US Taxes for Americans Living in Spain
Spain has become increasingly popular for US expats and remote workers, the Spanish Digital Nomad Visa and the Beckham Law regime have made it particularly attractive for high-earning newcomers. But Spain's tax system is complex, and US citizens must navigate both Spanish obligations and ongoing IRS requirements. The US-Spain tax treaty provides significant relief, but applying it correctly requires expertise.
Local tax authority
The US-Spain tax treaty (1990) covers income tax on dividends (15%), interest (10%), and royalties (8%). It includes a Saving Clause preserving US taxation of citizens. Spain's wealth tax (Impuesto sobre el Patrimonio) and the recently introduced Solidarity Tax on large fortunes are not income taxes and generally not creditable against US income tax.
Spain-specific complexities
- Spain's Beckham Law (Régimen Especial de Impatriados) can be advantageous for qualifying newcomers, but US citizens face limitations in using it due to the Savings Clause
- Spain has a wealth tax (varying by region) that is not creditable as an income tax for US FTC purposes
- Spanish income tax rates reach 47% (plus regional surcharges), FTC is generally preferable to FEIE
- Model 720 (overseas asset declaration) is required for Spanish residents with foreign assets over €50,000, separate from FBAR but overlapping in scope
- Spanish capital gains tax rates (19-26%) are generally lower than Spanish income tax rates
What's different about filing from Spain
The Beckham Law and US citizens
Spain's Beckham Law (Special Regime for Inbound Workers) allows qualifying newcomers to pay Spanish tax only on Spanish-source income at a flat 24% rate (for income up to €600,000), rather than progressive rates on worldwide income. This can be a major benefit, but US citizens cannot fully benefit because the Savings Clause means the US taxes worldwide income regardless. US citizens on Beckham Law still file a full US return with worldwide income.
Spanish wealth tax
Spain (and most of its regions) impose a wealth tax (Impuesto sobre el Patrimonio) on worldwide net assets above €700,000 (national threshold; regional thresholds vary). This is not an income tax and is generally not creditable against US income tax for FTC purposes, meaning US citizens in Spain may pay wealth tax in Spain with no US offset. This is a significant additional cost for high-net-worth expats in Spain.
Model 720 and US asset reporting
Spanish residents with foreign assets exceeding €50,000 must file Model 720 (Declaración Informativa sobre Bienes y Derechos situados en el Extranjero). This is analogous to FBAR and Form 8938 in the US but applies to Spanish residents. The filing obligations overlap: your US accounts, IRAs, brokerage accounts, and real estate must be declared to Spain. Historically Model 720 had draconian penalties (ruled disproportionate by the EU court of Justice in 2022), the regime has been reformed but still requires careful compliance.
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Frequently asked questions about US taxes in Spain
Should I use FEIE or FTC for Spanish income?
For most US expats in Spain, FTC is preferable. Spanish income tax rates (up to 47% plus regional surcharges) generally exceed US rates, meaning Spanish taxes paid can fully offset US income tax liability. FEIE might be better for very low income levels, but the 5-year revocation bar risk makes FTC the safer long-term choice.
Can the Spanish wealth tax be credited against US income tax?
Generally no. The Spanish wealth tax (Impuesto sobre el Patrimonio) is not an income tax and therefore doesn't qualify for the US Foreign Tax Credit. It's a real additional cost for US citizens in Spain with significant assets.
I have Spanish bank accounts, do I need to file FBAR?
Yes. All Spanish financial accounts (Santander, BBVA, CaixaBank, etc.) count toward your FBAR threshold. You also need to check Model 720 filing requirements for your US accounts held as a Spanish resident.
I'm on Spain's Digital Nomad Visa, how does that affect my US taxes?
Spain's Digital Nomad Visa allows you to live and work in Spain for clients/employers outside Spain. It provides access to the Beckham Law regime (24% flat rate on Spanish-source income). Your US tax obligations remain unchanged, you still file a US return on worldwide income. The visa affects your Spanish tax; not your US tax.