The sunny beaches, delicious food, and cultural richness of Spain have made it a popular destination for US expats. Whether they are employees or entrepreneurs, however, US citizens living in Spain have several tax considerations to keep in mind. This article explains the basic rules regarding residency, income, and tax withholding as well as some of the benefits and treaty provisions available to US expats in Spain.
The US-Spain tax treaty, or the Income Tax Convention with Spain, helps to avoid double taxation for American expats in the country. The treaty provides clear rules for which government has the right to tax a particular individual’s income, and allows US expats to claim any Spanish income taxes paid on their US returns.
US citizens who live in Spain must file an annual Spanish tax return, called a “Relleno de Impuestos Individuales”. This form is due from May to June of each year. Nonresidents who earn more than 22,000 Euros a year from one source must file, and those earning less but from multiple sources or not from employment must also file. Expats who spend more than 183 days in Spain are considered residents for tax purposes and will be taxed at a rate between 17% and 50% depending on where they reside in the country.
Those who work in the country must have their employers withhold income taxes from each paycheck. Self-employed Americans in Spain, known as autonomos, must also make proactive quarterly estimated tax payments. Those who own property in the country must pay local property taxes, known as Plus Valia. This tax varies by region and is based on the value of the property.
In addition, US citizens who own non-US financial assets worth more than certain thresholds must submit FATCA reports to the IRS. These forms are filed with the individual’s tax return and can be postponed, if necessary, until June 15 under special conditions for expats.
Finally, US taxpayers who own a business in the country must file company taxes. The exact amount depends on the type of business, its profitability, and the number of employees. In general, limited companies pay 15% of profits for the first two years and then 25% for subsequent years. Joint ventures and other types of businesses have different tax rates. For the most accurate and up-to-date information, it is best to work with a professional, experienced US tax accountant in Spain Derren Joseph. These experts can help with all the complicated details and ensure that your taxes are filed properly and on time. They can also save you money by maximizing deductions and credits, and filing your returns efficiently. Contact a professional today to see how they can help you with your taxes in Spain.