The Comprehensive Guide to US Expat Taxes in Spain: Navigating Obligations and Benefits

Spain is a popular destination for American expats. Its affordable cost of living, great weather and rich culture make it a desirable place for many Americans to call home. However, as an American expat in Spain, you have a variety of tax obligations that must be met annually. These taxes can range from filing requirements to special levies. Regardless of your situation, it is critical to work with a US expat specialist to help you navigate these complicated issues. This article delves into the complete guide to US expat tax Spain and highlights the key considerations that you should be aware of.

Expats who are residents of Spain are taxed on their worldwide income at progressive rates. The exact tax brackets vary by region. For example, the highest rate in Catalonia and Andalusia is 49%, while the lowest is in Valencia at 19%.

In addition to the Spanish taxes that you must pay, you may also have responsibilities in the US for any assets that you own. For instance, the IRS requires that you report any financial assets held outside of the country using Fincen Form 114 (FBAR) and Form 8938. Additionally, Spain requires that you declare foreign assets on a form known as Modelo 720.

Self-Employed American Expats

If you are a self-employed American expat in Spain, you must file both the Spanish and US forms for your business. This is because you are considered to be a resident of both countries for tax purposes.

The IRS’s rules on foreign self-employment are complex and must be carefully followed to minimize your tax liability. It is important to consult with a US expat expert to ensure that you are filing the correct form and paying the proper amounts of tax.

Rental Income

American expats who rent property in Spain must be aware that the Spanish government has special taxes and reporting requirements for this type of income. These taxes and requirements are similar to those that apply to individuals who own investment properties in the United States. In order to take advantage of the Beckham Exclusion or other favorable treatment, it is essential that you hire a US expat tax professional with knowledge of both the IRS and the Spanish tax system.

Aside from income taxes, Spanish residents must pay a value-added tax (IVA) of 10% on certain goods and services. This tax applies to the purchase of new and used items as well as some real estate transactions. It is critical that you know the tax rules before making a purchase in order to avoid any surprises when it comes time to file your taxes.