A New Tax Season 2016
US Tax Consultants, the former SYNCORDIA, is pleased to announce that we have begun to prepare the Individual and Corporate Federal and State U.S. Tax Returns for 2016, as well as the Spanish returns.
As you know, all U.S. persons (U.S. Citizens and Green Card holders) must annually file (1) their worldwide income to the IRS (Form 1040), if their gross income is at least $4,050 (married filing separately) or $10,350 (single.) Also, you must file (2) the FinCEN 114 or FBAR (Foreign Bank Account Report), if you have a financial interest in or signature authority over a foreign financial account, (including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account,) with an aggregate amount of $10,000 at any time during 2016. You are required to report the account(s) to the Financial Crimes Enforcement Network of the Treasury Department by filing the FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).
We can file these two forms for you, as well as the other two Spanish Fiscal obligations: If you are a resident in Spain, (3) you will be taxed in Spain on your WORLDWIDE income at the IRPF (Impuesto sobre la Renta de Personas Físicas, Modelo 100) every year, before June 30th, if:
- Your gross income is higher than 22.000€, received from only one payer.
- Or you received income from more than one payer and the amount received from the second and other payers is more than 1.500€ and the annual gross income is over 12.000€.
It should include all your U.S source of income: a private pension, an annuity or SS Benefits from the U.S.A.
As a resident in Spain you also have the obligation of (4) reporting to the Spanish Tax Administration all rights and assets located abroad in Modelo 720, (deadline March 30,) which includes:
- the accounts in financial institutions located abroad
- the values, rights, insurance and annuities deposited, managed or obtained abroad
- all real estate and rights to property located abroad, including trusts
Obligaciones fiscales de los ciudadanos americanos residentes en España
Los ciudadanos de Estados Unidos residentes en España tienen anualmente 4 obligaciones fiscales:
Por un lado, tienen que presentar (3) la Declaración de la Renta, IRPF, antes del 30 de junio informando de los ingresos mundiales y pagando los impuestos correspondientes y (4) el Modelo 720, antes del 30 de marzo, informando de su patrimonio en el extranjero. Como ciudadanos americanos tienen que presentar anualmente en Estados Unidos el (1) Form 1040, declarando también las rentas mundiales y el (2) FinCEN 114 informado de las cuentas financieras que tengan abiertas en el extranjero.
Free INFORMATION sessions in February/March. Time and place to be announced on our webpage son. www.ustaxconsultants.net
Fees for 2017 Updated in our webpage: www.ustaxconsultants.net
Modelo 720 Filing deadline: March 30, 2017
Form 1040 Filing deadline: June 17, extension until October 16
FinCEN 114 Filing deadline: June 17, extension until October 16
Spanish IRPF Filing deadline: June 30, 2017
Modelo 720 – Assets outside Spain
Form 720 of the Spanish Tax Authorities: Report of all assets abroad. This form must be filed by all Spanish Residents owning assets abroad, only if they are over the limits described below. It is required to file this form every year before March 31.
The Form has three different blocks:
- Accounts in financial institutions abroad, which include current accounts, savings accounts, term deposits, credit accounts, etc. Information on each account should include the balance of these accounts on December 31st.
- Stocks, bonds, values, financial rights, and savings in insurance companies, deposited, managed or obtained abroad.
- All types of Real Estate and rights over Real Estate abroad, which include ownership of the property, actual use or enjoyment and bare ownership rights over real estate, timeshares, timeshare shifts, part-time property or similar formulas on real estate, other rights in rem over real estate.
Form 720 must be filed if any of these blocks exceeds the amount of 50,000€ and only the block in which the amount is exceeded. Penalty for not filing, incomplete filing, or filing with non-accurate data, will be punished with 100€ per inaccuracy with a minimum of 10.000€.
After filing for the first time, in the following years you should file Modelo 720 if you have an increase of 20.000€ in any of the three blocks.
There is no obligation to include pension plans, as long as it does not happen the event that implies the distribution of the pension either for life or for a period of time.
Fondos de inversión – PFIC
A Passive Foreign Investment Company is any foreign corporation that has either: (1) 75% or more of its gross income classified as passive income, or (2) 50% or more of its assets are held for production of passive income.
While there are a few exceptions to the previous rules, most foreign mutual funds, pension funds and money market accounts would be good examples of PFICs.
PFIC must be reported annually in Form 8621. You can choose the Mark-to-Market option. This method allows the shareholder to report the annual gain in the market value (i.e. unrealized gain) of the PFIC shares as ordinary income on the “other income” line of their Tax Returns. Unrealized losses are only reportable to the extent that gains have been previously reported. The adjusted basis for PFIC stock must include the gains and losses previously reported as ordinary income.
Upon the sale of the PFIC shares, all gains are reported as ordinary income where losses are reported on Schedule D.
TAXPAYERS MUST LET US KNOW in advance IF THEY OWN A PFIC.
NIIT – Net Investment Income Tax
Effective Jan. 1, 2013, individual taxpayers are liable for a 3.8 percent Net Investment Income Tax on the lesser of their net investment income, or the amount by which their modified adjusted gross income exceeds the statutory threshold amount based on their filing status.
The statutory threshold amounts for 2015 were:
– Married filing jointly — $250,000,
– Married filing separately — $125,000,
– Single or head of household — $200,000, or
– Qualifying widow(er) with a child — $250,000.
In general, net investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.
Net investment income generally does not include wages, unemployment compensation, Social Security Benefits, alimony, and most self-employment income. It must be paid before April 17th, even if you live abroad or you have an extension to file.
Resident in Spain – Treaty on no-double taxation
An individual is resident of Spain if any of the following circumstances apply:
- Remain more than 183 days during the calendar year in Spanish territory, unless the taxpayer proves his tax residence in another country (through a tax residence certificate issued by the IRS, Form 8802).
- When the main center or base of their activities or economic interests, directly or indirectly, is located in Spain.
- When the spouse, not legally separated, and minor children who depend on this individual are residents in Spain.
If an individual is deemed to be a tax resident in Spain, the taxpayer will be taxed in Spain for his worldwide income. Income obtained anywhere in the world must be declared, subject to the provisions laid down in the Convention for the avoidance of double taxation between Spain and the U.S. (Feb. 20, 1999.)
U.S. and Spain Tax Treaty.
The agreement, based on the taxpayer’s country of residence, lists some types of income and the country where the income will be taxed or exempt of taxation.
NML Consultores: US Tax Consultants
Travesía de las Cañas, 2 – 28043 – Madrid
Postal address: P.O. Box 29035 – 28080 Madrid
Telephone: +34 91 519 4392
Fax: +34 91519 6566
Web page: www.ustaxconsultants.net – www.NMLconsultores.com
I am considering moving to Spain & I want to know if my US Social Security retirement benefit will be taxed by the Spanish Tax Authorities.
Correct! In general terms your US SS Benefits are taxable in Spain, but of course it will depend on the amount and if you have other income.
Doesn’t Article 20 section 1(b) of https://www.irs.gov/pub/irs-trty/spain.pdf mean that US Social Security benefits are NOT taxable in Spain ?
I am sorry, but that it is not my understanding. You need to read first the Article 20 1.a which very clear states that pensions and similar remunerations, SS benefits seems to me that falls under this category, are taxable in Spain.
The Treaty contains a “Reservation clause” (Article 20.1 b) according to which the United States reserves the right of taxation on the SS Benefits, on its citizens and residents as if the Convention were not in force. The imposition taken in the United States by a resident of Spain on the basis of the criteria of citizenship does not give right in Spain to apply in the IRPF deduction by Double international taxation. If the United States taxes any income by making use of the “reservation clause” established for its citizens, double taxation has to be avoided by United States. So, you can only recuperate the taxes paid with the IRS Foreign Tax Credit, which means that you must file the IRPF first so you can have the deduction in your 1040. You cannot claim in Spain the deduction of the taxes paid in the USA.
Anyway, I am sure you know that the Spanish IRPF Law requires that all residents in Spain must report worldwide income, which includes Foreign pensions:
“Todo residente fiscal en España debe declarar en su IRPF por su renta mundial, con independencia de la procedencia de sus ingresos. Es decir, deberá declarar en España las rentas que obtenga en cualquier parte del mundo, sin perjuicio de lo que se disponga en el Convenio para evitar la doble imposición internacional suscrito entre España y el país de origen de la renta”.
The AEAT has an information document, I have only found it in Spanish, which summarize some of the articles of the Treaty and how they are interpreted.
There are two more treaties with fiscal implications that may apply to some US Citizens residents in Spain that you can down load from our download page:
– Totalization agreement (Social Security)
– Treaty of the Armed Forces
Can you help me decide if I have to file a Spanish tax return for 2016? I visited Spain from 1/1/17 to 3/15/17 with 3 of those days spent in England. 74 days total or 71 days if I can exclude the 3 days in England. That was a trip not requiring a visa, from the US (I’m American). On 9/13/17, I entered Spain on a non-lucrative visa & only traveled once out of Spain to Denmark over Christmas. That’s a total of 110 days. So, based on number of days in Spain (counting the days before I even had the non-lucrative residency visa), my total # of days in Spain in 2017 is either 181 or 184. Help, please?
Bottom line, I guess, is do my days in Spain before I even thought about a non-lucrative visa count and if so, do the days in England count toward my total number of days in Spain in determining if I have to file for my first year in Spain as 2017 or can I do the first tax return in Spain for 2018?
I am sorry to tell you that the three days you spent in England do not count, so according to the number of days you have spent in Spain you are considered fiscal resident of Spain, so you must file tha Spanish IRPF and modelo 720.
Please give us a call to the office from 9am to 2pm and we could suggest other beter options.
Is the money in my 401k declarable on the modelo 720?
Las cuentas 401K son consideradas pensiones, por lo que sólo hay que declararlas por el valor de lo que se recibe anualmente.
I am not collecting income from my 401k yet so, to be absolutely clear, as long as I am not collecting money from my 401k for income, I do NOT have to declare this account on the 720. Is this correct?
my name is Jim from the US my wife and I forgot to file our modelo 720 this year. While trying to understand what to do next I realized that my accountant has been declaring our 401k’s and IRA’s on our 720 and that this is possibly incorrect. The only reason to file again this year is gains related to those accounts. After reading your blog I thought you might have an opinion on how we should proceed. Do we file late including the information on our retirement accounts? Or do we not file and stop reporting on these accounts? thank you in advance jim
Jim, My suggestion is not to file a 720 out the de filing period, so if I were you , I will wait until next January 2021 to file the appropriate corrections. To report the total value of a pension plan is not a big mistake and if you file the corrections now, you might get a fine for filing late.
you are not worried the penalty for not filling is worse?
also you said
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