U.S. citizens and residents are taxed on their global income. This includes Americans living in Spain, who must file both U.S. and Spanish tax obligations. The U.S. and Spain have a tax treaty to prevent double taxation and define tax responsibilities. Therefore, taxes for Americans living in Spain require careful examination.
Tax Residency in Spain
Generally, you are considered a tax resident in Spain if you spend more than 183 days in the country within a calendar year or if your main professional activities or economic interests are in Spain.
Who Must File Taxes in Spain?
Both tax residents and non-residents with Spanish-sourced income are required to file Spanish taxes. Residents report worldwide income, while non-residents only report Spanish-sourced income.
Tax-Governing Authority in Spain
The Agencia Estatal de Administración Tributaria (AEAT), also known as the Spanish Tax Agency, oversees tax matters in Spain.
Types of Taxation in Spain
Spain imposes various taxes, including income tax (IRPF), capital gains tax, payroll tax, corporate tax, VAT, wealth tax, inheritance tax, property tax, and social security contributions.
Tax Rates in Spain
- Residents: Spain uses progressive tax rates for residents, varying for income, savings, and other categories. Rates for income ranging from 19% for earnings up to €12,450, scaling up to 47% for incomes exceeding €300,000. These rates apply to various income types, including wages, savings, and investments, with specific brackets ensuring higher earners pay a greater percentage. Tax brackets may vary by region, reflecting local fiscal policies.
Here’s an illustrative example showing how tax brackets are applied to calculate the income tax on a 100,000€ salary.
| Income Range | Tax Rate | Taxable Income | Tax Amount | ||
| €0 to €12,450 | 19% | €12,450 | €2,365.50 | ||
| €12,450 to €20,199 | 24% | €7,749 | €1,859.76 | ||
| €20,200 to €35,199 | 30% | €14,999 | €4,499.70 | ||
| €35,200 to €59,999 | 37% | €24,799 | €9,175.63 | ||
| €60,000 to €100,000 | 45% | €40,000 | €18,000.00 | ||
| €99,997 | €35,900.59 | 35.90% | Total income tax rate |
- Non-Residents: Non-Eu citizens who are Non-residents are subject to a 24% flat rate on income sourced in Spain. EU citizens Non-residents pay 19% flat rate.
- Special Regimes: Beckham’s Law offers a special tax regime for certain new residents. For more details, read our article “The Beckham Law: How to pay less taxes in Spain as a foreigner“
Spanish Tax Due Dates
Tax returns in Spain are generally due between April and June for the previous tax year.
Foreign Income Taxation
Spain taxes residents on worldwide income. The U.S.-Spain tax treaty and Foreign Earned Income Exclusion (FEIE) help prevent double taxation.
The FEIE allows eligible taxpayers to exclude a certain amount of their foreign earned income from U.S. taxation, further mitigating the risk of double taxation ($126,500 for year 2024)
U.S.-Spain Tax Treaty
The US-Spain tax treaty outlines how various types of income are taxed and aims to prevent double taxation for those living cross-border.
Totalization Agreement
This agreement coordinates social security contributions and benefits for people who work in both countries.
U.S. Tax Deductions for Expats
Key deductions include the FEIE, Foreign Tax Credit (FTC), and Foreign Housing Exclusion, which help mitigate the tax burden.
Spanish Tax Deductions for U.S. Expats
Spain offers deductions for foreign taxes paid, certain business expenses, and specific personal circumstances.
Filing U.S. Taxes from Spain
U.S. expats must file annual U.S. tax returns, reporting global income and complying with FATCA and FBAR requirements if applicable. These assets may include foreign bank accounts, investment accounts, and certain types of financial instruments.
FBAR, on the other hand, mandates the reporting of foreign financial accounts exceeding $10,000 at any time during the calendar year to the U.S. Department of the Treasury.
At Spainguru.es, recommended experts are available to provide tailored guidance and assistance in filing U.S. taxes while living in Spain, ensuring compliance with both U.S. and Spanish tax laws.
Renting Out Your U.S. Residence
Rental income must be reported in both the U.S. and Spain, with potential tax obligations and credits available under the tax treaty.
Understanding FBAR in Spain
U.S. expats with foreign financial accounts exceeding certain thresholds must file an FBAR with the U.S. Treasury.
Catching Up on U.S. Taxes: Streamlined Procedure
The IRS Streamlined Procedure allows U.S. expats who have fallen behind to catch up on tax filings without facing penalties, assuming non-willfulness.
Inheritance and Estate Taxes for U.S. Expats
Spain has an inheritance tax, and the U.S.-Spain treaty may offer guidance on how estates are taxed for residents in Spain. You can find recommended inheritance experts on Spainguru.es.
Additional Tax Considerations
This includes the taxation of trusts, dual citizenship implications, retirement planning, and specific investment and business activities taxation.
Conclusion
In conclusion, the tax obligations for Americans living in Spain demands careful attention to both U.S. and Spanish tax laws. Being taxed on global income by the U.S. means that Americans residing in Spain must adhere to both countries’ tax regulations. The U.S.-Spain tax treaty serves to prevent double taxation and delineates responsibilities, underscoring the importance of understanding its provisions.
Whether determining tax residency, reporting income, or managing deductions and credits, expatriates must stay informed and compliant to avoid penalties and optimize their financial situation.
Furthermore, considering additional complexities such as FBAR requirements, rental income, and estate planning underscores the necessity for thorough tax planning and compliance efforts. Therefore, individuals navigating these tax landscapes should seek professional guidance to ensure adherence to both U.S. and Spanish tax regulations while maximizing available benefits and minimizing potential liabilities.
This article is for informational purposes only and does not offer tax advice. Please consult with professional tax advisors for personalized guidance.
