Tax obligations 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 U.S.

As a U.S. Citizen you must file, in the U.S.A., (1) the Form 1040 (Federal Income Tax) every year, if your gross world wide income is at least $5 (married filing separately) or $10,350 (single). If you can be claimed as dependent, you must file the correspondent 1040 if your unearned income (taxable interest, ordinary dividends, capital gains, etc.) was over $1,050 or the earned income was over $6,300.

April 15th is the general deadline for Form 1040. Failure to pay by this deadline can result in filing and payment penalties. If you are a US citizen or resident alien that resides in a foreign country on the April 15th due date, you are entitled to an automatic two month extension to file, until June 15th. If you are unable to file your return by the automatic two month extension date  you can request an addition extension of time to file by filing Form 4868, up to four months. The extensions are to file, not to pay, any amount the you might owe the IRS must be paid before April 15th; be sure that you have paid quarterly your Estmamted Tax Payments issued the year before.

You also must file (2) with the Financial Crimes Enforcement Network, the FinCEN 114 or FBAR (Foreign Bank Account Report), if you have authority or signature authority of any foreign financial accounts that have an aggregate of $10,000 during any point of the calendar year. There are very harsh penalties for not filing the FinCEN.  A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty of $10,000 per violation.

If you are resident in Spain, (3) you will be taxed in Spain on your WORLDWIDE income at the IRPF (Modelo 100 – Impuesto sobre la Renta de Personas Física) every year, and it includes all your U.S source of income: a private pension, an anuity or SS Benefits from the U.S.A. The tax season in Spain starts around April 10th and the deadline is June 30th. You have to file the IRPF, before June 30th, only if your gross income is higher than 22.000€, received from only one payer; or if 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 11.200€.

You are also required (4) to report to the AEAT (Agencia Tributaria Española) your foreign assets in the Modelo 720 before March 31st. Assets not declared, that cannot be proved its ownership arousing from declared income or assets, will be considered income to be taxed, and a 150% penalty over the value of them. Penalty for not filling, incomplete filling or filing non-accurate data will be punished with 100€ per datum with a minimum of 10.000€.


U.S. and Spain Tax Treaty

If an individual turns out to be tax resident in Spain, the taxpayer will be taxed in Spain for its worldwide income, you must declare the income obtained anywhere in the world, subject to the provisions laid down in the Convention for the avoidance of double taxation between Spain and the U.S. (Feb. 20, 1999).

The agreement, based on the country of residence of the taxpayer, lists some types of income and the country were the income will be taxed or exempt of taxation.

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