2024 Update: Please see a more recent post on the Spain-USA tax treaty.
Must we? Didn’t we Yankees endow earthly civilization with the Big Mac, Love Boat re-runs, the Chia Pet? Isn’t it enough that we grace Spanish soil with our Stetson-crowned, Buckaroo-booted presence? Must we submit to the indignity of expat taxation, too?
I’m afraid so. Presume yourself to be liable for a Spain tax on worldwide income if slipping those Buckaroos under a Spanish bed 183+ sunsets yearly. Ernst & Young says so. Deloitte says so. The Local news site says so. You won’t be taxed twice, thanks to tax treaties, but still must furnish a 1040 to Uncle Sam, even if Tia Hispania gets all the money.
I have filed returns in Spain and the U.S. for tax years 2017 and 2018, huddle today over dusty keyboard in BVDs to yak informally about my experiences. Informally. Transitophile is not a tax expert. If you want serious counsel, look for someone who doesn’t blog in his underwear.
WHAT SPAIN TAX FORMS WILL I FILE?
At least two, guess I, for most fellow holders of non-lucrative visas:
Modelo 720: tells the Agencia Tributaria about your out-of-Spain asset categories valued at €50,000+. No tax is paid with this form; they just want to know (but want to know badly).
Modelo 100: the main tax form, informing you and La Agencia what funds will be gobbled out of your Spain bank account. Said gobbling is done in two installments, in early July and early November.
And a third tax form, for those boasting global assets north of €700,000:
Modelo 714: a wealth tax, abolished in 2008, restored in 2011, still in force today, but with different tax rates and allowances in different Spain autonomous regions. Madrid waives the wealth tax; blue bloods in the capital must file a 714, but pay no tax with it.
How about if you draw a Spain paycheck, or run a Spain business, or otherwise deal with a different tax picture? This list might help you. I can’t.
WHEN DO I SUBMIT THESE FORMS?
720: from early January to late March. Roughly.
100 and 714: from early April to late June. Roughly.
WHAT DO I HAVE TO FILE IN THE U.S.?
- The 1040, by June 15. Not April; June. Expats get an automatic two month extension.
You may want to attach copies of your filed Spain tax returns, to show Uncle Sam why he’s not getting a check. I did.(Update, 2024: Unnecessary and inappropriate, according to two tax professionals.) - An FBAR, if your out-of-the-U.S. assets ever crept north of $10,000.
- An 8938, if said out-of-the-U.S. assets were significantly greater. (Think $50,000+)
HOW MUCH MORE DID YOU HAVE TO PAY IN SPAIN?
A larger overall tax bill than I would have paid in the U.S., but not that much larger. Please note that my past U.S. tax bills included significant state taxes in (relatively) high tax California.
CAN YOU RECOMMEND PROFESSIONALS?
I can! I have dealt with the companies below only for the 2018 tax year, but feel impressed enough to mention both.
For Spain tax returns: Opción Conta. Tax preparation for small businesses is their métier, but they were happy to help this expat with personal tax returns. Prompt, honest, attentive, reasonably priced and — a downside, for some — pretty much monolingual Spanish. I sweated over my español whilst crafting explanations of my tax needs, and checked their work to flag potential language-related misunderstandings.
For U.S.A. returns: A few clicks in a search engine will turn up many companies offering tax services to expats. Some boast glowing reviews. I rang up several, failed to speak to a live human with even remedial tax knowledge, became suspicious, remain suspicious today.
Fortunately, my hunt turned up one happy exception: Expatriate Tax Returns. I:
- Signed an engagement letter
- Did the FBAR myself. Easy.
- Completed a covers-all-bases questionnaire
- Submitted said questionnaire to an online portal, accompanied by 1099s and other paperwork goodies I’d expect to provide to any other tax preparer in the U.S.
- (Crucially) told them what my tax hit would be in Spain. Very important! Remember those tax treaties; you don’t want to pay twice.
- Paid a reasonable credit card fee up front before receiving my draft 1040
- Approved the draft, and asked them to submit it to the IRS with a copy of my filed Spain tax return.
Done! Easy! (Or relatively easy, at least. These are taxes we’re talking about.) Affordable! I’m happy.
WILL SPAIN COME AFTER ME IF I DON’T FILE?
They went after Shakira, and have chased others. I don’t know if they’ll come after you. “So are you paying your taxes in Spain?” doesn’t make for light-hearted chitchat in intercambios. No U.S. expat has yet confided a boiling-in-oil at the hands of the Agencia Tributaria. The boiling may have been endured in private.
I suspect, but don’t know, that Spain is mis-managing a fruitless Lose-Lose on expat taxes. I don’t remember receiving any significant information on expat tax obligations before or after applying for my visa. I smelled a potential problem and did pre-move research, but will bet that many don’t, and discover that they’re supposed to file and pay in Spain only after they’ve been in-country long enough to fear stiff penalties for fessing up, coming clean.
Spain loses, because it doesn’t get the money, at least not without chasing it. The long-term expat loses, too, because she lives under a shadow. Spain can make excellent guesses about her assets and income; didn’t she have to file financial statements while putting in for the visa? What if the extranjeria tweaks the visa renewal requirements, asks the renewal to be accompanied by, say, a few pages from a filed Modelo 100? The dreaded letter or phone call could come at any time. The expat may feel he should pay Spain taxes, given use of social services here. But how can he dare come clean now, after years of non-compliance?
I believe that the repenting expat tax dodger will pay far less than if caught red-handed by La Agencia, but still faces substantial penalties. I suggest starting with a Spain tax attorney.
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Footnote: Apologies for the Internal Server errors that plagued this site a month ago. I had to restore the site from a back-up, lost a couple of comments, had to settle on a new site theme. Live and learn.