or humanitarian collaboration agreements with Spanish public administrations will not count in this calculation.
Spain is their primary residence, and their activities or economic interests are directly or indirectly located in Spain.
Unless there is evidence to the contrary, it will be presumed that the taxpayer has his primary residence in Spanish territory when, per the above criteria, they are not legally separated from their spouse, and their children who depend on them reside in Spain.”
Article 9 states that an individual’s tax residence is not only determined based on their permanence in a State for more than 183 days; other criteria must also be considered, such as the centre of their economic and family interests and the accreditation of his residence in another State.
Do you need a professional help for Spain tax services for American Expats?
If you are a US citizen or live outside the US, you must file the following tax returns: Income, Estate, Gift Returns, and Pay Estimated Tax, just like those who reside in the US.
Tejada Law Firm offers a trusted US tax service that guarantees confidentiality, discretion, and comprehensive advice if you decide to move or invest in Spain. Our team of lawyers, specialised in Immigration, Property Conveyancing, and Taxation, will advise you on all procedures involved and plan your case to achieve the best tax and legal efficiency.
Once the tax residency of an American expatriate in Spain is complete, they will be affected by the following tax obligations:
Personal Income Tax (IRPF) is Spain’s tax return. It is a tax levy on the worldwide income of all expat taxpayers in Spain. It is quite complex, and so it requires professional advice and guidance, such as from a trusted partner specializing in American tax services.
Form 720 in Spain: Every individual and legal entity must complete Form 720 to declare overseas assets exceeding €50,000 outside of Spain. This step is essential to prevent any allegations of tax evasion.
Tax is applied to worldwide net assets exceeding €3,700,000.
In general terms, some of the tax obligations for US citizens receiving income in Spain and who have non-resident status are as follows:
As a non-resident in Spain, you will have different tax implications depending on the type of operation you carry out.
This tax involves more than real estate; it also applies to homes, apartments, plots, and land.
In addition, it applies to economic rights, which include shares, bonds, stocks, prizes, compensation, property damage insurance, mobile property, and other assets.
The following are a few tax responsibilities for non-residents:
As a non-resident in Spain, selling a property has tax ramifications, including the Municipal Capital Gains Tax , called the plusvalia property tax and the Capital Gains Tax.
In Spain, non-fiscal residents must pay taxes on capital gains from selling real estate and furniture.
Non-resident tax requirements must be met if you own a property in Spain for your use and enjoyment.
If you, as a non-resident, receive an inheritance in Spain, you must declare it.
Agreements to avoid double taxation exist, and they rank higher than each country’s internal regulations. For expert assistance, a U.S. tax advisory can help navigate these agreements effectively. Here are some incomes we consider of greater relevance, regulated in the double taxation agreement signed between Spain and the US.
01. Income from real estate (Article 6 CDI)
Spain and the US may impose taxes on incomes from US-based real estate. The Spanish Personal Income Tax deduction for foreign double taxation would be available to the resident taxpayer.
02. Dividends
(article 10 CDI):
Spain may impose taxes on US-sourced dividends in line with its domestic laws. According to the laws of the United States, if the company paying the dividends resides there, it may also be subject to taxation. However, if the beneficiary of the dividends resides in Spain, a tax of up to 15% of the gross amount must be paid. This amount qualifies the resident taxpayer to claim an international double taxation deduction under Spain’s income tax regulations. For assistance with these matters, experts in tax services for Americans can provide guidance to ensure compliance and maximise deductions.
03. Interests
Interests (Article 11 CDI):
Under Spanish domestic law, interest from the United States may be subject to taxation in Spain. Generally speaking, only Spain has the authority to tax them. However, in certain cases, U.S. domestic law may also impose taxes on this interest. In such instances, the U.S. tax cannot exceed 10% of the gross interest amount if the beneficial owner resides in Spain. You may claim an international double taxation deduction in Spain for up to that amount in these situations.
Members of boards of directors of US-based corporations are subject to both US and Spanish taxes on their compensation (Article 18 CDI). In Spain, the taxpayer can claim the international double taxation deduction.
04. Capital Gains
Profits from selling real estate in the United States may be liable to taxes in Spain and the United States (article 13.1 CDI). In Spain, the taxpayer can use the deduction for international double taxes.
Spain and the US may impose taxes on profits from the sale of shares, interests, or other rights that – directly or indirectly – give the owner the ability to enjoy US-based real estate (Article 13.4 CDI). The deduction for international double taxation is available to taxpayers in Spain.
Regarding the elimination of double taxation, we refer to Article 24 of the Double Taxation Avoidance Agreement between the United States and Spain.
“1. In Spain, double taxation is prohibited under the following rules in Spanish law:
(a) Where a Spanish resident earns income that, under the terms of this Agreement, may be taxed in the United States based on criteria other than citizenship. Spain shall allow such residents to deduct an amount equal to the tax paid in the United States from their income tax.
However, this deduction may not exceed the portion of the income tax, calculated before deduction, corresponding to the income earned in the United States.”
Do you need a professional help for Spain tax services for American Expats?
US citizens residing in Spain will continue to have tax obligations to the IRS; some of the forms by which they may be affected would be:
Rosana Tejada from Tejada Solicitors advises her American clients that once they obtain a tax residency in Spain, they keep themselves adequately informed by a US tax advisor about their tax obligations to the IRS.
American citizens must pay taxes in Spain on all of their worldwide income after establishing their tax residence.
In general, they are required to declare their income tax return in Spain when:
For example, if an American citizen residing in Spain receives a State Pension of €10,000, another Private Pension of €6,000, or a single foreign pension of €16,000, they would have to declare their income tax, as the obligation to declare is limited to €15,000.
Regarding rentals, if the income exceeds €1,000 per year, dividend income, interest, and capital gains are subject to withholding in Spain, with a maximum of €1,600.
Rosana Tejada, a tax expert at Tejada Solicitors and expat tax specialist, offers an American tax service which states that all expatriates seeking to profit from the international double tax deduction must declare in any circumstance.
As a non-resident, you must only file a tax return for income generated in Spain, which includes rental income from Spanish property, capital gains from selling Spanish assets, Spanish inheritance tax, and Spanish donation tax.
For resident taxpayers:
For non-tax residents:
Common Tax Forms for resident and non-resident taxpayers:
The AEAT website will post deadlines and obligations for each of these declarations every year.
Non-Tax Residents:
Form 210: Depending on the type of income, the following deadlines apply:
Do you need a professional help for Spain tax services for American Expats?
For American tax residents in Spain
For expat residents in Spain who intend to redeem their pension plan, it is crucial to note that if the redemption is in the form of capital, you will receive a 40% reduction on the benefits corresponding to premiums paid before 2007. However, if you choose to surrender your pension plan as an annuity, you will not be eligible for this reduction.
If you retire in 2022, please remember that you must redeem your pension plan as capital by January 1st, 2025; otherwise, you will forfeit the 40% reduction.
If you redeem the pension plan (or pension scheme) in a mixed form, partially in capital and partly in income, the capital redemption is still eligible for the 40% reduction, provided you meet the following requirements. For tailored guidance on these matters, an American tax service can help ensure compliance and optimise your tax benefits.
According to Spanish tax law, long-term property rentals, both local and international, are eligible for tax deductions. Everyday deductible expenses include community fees, municipal taxes, insurance, water, energy, mortgage interest, real estate agent fees, cleaning, laundry, and maintenance and repair charges.
The following is a breakdown of percentages applicable for the tax deduction on rental housing:
In the case of rental agreements for residences situated in stress zones as defined by the new Housing Law (determined by each autonomous region) beginning on January 1st, 2024:
Individuals over 65 can sell their primary residence without paying income taxes. However, only half of the capital gains will be exempt if only one spouse, the property owner, is 65 years old at the time of sale.
When transferring to another home, not the principal residence, the gains will not be taxed, provided the entire amount is used to establish a life annuity insurance, with a maximum payout of €240,000, within 6 months of the transfer.
Individuals under 65 who sell their primary house and make a profit are not liable to income tax if the funds are reinvested in acquiring another primary residence. A key requirement is that the whole profit from the property sale be reinvested in a new primary residence within two years of the initial transfer date.
Tax regulations define a primary residence as one that has been lived in for at least three years before the property transfer.
The following reductions apply to both tax and non-tax residents in Spain who receive capital gains from property transfers: Residents can benefit from a 50% capital gains tax discount when selling a home in Spain purchased between May 12th, 2012, and December 31st, 2012.
Reinvestment exemptions for when selling primary residence abroad
For American citizens who are non-residents in Spain
Do you need a professional help for Spain tax services for American Expats?
Tejada Solicitors is a law firm of lawyers and economists specialising in property transactions and international taxation. Our clientele comprises non-resident investors and expats looking to buy or invest in Spain.
Every day, we see various issues that we painstakingly assess from a legal and financial standpoint. In each case, we seek to address the many tax problems that our customers may face.
For tailored solutions, we offer an American tax service, ensuring compliance and efficiency for US citizens.
American citizens who wish to invest or move to Spain will need a Spanish tax advisor who specialises in international taxation and is familiar with the double taxation agreement between Spain and the United States (US), helping to avoid double taxation.
Rosana Tejada and Veronica Pirau urge American citizens who wish to expatriate to Spain on any visa (Non-Profit Visa, Digital Nomad Visa, and more) to coordinate the immigration process with tax issues. Surprises may occur, and combining both processes is critical for a successful transition. Partnering with a trusted US tax advisory can help ensure a smooth integration of tax planning and immigration requirements.
Tejada Solicitors takes a holistic approach to managing your case. Our team, which includes an immigration professional, a tax lawyer, and a property conveyancing expert, will thoroughly investigate and assess your circumstances. Our objective is to streamline the entire procedure, decrease stress, and ensure the success of your move to Spain. Please rely on the experience and support of our professional legal team, which is well-versed in these complex procedures.
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Individuals residing in a country that has a double taxation agreement with Spain, including specific provisions on wealth (as some agreements address only income), may qualify for a deduction if they can demonstrate eligibility. Certain assets located or deposited in Spanish territory may be subject exclusively to taxation in the individual’s country of residence and exempt from taxation in Spain. If both countries have the right to tax a particular asset, the country of residence is responsible for implementing measures to avoid double taxation.
Foreign tax credit relief can be claimed when reporting overseas income in your Self-Assessment tax return.
Moving to Barcelona from the USA
