When Americans moving to Spain with US-based rental properties, two questions come up fast: “Will Spain tax my rentals?” and “Do I need to restructure through an LLC or corporation for tax reasons?
This article shares real experiences from Spainguru’s community about what they actually did with their US rentals, what surprised them about Spanish taxes, and why most ended up focusing on planning and good advisors rather than complex restructuring.
The original question
“We’re considering a move to Spain and have U.S.-based rental properties. Before doing anything, we’re trying to understand whether others have restructured their real estate holdings (for example, via a U.S. C‑Corp or similar) to better align with Spanish tax rules.
I’m not seeking advice in the comments — just firsthand experiences and referrals to cross-border CPAs or tax professionals who helped with this type of situation.”
Key Spanish tax concepts (quick context box)
Before looking at experiences, a few basics help explain why people answered the way they did:
- If you are a Spanish tax resident, Spain taxes your worldwide income, including US rental income, even if it is already taxed in the US.
- The US–Spain tax treaty lets you use foreign tax credits, but it does not cancel Spanish tax; you may still owe extra if Spain’s effective rate is higher.
- Spanish residents can be subject to wealth tax (and, currently, the temporary “solidarity wealth tax”) on their worldwide assets above regional thresholds, including foreign real estate.
- Spain generally treats many common‑law trusts as transparent (as if they do not exist), attributing the assets and income to the settlor or beneficiary directly.
These rules explain why “just put it into a US entity or trust” rarely produces a magic tax result in Spain.
What community members actually did
1. Many did not restructure at all
Several group members with US rentals simply kept their existing structure (personal ownership or family trust) when they became Spanish tax residents.
- One member said they left their US properties inside a family trust mainly for estate planning, adding that restructuring “seemed like a major headache” and they were unsure Spain “cared at all” about US‑side structuring.
- Others echoed that their advisors saw little or no pure tax benefit from shifting into a company structure unless they had many units or specific liability‑protection goals.
The pattern: if you have a small number of rentals and your primary concern is income tax, most people did not find restructuring worth the cost and complexity.
2. Trusts: Spain often ignores the wrapper
One member warned that “Spain doesn’t recognize common law trusts,” and that selling assets held in a trust can be a “real tax shock” when capital gains are assessed directly on the person Spain considers to own them.
Current Spanish doctrine treats many foreign trusts as fiscally transparent:
- The trust itself is ignored; authorities look through to the settlor or beneficiaries.
- For wealth and inheritance/gift tax, Spanish residents are taxed as if they hold the assets directly, based on who has real control or vested rights.
Implication: putting US rentals in a revocable living trust or similar structure for US estate planning usually does not hide or shield anything from Spanish tax; it can even add reporting complexity (e.g., Modelo 720 foreign assets reporting).
Wealth tax: the “silent” deal‑breaker for some
Several commenters highlighted Spanish wealth tax as the decisive factor, sometimes more important than income tax itself.
- One member noted that depending on the net value of your US real estate, you can face annual wealth tax in Spain and cannot use the US–Spain treaty to offset it because the US has no equivalent wealth tax.
- Another explained that they chose to remain California tax residents because, for their situation, staying in CA and avoiding Spanish wealth tax was actually cheaper than becoming Spanish tax resident, despite California’s high reputation for taxes.
They also reminded readers:
- Wealth tax rules and exemptions differ a lot by autonomous community. Madrid, for example, has historically applied a near‑full exemption, while other regions like Catalonia and Valencia have higher effective burdens.
- The temporary “solidarity wealth tax” is applied at the state level and specifically targets higher net‑worth individuals, including those with significant foreign assets.
For US landlords with substantial equity, wealth tax planning often drives the bigger decision: become tax resident in Spain or not, and if so, in which region.
Does a US company (LLC / C‑Corp) really help?
Several points emerged from the discussion and cross‑border tax guidance:
- Income follows the person Spain sees as taxpayer
Even if rental income is earned inside an LLC or US corporation, Spain generally taxes you if the income ends up on your personal tax return – either as rental income, salary, or dividends. - Corporate vs personal rates in Spain
The original poster correctly noted that:- Personally earned rental income is typically taxed at general (work/ordinary) rates, after allowable deductions.
- Dividends and similar yields are taxed under savings income brackets, with their own progressive rates.
Some expats therefore explore whether holding rentals via a company and taking dividends could move income into the savings‑income bucket. In practice, any advantage often shrinks once you include US corporate tax, compliance costs, and Spain’s “substance over form” approach, which can re‑characterize transactions if they are seen as purely tax‑driven.
- Liability protection vs tax optimisation
Multiple members reported that their advisors only recommended company structures when:- They owned many properties,
- They wanted liability protection and estate‑planning flexibility, or
- They had specific business reasons unrelated purely to tax.
- “Spain doesn’t care how you’re paid”
A member bluntly commented that for Spain, “income is income,” suggesting that routing cash through an intermediary entity does not magically make it non‑taxable; it just changes the label on the return (rent, salary, dividend, etc.).
Net result: for most small‑to‑medium landlords, there was no consensus benefit to flipping into a US corporation purely for Spanish tax savings, whereas compliance, cost, and potential double‑tax traps increased.
Misconception watch: “Spain considers all foreign property rented”
One commenter mentioned hearing that Spain considers any foreign property to be “rented whether it is or not” and taxes it as such, suggesting you should not leave a US home empty because you will be taxed on “rental income whether it’s rented or not.”
Clarification:
- Spain does apply an “imputed rental income” concept, but this is a domestic rule aimed at Spanish properties (and certain non‑resident cases), where a notional income percentage of the cadastral value is taxed if the property is not rented.
- For foreign property, Spanish tax residents are taxed on actual worldwide income and gains; there is not a general rule that treats a foreign principal home as if it is rented when it is clearly not.
This is why professional advice is critical: mixing domestic non‑resident‑property rules with global‑income rules easily leads to confusion.
Tax residence vs citizenship
Another commenter correctly pointed out that tax status is tied to residency, not citizenship.
- You typically become Spanish tax resident if you spend more than 183 days in Spain in a calendar year, or if your main economic interests center there.
- Being or not being a Spanish citizen does not, on its own, change whether your US rentals fall into Spain’s worldwide‑income and wealth‑tax net; what matters is where you are tax resident.
This explains why some people choose to structure their year (or maintain ties to a US state) to avoid triggering Spanish tax residency if the wealth‑tax impact would be severe.
When community members sought professional help
Several responses stressed the importance of getting cross‑border tax advice:
- One member said they had spoken with multiple professionals (financial planning, insurance, US CPA) and still concluded incorporating was not worthwhile, but emphasized that “your mileage may vary” and that people should talk to their own accountant.
- Another explicitly offered to connect the original poster with an expert, noting that “it’s not as simple as everyone makes out” and that you must solve the tax question before choosing your visa and planning the move.
For complex situations (multiple properties, trusts, retirement accounts, future inheritance, high net worth), combining a US expat tax CPA and a Spanish tax advisor familiar with trusts, wealth tax, and the treaty is the approach that repeatedly shows up in expat guides and professional updates.
Conclusion
From the experiences shared in the Spainguru community and current cross‑border tax guidance, most Americans moving to Spain with US‑based rental properties did not rush to restructure their holdings purely for tax reasons.
- Existing arrangements (personal ownership, LLCs, family trusts) were often left in place, especially when they already served US‑side estate or liability goals, because Spain tends to look through foreign entities and trusts and tax the underlying income and assets anyway.
- The biggest new variables were Spanish worldwide income tax, wealth tax/solidarity wealth tax, regional differences, and reporting obligations like Modelo 720, not the specific US legal wrapper.
The dominant message is that US rentals can remain a solid asset base when you move to Spain, but they require careful, personalized planning rather than one‑size‑fits‑all restructuring. Talking to an experienced cross‑border tax professional (US–Spain) before changing your structure or establishing Spanish tax residency is strongly recommended.
Read also “Rent vs Sell: What Should You Do With Your US Home Before Moving to Spain?”: https://spainguru.es/2025/05/14/rent-vs-sell-what-should-you-do-with-your-us-home-before-moving-to-spain/
This article is based on personal opinions and experiences from the Spainguru community and public tax guidance, and it is not legal or tax advice.
