# Taxes



## pendejo1 (Jun 21, 2018)

If I move from the USA to Madrid, Spain, I would be exposed to USA taxes AND Spanish taxes. But I do have the "no double taxation" agreement going for me. So I am pretty familiar with what I get taxed in the USA. 

What is my tax exposure in Madrid? I understand that no Wealth (Patrimonio) Tax is in effect currently for Madrid. Is there a "regional" or "city" income tax of some sort? I realize that there is a "country" income tax. 

(Please, I know there will be those who quack "see a professional." I just want to get a rough estimate of incremental tax exposure if I move to Madrid).

Thanks!


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## Pesky Wesky (May 10, 2009)

*******1 said:


> If I move from the USA to Madrid, Spain, I would be exposed to USA taxes AND Spanish taxes. But I do have the "no double taxation" agreement going for me. So I am pretty familiar with what I get taxed in the USA.
> 
> What is my tax exposure in Madrid? I understand that no Wealth (Patrimonio) Tax is in effect currently for Madrid. Is there a "regional" or "city" income tax of some sort? I realize that there is a "country" income tax.
> 
> ...


 If you don't want to see a professional, read a professional
Do you need to submit a Spanish tax return?


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## skip o (Aug 1, 2011)

I am not a pro, but I pay my Spanish taxes in full, and deduct what I paid from my US taxes. Since the deductions are higher than the amount owed to the US, the deduction will usually get rolled over to the following year. I find that every accountant and lawyer I work with in Spain won't admit that they made a mistake, and many of the accountants I have worked with in the US are the same. For some reason the first year I was a resident in Spain the accountants had me pay both Spain AND US taxes in full, so my payment to Spain in 2017 will be deducted from my 2018 US taxes, 2018 deducted from 2019 and so on. No idea if that was due to my accountants making a mistake. So if/when I move back to the US, I will have a year or two of no taxes due to all the deductions I have from my Spain payments.

Generally, Spanish income taxes are higher and property taxes are much lower in Spain. Health care is so much cheaper in Spain that moving to Spain has been an overall money saver for me. Literally every procedure & medication has been 50% to 90% cheaper in Spain. 

My understanding is that there is no wealth tax in Madrid, which is such a ridiculous policy. I can't believe there aren't endless protests about that.

I have found that making a mistake on US tax returns isn't that big of a deal. You correct it later, the taxman usually is cool with it. In Spain you make a mistake and they will come for your firstborn. Check out the fees on misfiling a 720, it's insane. And of course, you can talk to 10 different Spanish accountants and get 10 different answers on how to correctly file a 720 with regards to IRAs, 401ks, annuities, etc. I am pretty confident 90%+ 720s have errors in them, based on how inconsistent the accountants are around here.


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## pendejo1 (Jun 21, 2018)

skip o said:


> I am not a pro, but I pay my Spanish taxes in full, and deduct what I paid from my US taxes. Since the deductions are higher than the amount owed to the US, the deduction will usually get rolled over to the following year. I find that every accountant and lawyer I work with in Spain won't admit that they made a mistake, and many of the accountants I have worked with in the US are the same. For some reason the first year I was a resident in Spain the accountants had me pay both Spain AND US taxes in full, so my payment to Spain in 2017 will be deducted from my 2018 US taxes, 2018 deducted from 2019 and so on. No idea if that was due to my accountants making a mistake. So if/when I move back to the US, I will have a year or two of no taxes due to all the deductions I have from my Spain payments.
> 
> Generally, Spanish income taxes are higher and property taxes are much lower in Spain. Health care is so much cheaper in Spain that moving to Spain has been an overall money saver for me. Literally every procedure & medication has been 50% to 90% cheaper in Spain.
> 
> ...


Thanks for your interesting insights! Did you notice when you paid Spanish taxes whether you paid taxes to the region (ie State or City) that you live in?

Thanks


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## kalohi (May 6, 2012)

There is no regional (state or city) income tax in Spain.


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## Esmeralda Dizon (Jul 19, 2018)

Do I have to be resident before I am liable to pay taxes


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## Overandout (Nov 10, 2012)

Esmeralda Dizon said:


> Do I have to be resident before I am liable to pay taxes


No, you can be liable for non-residents taxes if you are not a tax resident.


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## xabiaxica (Jun 23, 2009)

Esmeralda Dizon said:


> Do I have to be resident before I am liable to pay taxes





Overandout said:


> No, you can be liable for non-residents taxes if you are not a tax resident.


...if you own property in Spain


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## pendejo1 (Jun 21, 2018)

For the first year in Spain living with a residency visa, must you pay Spanish taxes that year if you are present in Spain under 183 days of a calendar year? This assumes you don't own any property.


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## xabiaxica (Jun 23, 2009)

*******1 said:


> For the first year in Spain living with a residency visa, must you pay Spanish taxes that year if you are present in Spain under 183 days of a calendar year? This assumes you don't own any property.


The Spanish tax year is Jan 1 to Dec 31. Tax returns are submitted the following June.

So if you arrived less than 183 days before the end of 2019, for example, you wouldn't be required to submit a tax return in June 2020, because you wouldn't be tax resident in 2019. 

Your first tax return would be in 2021


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## Accrevi (May 23, 2018)

xabiachica said:


> The Spanish tax year is Jan 1 to Dec 31. Tax returns are submitted the following June.
> 
> So if you arrived less than 183 days before the end of 2019, for example, you wouldn't be required to submit a tax return in June 2020, because you wouldn't be tax resident in 2019.
> 
> Your first tax return would be in 2021


What he said.


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## Tortuga Torta (Jan 23, 2016)

xabiachica said:


> The Spanish tax year is Jan 1 to Dec 31. Tax returns are submitted the following June.
> 
> So if you arrived less than 183 days before the end of 2019, for example, you wouldn't be required to submit a tax return in June 2020, because you wouldn't be tax resident in 2019.
> 
> Your first tax return would be in 2021


What would happen if you arrived in Spain with less than 183 days before the end of 2019 (e.g. Jul 4, 2019) but then left before 183 days had elapsed in 2020 (e.g. Jul 1, 2020)? 

You would have spent less than 183 days in each tax year, but you would have been in the country continually about 363 days--almost a year. 

Would you be considered a tax resident for 2019, 2020, or neither?


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## xabiaxica (Jun 23, 2009)

Tortuga Torta said:


> What would happen if you arrived in Spain with less than 183 days before the end of 2019 (e.g. Jul 4, 2019) but then left before 183 days had elapsed in 2020 (e.g. Jul 1, 2020)?
> 
> You would have spent less than 183 days in each tax year, but you would have been in the country continually about 363 days--almost a year.
> 
> Would you be considered a tax resident for 2019, 2020, or neither?


You woudn't be required to submit a tax return for either year, unless other factors came into play.


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## baldilocks (Mar 7, 2010)

xabiachica said:


> You woudn't be required to submit a tax return for either year, *unless other factors came into play*.


Such as you moved your home and family to Spain without having anywhere else to live, your centre of economic interest could then be considered to be Spain and you would be considered a tax resident and liable to pay taxes immediately, unless I have misread the rules and regs on this.


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## snikpoh (Nov 19, 2007)

Tortuga Torta said:


> What would happen if you arrived in Spain with less than 183 days before the end of 2019 (e.g. Jul 4, 2019) but then left before 183 days had elapsed in 2020 (e.g. Jul 1, 2020)?
> 
> You would have spent less than 183 days in each tax year, but you would have been in the country continually about 363 days--almost a year.
> 
> Would you be considered a tax resident for 2019, 2020, or neither?


The rules are "less than 183 days in a calendar year" - as you don't meet this criteria, then no tax liability.

However, be aware of what Baldi has stated - where's your "centre of economic interest?"


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## John98103 (Nov 12, 2015)

As a retired expat from the US, my understanding is that Spain taxes your worldwide income, including pension, social security, 401K distributions and capital gains (sale of property, investment profits, etc.) - 

Can I deduct any / all of that from the US federal return? 

And, will Spain effectively wipe out the US or vice-versa? 

Thanks


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## Elyles (Aug 30, 2012)

John98103 said:


> As a retired expat from the US, my understanding is that Spain taxes your worldwide income, including pension, social security, 401K distributions and capital gains (sale of property, investment profits, etc.) -
> 
> 
> 
> ...




Basically you are not taxed in Spain on the income you are taxed on in the US. Talk to a local tax person who has knowledge of the Tax Treaty. We have a local who has helped us a lot.


Sent from my iPad using Tapatalk


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## skip o (Aug 1, 2011)

John98103 said:


> As a retired expat from the US, my understanding is that Spain taxes your worldwide income, including pension, social security, 401K distributions and capital gains (sale of property, investment profits, etc.) -
> 
> Can I deduct any / all of that from the US federal return?
> 
> ...


I pay my Spanish income taxes and then that amount is deducted from the following year's US taxes. No idea if it has to be done that way, I am just doing what the accountants tell me. My Spanish income taxes are higher than my US taxes, but my Spanish property taxes in the center of Barecelona are so much lower than the property taxes I would be paying in the US (in the center of Chicago or Boston or whatever) that my overall tax burden is about the same in both countries. And, of course, health care in soooooooo much cheaper in Spain.


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## Bevdeforges (Nov 16, 2007)

skip o said:


> I pay my Spanish income taxes and then that amount is deducted from the following year's US taxes. No idea if it has to be done that way, I am just doing what the accountants tell me. My Spanish income taxes are higher than my US taxes, but my Spanish property taxes in the center of Barecelona are so much lower than the property taxes I would be paying in the US (in the center of Chicago or Boston or whatever) that my overall tax burden is about the same in both countries. And, of course, health care in soooooooo much cheaper in Spain.


No, your tax accountants aren't making a mistake. Technically speaking, the foreign tax you pay is credited against your US taxes in the year that it is PAID, not necessarily in the year it is accrued. (There are some ways around that - but they can get really messy, so your accountant is attempting to keep it simple for you.)

For taking the Foreign Tax Credit (FTC) on your US taxes, you need one or more forms 1116 - usually one for "earned income" and a separate one for "unearned income" (i.e. investments). Haven't looked recently, but there may be a separate form required for pension income, too. The principle is that you can only deduct the income taxes paid on one form of income from the taxes on that same form of income (though like most tax calculations, the actual calculations are a bit more complicated than that). 

Take a look at IRS Publication 54 https://www.irs.gov/forms-pubs/about-publication-54 and publication 514 https://www.irs.gov/forms-pubs/about-publication-514 for details and examples.
Cheers,
Bev


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