The vivacious energy of Spain makes the country one of Europe’s most enticing destinations. Join the madrilenos at buzzy tapas spots, elegant cocktail lounges, laid-back rooftop bars and heaving clubs in Madrid or sample innovative Michelin stars in Catalonia. You can also savor fresh-as-it-gets seafood in the Galician capital of Santiago, or explore the country’s beautifully green northwest corner to discover timeworn stone villages, centuries-old wineries and plunging valleys.
A deep love of fabulous food infuses Spanish culture – you’ll be lining up to graze on pintxos in Bilbao and San Sebastian, crowding into heaving Granada tapas bars or digging into super-fresh Valencian paella by the Mediterranean. There’s also a lot of history to take in – from ancient ruins and Renaissance palaces to 2023 Capital of Gastronomy Cuenca’s artisanal restaurants.
But whether you’re planning a short trip or moving permanently to Spain, you must understand your tax responsibilities. This guide to American living in Spain taxes will illuminate the key considerations from income declarations to special levies.
US expats in Spain are subject to taxes based on their residency status, but IRS several exclusions and foreign tax credits help avoid double taxation. In addition, the US and Spain have a tax treaty that can impact social security payments and distributions.
In general, Americans who spend 183 days or more in Spain each year must file a US tax return. Exceptions can be made for temporary absences or when it’s possible to establish the period of residency in the US before leaving for Spain.
The main income tax breaks for Americans living in Spain include the foreign earned income exclusion, the foreign housing expense deduction and the foreign tax credit. In most cases, it’s best for US expats to claim these breaks rather than renouncing their citizenship (which can be a serious and permanent decision).
In addition to the personal income tax, Americans in Spain must pay wealth tax, property tax and healthcare taxes. In some cases, expats can save money on healthcare in Spain by obtaining a European Health Insurance Card.
Americans in Spain may be required to file FBAR reports if their total financial assets exceed certain thresholds. These are typically reported on FinCEN Form 114 and can be submitted with a US tax return or separately.
Americans who live in Spain should register with the local Agencia Tributaria or Foreigner’s Office (Oficina de Extranjeros) within 30 days of their arrival in the country. They must provide their Foreigner’s Identity Card (NIE) or passport, a statement of liability to pay Spanish taxes and an original copy of their tax return. It’s also important to note that a US tax expert who is familiar with the intricacies of the US-Spain treaty should review all relevant forms and filing requirements. To learn more about our international tax services for American expats in Spain, contact us now. We’re happy to answer any questions you have and provide a free consultation.