Need to know
Relevant information about taxes obligations for U.S. Expats.
Tax obligations of U.S. Citizens Residents in Spain
As U.S. Citizen or Green Card Holder, you have at least two different fiscal obligations in Spain and another two in the US.
As U.S. Citizen you must file, in the U.S.A., the Form 1040 (Federal Income Tax) every year, if your gross world wide income is at least $4,050 (married filing separately) or $10,350 (single). You also must file with the IRS the FinCEN 114 or FBAR (Foreign Bank Account Report)
Streamlined Filing Compliance Procedure for delinquent filers
The IRS streamlined filing compliance procedure describe below is available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.
The streamlined procedure is designed to provide to taxpayers in such situations with a streamlined procedure for fling amended or delinquent returns, and terms for […]
PIFCs – Americans Should Avoid Non-US Mutual Funds
The Foreign Account Tax Compliance Act of 2010 has changed the nature of Tax Reporting for American Expatriates.
Formerly benign Passive Foreign Investment Companies (PFICs) have become a tax nightmare incurring significant costs in tax preparation and taxes affecting investment performance.
If you are a U.S. citizen or a U.S. permanent resident who has been living and working outside the U.S. and investing your savings […]
The Spanish SL vs. U.S. LLCs from a tax point of view
In Spain (1) an individual can develop an economic activity as self-employed (autónomo). Autónomos must register in the Social Security and must fulfill their tax obligations. The most common form of a Spanish company is (2) the SL Sociedad Limitada, the shareholders can be individuals or other companies (Spanish or foreign), and the company has different legal personality from its shareholders. […]
2018 Tax Rates in Spain compare with the Tax Rates in the U.S.
Within the “Learn More” section below, you will find two tables with the Tax Rates for residents and nonresidents of Spain, for both Earned Income and Savings Income. For the U.S. side you have tax table for the Earned Income and a second one for the Passive Income […]
Self- employed or Limited Liability Company in Spain?
There is always a first moment in which you decide to start a business at your own risk, and the question is always which legal form has more tax advantages and lower economic costs; Do I start as a self-employed or do I start a partnership?
This is one of the most frequent questions when it comes to start a new business, and the answer is very relative. The final decision should always be considered with the help of an expert.
Treaties for the Avoidance of Double Taxation between Spain and the U.S.A.
The first income tax treaty between United States and Spain and the accompanying Protocol were signed on February 22, 1990; which is The Convention between The United States of America and The Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. The Convention consists of 30 articles and a protocol containing 20 provisions. The Convention describes the persons to which it applies, the income taxes covered by it, and provides that each […]
How the timing of the trip to Spain would impact the tax liability, both here in the US and in Spain, with a nonlucrative VISA.
- If you have a nonlucrative visa, it means that you might not have any income from Spanish sources.
- In Spain, like in the rest of the world, except the US, you must file a tax return if you are a fiscal resident. In the USA you must file a Tax return because of your nationality. The fiscal residency is established for the corresponding natural year and you can only be a fiscal resident of one country on that year. You establish your residency mainly if you live in the country for more than 183 days (Treaty USA Spain Tax Convention Feb 1990. Article 4). […]
What is FATCA and how does it affect Americans Abroad?
FATCA stand for Foreign Account Tax Compliance Act. The legislation was passed into law in 2010 as part of the unrelated jobs legislation known as the HIRE law. FATCA is a broad, complex set of rules designed to increase tax compliance by Americans with financial assets held outside the United States. The legislation was drawn up primarily as a response to the 2009 UBS off-shore banking scandal which revealed that many Americans were maintaining large financial holdings in secret Swiss bank accounts without reporting or paying the U.S. taxes dueon those assets […]
Frequently Asked Questions
Form 1040. Do I have to file an individual tax return in the U.S.A.?
Yes, if you are U.S. Citizen or Green Card holder, you are required to file US taxes in the U-S every year, with the Form 1040, wherever in the world you live, if you earn over $10,000, or just $400 of self-employment income; regardless of where their income is earned, where in the world they live, whether the US has a tax treaty with that country, or whether they also pay foreign taxes.
Form 1040. Can I take any exemptions?
There are some IRS exemptions just for expats that allow them to reduce or in most cases eliminate their US tax liability completely (although they still have to file a US return to claim these exemptions).
1040. Can I take Foreign Tax Credit?
Expats who pay foreign taxes meanwhile may benefit from claiming the Foreign Tax Credit, which gives a $1 tax credit for every dollar of tax paid abroad. If you pay foreign taxes at a higher rate than the US rate, then they will have excess credits left over that can be carried forward for use in subsequent years.
IRS Delinquent filers. Is there any kind of Amnesty for those Americans that have not filed in the past, neither the Individual Tax Return (1040) nor the FBAR?
Expats who have been living abroad but not filing US taxes because they weren’t aware that they were meant to can catch up without facing any penalties using an IRS amnesty program called the Streamlined Procedure. To catch up using the Streamlined Procedure, expats must file their last 3 tax returns and lasts 6 FBARS (as applicable), pay any back taxes owed (often none, once they claim any of the exemptions), and self-certify that their previous non-compliance was non-willful.
IRPF. If I lived in Spain more than 183 days, last year. Do I have to file the IRPF in Spain?
Yes, you are required to file the Spanish IRPF reporting worldwide income of the entire year, except if your earned income is less that € 22,000 (€ 12,000 if more than one payer), or your passive income is lower than € 1,000.
Expats who live in a foreign country will also have to comply with the tax rules of that country. These vary from country to country, so it’s definitely worth consulting a qualified accountant in your country of residence to see whether you need to file and pay taxes there too, given your circumstances.
When do I have to file Modelo 720?
You are required to file the Modelo 720 if you are Spanish resident and you own assets abroad whose balance as of 31 December exceeds €50,000.
Modelo 720. Once the first declaration of Form 720 corresponding to a fiscal year has been filed, must it be filed again each year? With regard to what information should it be filed again?
Once Form 720 has been filed about one or more of the disclosure obligations in it, this Form should only be filed again when, in relation to one or more of these obligations, there is an increase of the overall limit established for each information block above 20,000 euros compared with what the last declaration determined.
Form 1040. When is the due date for me to file taxes?
The due date is April 15th, expats have an automatic filing extension until June 15th, with a further extension available until October 15thupon request.
All Americans who earn over $10,000, or just $400 of self-employment income are required to file, regardless of where their income is earned, where in the world they live, whether the US has a tax treaty with that country, or whether they also pay foreign taxes.
Can I take Foreign Earned Income Exclusion, Form 2555?
The most commonly used exemption for expats is called the Foreign Earned Income Exclusion, which allows expats to exclude the first $102,100 (the 2017 figure) in earned income from US tax liability. Only in earned income! Expats must first prove that they live abroad using either the Bona Fide Residence Test (showing that they are a permanent resident in another country), or the Physical Presence Test (showing that they spent at least 330 days outside the US in a year).
FBAR. Do I declare my foreign financial accounts?
U.S. Citizens and Green Card holders who have over $10,000 in total in foreign bank or investment accounts at any time during the year are required to report all their foreign accounts by filing a foreign bank account report (FBAR), or FinCEN 114. It’s important not to neglect this requirement, as penalties for not filing an FBAR when you are particularly steep ($ 10,000), even if you weren’t aware that you were supposed to. FBARs are filed online to FinCEN (Financial Crime Enforcement Network).
IRPF. Do I have to file taxes in Spain if I was Non-Resident?
Yes, you are required to report and pay 24% taxes over your income which source was Spain
Do I have to file Modelo 720, in Spain if I was Non-Resident?
No, you are required to file the Modelo 720 from January 1stto April 30thof the following year if you were fiscal resident of Spain.
Modelo 720. If a person or entity is required to file information return form 720 for accounts in financial institutions abroad, for securities, rights, insurance and income deposited, managed and earned abroad, and for properties located abroad and for rights relating thereto, can the same form be used to declare all three groups of assets?
Yes, each one of the three groups of assets represents a different reporting obligation, but the three reporting obligations are expressed using the same information form. As a result, the three reporting obligations are complied with using Form 720, where taxpayers must report all assets and rights for which there is an obligation to report.
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