Spanish Taxes - real life experience?

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Thomas3857
Posts: 23
Joined: Fri Apr 16, 2021 12:14 pm

Spanish Taxes - real life experience?

Post by Thomas3857 »

[2022 thread bumped in 2024 --admin LadyGeek]

Hi all - Just found this forum and it's been very helpful so far. We are very close to pulling the trigger and retire to Spain. We have explored Spain a number of times - sometimes spending as much as a month in a particular city - before finally choosing Valencia as our destination. My lingering concern, however, is the issue of taxes. I've read numerous posts on various message boards, read the US - Spain Tax Treaty and even had two consultations from Spain-based tax advisors but even with those efforts I'm still unsure about the following:

1. One tax advisor told us that by combing IRS Form 8802, “Application for United States Residency Certification” each year with IRS Form 6166, a letter of U.S. residency certification and maintaining a residence in the US, mail going to the US address, fiscal center being in the US we can avoid becoming a tax resident EVEN THOUGH we spend over 183 days in Spain. Is this possible? Has anyone actually done this with success?

2. Wealth tax - Valencia's allowances aren't as generous as other regions, however, if as one advisor informed us, IRA and 401k aren't used to calculate the wealth tax . Thoughts on this?

Thanks!
WhiteMaxima
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Joined: Thu May 19, 2016 5:04 pm

Re: Spanish Taxes - real life experience?

Post by WhiteMaxima »

If one reside in Spain for 183 days/year, they will be treated as tax resident. Spainish tax will be applied toward world wide income and total asset. Also no-EU citizens will need Spain long term visa to stay in Spain.
Flurry
Posts: 27
Joined: Mon Oct 25, 2021 9:29 am
Location: Austria (No kangaroos)

Re: Spanish Taxes - real life experience?

Post by Flurry »

If you want to live there, pay taxes (and learn the language in case you didn't do that yet). Don't be one of these Americans.
gt4715b
Posts: 533
Joined: Mon Jun 11, 2007 10:29 am

Re: Spanish Taxes - real life experience?

Post by gt4715b »

Thomas3857 wrote: Fri Mar 04, 2022 11:00 am
1. One tax advisor told us that by combing IRS Form 8802, “Application for United States Residency Certification” each year with IRS Form 6166, a letter of U.S. residency certification and maintaining a residence in the US, mail going to the US address, fiscal center being in the US we can avoid becoming a tax resident EVEN THOUGH we spend over 183 days in Spain. Is this possible? Has anyone actually done this with success?
Form 8802 is an application to get Form 6166, which you use to show to foreign countries to get some tax benefit or relief. When you fill out 8802 you are certifying that you are a US resident. If you look at this language in the instructions:

Who Is Not Eligible for Form 6166
  • You are a dual resident individual who has made (or intends to make), pursuant to the tie-breaker provision within an applicable treaty, a determination that you are not a resident of the United States and are a resident of the other treaty country. For more information and examples, see Regulations section 301.7701(b)-7.
I'm assuming you're considering actually living in Spain (like 9+ months a year). You'll need a visa to stay in Spain more than 90 days straight. With any visa that you get (although I assume you'll get the Non-Lucrative visa), the expectation is that you will be a resident. I don't know how tightly linked the immigration system is with the tax system, but once the tax system finds you it will be very difficult to convince them that you're not a resident.

Here is the definition of residency from Spain:

Normativa: Artículo 6 Ley IRNR

Se entiende que una persona física tiene su residencia habitual en España cuando se dé cualquiera de las siguientes circunstancias:
  • Que permanezca en España más de 183 días durante el año natural. Para determinar este período de permanencia se computan sus ausencias esporádicas, salvo que acredite su residencia fiscal en otro país. En el supuesto de países o territorios calificados como paraíso fiscal(1), la Administración tributaria puede exigir que pruebe la permanencia en dicho paraíso fiscal durante 183 días en el año natural.
Not sure about your Spanish, but it says you're a resident if you spend more than 183 days during the year in the country.

So, in summary, you are ineligible for a Form 6166 letter (because you have made the decision to be a resident of Spain, according to the residency conditions in Spain). If you live in Spain you'll have to pay Spanish taxes (and use the foreign tax credit to avoid double taxation from the US).
Thomas3857 wrote: Fri Mar 04, 2022 11:00 am 2. Wealth tax - Valencia's allowances aren't as generous as other regions, however, if as one advisor informed us, IRA and 401k aren't used to calculate the wealth tax . Thoughts on this?
This is generally believed to be the case, although I haven't found any official documentation from Spain where this is explicitly stated.
InvestInPasta
Posts: 213
Joined: Sat Sep 16, 2017 12:42 pm
Location: Italy

Re: Spanish Taxes - real life experience?

Post by InvestInPasta »

Thomas3857 wrote: Fri Mar 04, 2022 11:00 am2. Wealth tax - Valencia's allowances aren't as generous as other regions, however, if as one advisor informed us, IRA and 401k aren't used to calculate the wealth tax . Thoughts on this?

Thanks!
If you stay in Spain more than 6 months I think you will have to pay tax in Spain unless there are some rules/laws to encourage wealthy people to retire/live in Spain. Other EU countries have some laws to encourage walthy to retire there, if you retire in Portugal or Italy or Malta you have to pay only a high flat tax (Italy) or almost no tax at all (Portugal for 10 years and Malta).

Anyway if you don't want to pay the wealth tax in Spain just go to live in Madrid or its region instead of Valencia. In Comunidad De Madrid there is no wealth tax.
When I study English I am lazier than my portfolio. Feel free to fix my English and investing mistakes.
jessical
Posts: 2
Joined: Wed Jan 11, 2023 11:53 am

Re: Spanish Taxes - real life experience?

Post by jessical »

gt4715b wrote: Mon Jul 25, 2022 11:43 am
Thomas3857 wrote: Fri Mar 04, 2022 11:00 am
1. One tax advisor told us that by combing IRS Form 8802, “Application for United States Residency Certification” each year with IRS Form 6166, a letter of U.S. residency certification and maintaining a residence in the US, mail going to the US address, fiscal center being in the US we can avoid becoming a tax resident EVEN THOUGH we spend over 183 days in Spain. Is this possible? Has anyone actually done this with success?
Form 8802 is an application to get Form 6166, which you use to show to foreign countries to get some tax benefit or relief. When you fill out 8802 you are certifying that you are a US resident. If you look at this language in the instructions:

Who Is Not Eligible for Form 6166
  • You are a dual resident individual who has made (or intends to make), pursuant to the tie-breaker provision within an applicable treaty, a determination that you are not a resident of the United States and are a resident of the other treaty country. For more information and examples, see Regulations section 301.7701(b)-7.
I'm assuming you're considering actually living in Spain (like 9+ months a year). You'll need a visa to stay in Spain more than 90 days straight. With any visa that you get (although I assume you'll get the Non-Lucrative visa), the expectation is that you will be a resident. I don't know how tightly linked the immigration system is with the tax system, but once the tax system finds you it will be very difficult to convince them that you're not a resident.

Here is the definition of residency from Spain:

Normativa: Artículo 6 Ley IRNR

Se entiende que una persona física tiene su residencia habitual en España cuando se dé cualquiera de las siguientes circunstancias:
  • Que permanezca en España más de 183 días durante el año natural. Para determinar este período de permanencia se computan sus ausencias esporádicas, salvo que acredite su residencia fiscal en otro país. En el supuesto de países o territorios calificados como paraíso fiscal(1), la Administración tributaria puede exigir que pruebe la permanencia en dicho paraíso fiscal durante 183 días en el año natural.
Not sure about your Spanish, but it says you're a resident if you spend more than 183 days during the year in the country.

So, in summary, you are ineligible for a Form 6166 letter (because you have made the decision to be a resident of Spain, according to the residency conditions in Spain). If you live in Spain you'll have to pay Spanish taxes (and use the foreign tax credit to avoid double taxation from the US).
Thomas3857 wrote: Fri Mar 04, 2022 11:00 am 2. Wealth tax - Valencia's allowances aren't as generous as other regions, however, if as one advisor informed us, IRA and 401k aren't used to calculate the wealth tax . Thoughts on this?
This is generally believed to be the case, although I haven't found any official documentation from Spain where this is explicitly stated.

You missed the part in Spanish where it talks about unless tax residency can be proven otherwise! "salvo que acredite su residencia fiscal en otro país"
jessical
Posts: 2
Joined: Wed Jan 11, 2023 11:53 am

Re: Spanish Taxes - real life experience?

Post by jessical »

Thomas3857 wrote: Fri Mar 04, 2022 11:00 am Hi all - Just found this forum and it's been very helpful so far. We are very close to pulling the trigger and retire to Spain. We have explored Spain a number of times - sometimes spending as much as a month in a particular city - before finally choosing Valencia as our destination. My lingering concern, however, is the issue of taxes. I've read numerous posts on various message boards, read the US - Spain Tax Treaty and even had two consultations from Spain-based tax advisors but even with those efforts I'm still unsure about the following:

1. One tax advisor told us that by combing IRS Form 8802, “Application for United States Residency Certification” each year with IRS Form 6166, a letter of U.S. residency certification and maintaining a residence in the US, mail going to the US address, fiscal center being in the US we can avoid becoming a tax resident EVEN THOUGH we spend over 183 days in Spain. Is this possible? Has anyone actually done this with success?

2. Wealth tax - Valencia's allowances aren't as generous as other regions, however, if as one advisor informed us, IRA and 401k aren't used to calculate the wealth tax . Thoughts on this?

Thanks!
To your point #1 - that is what our plan is! That is what we were advised by the Balcells group. It even says on Spain's Hacienda (their IRS) that physical residency does not equal tax/fiscal residency.
fc70
Posts: 1
Joined: Sat Mar 18, 2023 1:07 pm

Re: Spanish Taxes - real life experience?

Post by fc70 »

Do you have an EU or USA passport? If USA how do you plan to stay more than 90 days per every 180 days? I ask because immigration status does impact on tax residency.
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