Spain has been a very popular destination for American expats for many years, attracted by the history, beauty, and culture. If you’re also dreaming of moving to Spain from the US as an expat worker or retiree, what do you need to know about your tax?
Foreigners who spend more than 183 days a year in Spain, or for whom Spain is their main base or center of economic activities or interests, are considered residents for tax purposes. Expats who earn over 22,000 Euros a year from just one employer must file a Spanish tax return.
American citizens will also have to file a US tax return. However, due to a tax treaty between Spain and the United States, you can avoid double taxation. It may be beneficial for you to work with a expat tax advisor to help with unique situations like this.
The United States – Spain Tax Treaty covers double taxation with regards to income tax and capital gains tax, however, the benefits are limited for most American expats living in Spain.
The treaty does ensure though that no one will pay more tax than the higher of the two countries’ tax rates, and it also defines where taxes should be paid, which normally depends on where the income arises. The way the treaty allows US expats to avoid double taxation on their income in Spain is by allowing them to claim US tax credits when they file their US tax returns up to the same value as Spanish income taxes that they’ve already paid.
As a US Person, to open an account with a Spanish financial bank or institution, you must provide your social security number (SSN). The banks use your SSN to send information about your interest and investment income/losses to the IRS.
The US income tax return is also called a form 1040. If you earned more than US$12,550 (in 2021, or $400 of self-employment income), you are required to file Form 1040.
While any US taxes due are still due by April 15, Americans who are living abroad get an automatic postponement of 2 months until June 15, which can be extended further on request until October 15.
If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
The US and Spanish governments share taxpayer info, and Spanish banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The IRS is very harsh in assessing penalties for failure to file FBARs or for incorrect FBAR filings.
If you’re a US citizen, green card holder, or US Spanish dual citizen, and you have been living in Spain but you didn’t know you had to file a US tax return: there’s a program called the Streamlined Procedure that allows you to catch up on your filing without paying any IRS penalties.
American Overseas offers expat tax service for American expats, US persons living and working abroad, and green cardholders.
International taxation is a quite complex and specialized area. Americans Overseas offers a large independent network of US tax accountants and financial planners, specialized for Americans living abroad. Avoid double taxation and choose affordable advice.
Americans Overseas refers you free of any obligation and free of costs. Whether you’re employed or have a small business, we’ll make your life easier with a good, affordable tax advisor for your specific financial situation.
Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.
U.S. citizens and resident aliens who live abroad are generally required to file a federal income tax return and pay taxes on their worldwide income.Read more... about Who is required to file taxes in the US?
Yes, US citizens are required to file taxes on their worldwide income, regardless of where they are living.Read more... about Do US citizens living abroad still have to file taxes in the US?
Received an American check? You can cash your check in the following ways: cash the check at your own bank, transfer to another person (endorsement), cash checks using an online service or cash the check by another bank.Read more... about How can I cash my US check?
US citizens living abroad may be required to file Form 2555 and/or Form 1116 to claim the foreign-earned income exclusion.Read more... about Are there any special tax forms required for US citizens living abroad?
FBAR (Foreign Bank Account Report) filing is the requirement for certain U.S. individuals and entities to report their foreign financial accounts to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The FBAR filing requirement applies to U.S. persons who have a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.Read more... about What is FBAR filing?