Spain’s rich culture and laid-back lifestyle make it a favorite destination for American expats. However, living in a foreign country comes with specific tax responsibilities, and it’s essential to understand the tax implications of residing in Spain. Here’s what you need to know about taxes as a US expat in Spain.
Spain Overview:
- Primary Language: Spanish
- Currency: Euro (EUR)
- Tax Authority: Agencia Española de Administración Tributaria (AEAT)
- Tax Year: January 1 to December 31
- Tax Deadline: June 30
- Tax Treaty with the US: Yes
- Totalization Agreement with the US: Yes
- Joint Filing Available: Yes
- Extensions on Tax Returns: No
Income Tax Rates in Spain
Non-residents are taxed at a flat rate of 24% on Spain-sourced income (or 19% for EU/EEA citizens). Spanish residents are taxed on their worldwide income at progressive rates:
| Income in EUR | Tax Rate (%) |
| Up to €12,450 | 19% |
| €12,450.01 to €20,200.00 | 24% |
| €20,200.01 to €35,200.00 | 30% |
| €35,200.01 to €60,000.00 | 37% |
| €60,000.01 to €300,000.00 | 45% |
| Over €300,000.01 | 47% |
It’s important to note that tax rates can vary based on the autonomous region in which you reside, as regional governments may adjust the rates.
Who Must Pay Taxes in Spain?
You are required to file a Spanish tax return if any of the following apply:
- You earn over €22,000 annually from employment.
- You receive income from multiple sources.
- You are self-employed.
- You receive over €1,600 in dividends, interest, or capital gains in a year.
- You earn more than €1,000 in rental income annually.
Spanish Tax Residency
You are considered a tax resident in Spain if any of the following are true:
- You spend more than 183 days in Spain during the calendar year.
- You have a business or economic interests in Spain.
- Your spouse or underage children are tax residents of Spain (unless you can prove residency in another country).
If none of these conditions are met, you are considered a non-resident for tax purposes.
Income Subject to Taxation in Spain
- Residents: Spanish residents are taxed on their worldwide income, although up to €60,100 of income from work performed abroad may be exempt if specific conditions are met.
- Non-Residents: Non-residents are taxed only on Spain-sourced income.
Capital Gains and Losses
Spain taxes capital gains, whether from the sale of stocks or real estate. Non-residents pay a flat rate of 19%, while residents face progressive rates:
| Capital Gains (EUR) | Tax Rate (%) |
| €1 to €6,000 | 19% |
| €6,000 to €50,000 | 21% |
| Over €50,000 | 23% |
Estate and Gift Tax
Spain applies inheritance and gift taxes on both residents and non-residents. Residents are taxed on worldwide assets, while non-residents are taxed only on assets located in Spain. Rates range from 7.65% to 34%, depending on the value and the relationship between the parties involved. Regional variations also apply.
Social Security in Spain
Spain’s social security system is funded through contributions from both employers and employees. The standard contribution rates are:
- Employees: 6.35%
- Employers: 29.9%
Filing Taxes in Spain
- Tax Year and Deadlines: The Spanish tax year runs from January 1 to December 31, with returns due between April and June of the following year. The exact deadline typically falls in late June.
- Filing Requirements: Residents must file a tax return if their worldwide income exceeds certain thresholds. Non-residents must file if they earn Spain-sourced income, such as from Spanish employment, rental properties, or the sale of assets.
Payment Options
Taxes can be paid via direct debit from a Spanish bank account, either in full or in two installments: 60% in June and 40% in November. In some cases, taxpayers may request a payment plan, though this usually incurs interest.
Late Filing and Penalties
Penalties for late filing range from 5% to 20% of the unpaid tax, depending on how late the return is filed. Interest also accrues on unpaid taxes. It’s possible to file an amended return if mistakes are discovered, but it’s best to do so promptly to minimize penalties.
Avoiding Double Taxation: Treaties and Agreements
US-Spain Tax Treaty
The US-Spain tax treaty helps prevent double taxation by defining which country has the right to tax different types of income. It also provides provisions for resolving tax disputes and exchanging information between tax authorities.
Totalization Agreement
The US-Spain totalization agreement prevents individuals from having to pay social security taxes in both countries. Expats who work in both the US and Spain will only contribute to one country’s social security system.
US Tax Deductions and Credits
To help reduce your US tax liability, the IRS offers several deductions and credits for Americans living abroad, including:
- Foreign Earned Income Exclusion (FEIE)
- Foreign Tax Credit
- Foreign Housing Deduction or Exclusion
These benefits can help you reduce or eliminate your US tax liability while living in Spain.
Tax Deductions in Spain
Spain offers several deductions for tax residents, including:
- Investments in a primary residence.
- Foreign taxes paid.
- Certain business expenses.
- Maternity leave.
- Pension contributions.
Special Tax Regime for Expats
Spain provides a special tax regime for expats on temporary assignments. Under this regime, eligible individuals can opt to be taxed as non-residents at a flat rate of 24% on only Spain-sourced income, offering potential tax savings.
Living Abroad in Spain? We Can Help!
Managing taxes as a US expat in Spain can be challenging, but our team of tax professionals can help ensure you’re optimizing your tax strategy. Contact us for guidance or schedule a consultation to get tailored advice for your specific tax situation.