# Tax questions!



## Putrijaya (May 25, 2016)

Hi everyone!

I am an American, my wife is Chinese with a US Permanent resident card. We are in the USA now but want to move somewhere with nicer climate and due to high level of income we pay ALOT of taxes in the US. If we leave the US we can avoid paying state income tax (10%) and we would also get the Foreign Earned Income credit if we were outside of the US for 330 days a year. All in all this would save us $70,000 every year and possibly more as our income could increase. We run an online company and work remotely, and even though I could get a non-lucrative visa I would prefer not to run afoul of the law. Unless they revised the wording of this recently to allow for this?

What kind of options exist for Spain visas or residency? If we invested 500,000 EUR in property and gained residence status would we have to then pay taxes on our income earned outside of Spain?

What other options would exist for us to live in Spain full time and have a stable visa situation?

Gracias!


----------



## xabiaxica (Jun 23, 2009)

Putrijaya said:


> Hi everyone!
> 
> I am an American, my wife is Chinese with a US Permanent resident card. We are in the USA now but want to move somewhere with nicer climate and due to high level of income we pay ALOT of taxes in the US. If we leave the US we can avoid paying state income tax (10%) and we would also get the Foreign Earned Income credit if we were outside of the US for 330 days a year. All in all this would save us $70,000 every year and possibly more as our income could increase. We run an online company and work remotely, and even though I could get a non-lucrative visa I would prefer not to run afoul of the law. Unless they revised the wording of this recently to allow for this?
> 
> ...


:welcome:

Some members of this forum have obtained non-lucrative visas & declared to the consulate that they are working remotely in order to fulfil the income requirements - though the wording on the govt. website hasn't changed.

As for tax - you would have to submit tax returns here & declare all worldwide income. Whether you would pay any extra depends upon the dual tax agreement & whether that income attracts a higher rate of tax here.


----------



## Putrijaya (May 25, 2016)

Thanks for the reply. 

OK so to clarify, once we were permanent residents we'd need to pay income tax in Spain?


----------



## xabiaxica (Jun 23, 2009)

Putrijaya said:


> Thanks for the reply.
> 
> OK so to clarify, once we were permanent residents we'd need to pay income tax in Spain?


As I said, you would have to submit tax returns & declare your worldwide income.

Whether you would actually pay any tax here would depend upon the source of the income & tax rates for that source of income in Spain, as compared to any tax you might have already paid in the US.

You should speak to a tax expert who understands the tax system in both countries if you need a more precise answer, based upon your personal circumstances


----------



## Putrijaya (May 25, 2016)

Got it. Thanks! Yes it seems I need to consult a tax expert to answer this question.


----------



## AllHeart (Nov 22, 2013)

Putrijaya said:


> Hi everyone!
> 
> I am an American, my wife is Chinese with a US Permanent resident card. We are in the USA now but want to move somewhere with nicer climate and due to high level of income we pay ALOT of taxes in the US. If we leave the US we can avoid paying state income tax (10%) and we would also get the Foreign Earned Income credit if we were outside of the US for 330 days a year. All in all this would save us $70,000 every year and possibly more as our income could increase. We run an online company and work remotely, and even though I could get a non-lucrative visa I would prefer not to run afoul of the law. Unless they revised the wording of this recently to allow for this?
> 
> ...


Taxes are really high in Spain too:

Spanish tax rates and allowances for 2016.

You can find out a lot on your own about Spanish taxes through these articles:

Advoco : Free Advice Centre

Here is the Spain-US tax treaty, where you can also find a lot of information on your own. Note Article 24, which states you will not be double taxed:

https://www.irs.gov/pub/irs-trty/spain.pdf

Your state (Oregon) is serviced by the Consulate of Spain in San Francisco. They have a lot of information on their website about requirements to live in Spain:

Pages - Inicio

The embassy also has a lot of information, especially about work-related issues. Here is the embassy in the States (Washington):

Pages - Inicio

Good luck!


----------



## Putrijaya (May 25, 2016)

Thanks... great information. I need to email advoco and get some consulting done. I need to figure out what Spain would consider to be taxable income after the exemptions I would claim in the US, namely the foreign earned income exclusion.


----------



## Putrijaya (May 25, 2016)

It looks like even if I lived in Spain on a non-lucrative visa after 183 days I'd be considered a tax resident and would need to file a tax return!!!


----------



## AllHeart (Nov 22, 2013)

Putrijaya said:


> It looks like even if I lived in Spain on a non-lucrative visa after 183 days I'd be considered a tax resident and would need to file a tax return!!!


Yes.


----------



## AllHeart (Nov 22, 2013)

Putrijaya said:


> Thanks... great information. I need to email advoco and get some consulting done. I need to figure out what Spain would consider to be taxable income after the exemptions I would claim in the US, namely the foreign earned income exclusion.


Unfortunately, Advoco doesn't take new clients.

The exemptions in the States have nothing to do with the exemptions in Spain. You basically start from scratch here. The only thing they look at is what taxes you've paid in the States and deduct that from your Spanish taxes owed. You can look at the Advoco articles for a list of Spanish exemptions (business and personal).

Edit: I just saw you mean the foreign earned income exclusion. I know nothing about that. I'll take a look and see what I can find out...

Here you go: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

And here: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-requirements


----------



## Putrijaya (May 25, 2016)

OK... well that makes sense. I think I'd be paying more taxes than I do now if I lived in Spain. I lived in China before and claimed the FEIE and also didn't pay state income taxes. However, the lifestyle in China took it's toll on my sanity.

Thank you!


----------



## AllHeart (Nov 22, 2013)

Putrijaya said:


> OK... well that makes sense. I think I'd be paying more taxes than I do now if I lived in Spain. I lived in China before and claimed the FEIE and also didn't pay state income taxes. However, the lifestyle in China took it's toll on my sanity.
> 
> Thank you!


You're welcome.  Yeah, the taxes are really high here. From what I understand on the Foreign Earned Income Exclusion, you may not qualify since I think you're saying your source of income is the States, not Spain, right? Also, even if it were in Spain and the States gave you the exemption, you'd still have to pay taxes on the whole amount in Spain. So you're no further ahead, as you say. 

Yeah, I couldn't survive living in China either!  North America is much more relaxed.


----------



## kalohi (May 6, 2012)

To claim the Foreign Earned Income Exclusion you have to be tax resident in a foreign country. 

As others have said, after half a year in Spain you are tax resident and have to declare your entire worldwide income. This would be offset by any tax paid in the States, but if you've claimed the FEIE and not paid any tax, there's nothing to offset.


----------



## Putrijaya (May 25, 2016)

AllHeart said:


> Yes.


OK... so here's the question. What if on day 182 I drove to France and lived there and then came back after 6 months. I would not exceed the 183 days in Spain, but how would they know I was in another country since there is no border controls between France and Spain, or Spain and Portugal, etc?


----------



## kalohi (May 6, 2012)

The burden of proof falls to you. You would have to keep dated travel documents and rental contracts, for instance. 

However, I'm not sure what type of of scenario you're imagining where you could up and move to another European country for 6 months. Any residency permit you get from Spain would only be valid in Spain and not in any other EU country. You can visit the rest of the EU as a tourist for only 90 days out of every 180. In order for you to move to another EU country you would have to go through the proper immigration channels of that country.


----------



## Putrijaya (May 25, 2016)

kalohi said:


> The burden of proof falls to you. You would have to keep dated travel documents and rental contracts, for instance.
> 
> However, I'm not sure what type of of scenario you're imagining where you could up and move to another European country for 6 months. Any residency permit you get from Spain would only be valid in Spain and not in any other EU country. You can visit the rest of the EU as a tourist for only 90 days out of every 180. In order for you to move to another EU country you would have to go through the proper immigration channels of that country.



Yes good point. Trying to wrap my head around this. Looks like I need to find a country that isn't going to tax the hell out of me.


----------



## AllHeart (Nov 22, 2013)

Putrijaya said:


> Yes good point. Trying to wrap my head around this. Looks like I need to find a country that isn't going to tax the hell out of me.


You can always try the Middle East, where they don't have taxes. But then there's the fact that you have to live there. If you're living in a wonderful country that takes good care of its people and has a good lifestyle with a lot to offer, you'll have to pay for it through your taxes. Like with anything else, you get what you pay for.


----------



## Putrijaya (May 25, 2016)

I have been doing alot of research and am tending to agree with you. My business is such that it might only be booming for the next 5 years or so, so I am trying to find a way to safe while I can. Spain is my dream for sure. Central Oregon is beautiful but very cold and I have Reynaud's syndrome which makes it hard for me to spend time outside for more than 1/2 the year. I also get SADS in the winter. Previously I never lived farther than 30 degrees north latititude!


----------



## AllHeart (Nov 22, 2013)

Putrijaya said:


> I have been doing alot of research and am tending to agree with you. My business is such that it might only be booming for the next 5 years or so, so I am trying to find a way to safe while I can. Spain is my dream for sure. Central Oregon is beautiful but very cold and I have Reynaud's syndrome which makes it hard for me to spend time outside for more than 1/2 the year. I also get SADS in the winter. Previously I never lived farther than 30 degrees north latititude!


I've heard Portugal is easier on people with a high income. But I don't know anything about it. Perhaps you can try there? They have a warmer and sunnier climate there than Oregon, which will help both the Raynaud's phenomenon and the SADS.

My mental and physical health are a lot better here than in Canada - for many reasons. You can't put a price on good health...or perhaps you can when you consider high taxes.  Mind you, my taxes due here in Spain are the same as in Canada - zero.


----------



## Putrijaya (May 25, 2016)

AllHeart said:


> I've heard Portugal is easier on people with a high income. But I don't know anything about it. Perhaps you can try there? They have a warmer and sunnier climate there than Oregon, which will help both the Raynaud's phenomenon and the SADS.
> 
> My mental and physical health are a lot better here than in Canada - for many reasons. You can't put a price on good health...or perhaps you can when you consider high taxes.  Mind you, my taxes due here in Spain are the same as in Canada - zero.


I was initially hoping to kill birds with one stone by going overseas and paying less taxes and living in a climate more conducive to my health... 

So you are retired then? I am only 42!

Thanks for all your kind help!


----------



## AllHeart (Nov 22, 2013)

You're most welcome for the help. People help me a lot here on the forum, so I pay it forward. That's what we do here and that's what makes the forum work. 

Yes, I'm retired early due to disability. I'm 52 and was retired at 50. That's why I don't pay any taxes. Both Canada and Spain have tax allowance for disability. I'm on the Canadian government Canada Pension Plan Disability. I never thought I'd be retired this early!

There's a Portugal forum here where you can ask questions:

Portugal Expat Forum for Expats Living in Portugal - Expat Forum For People Moving Overseas And Living Abroad


----------



## Elyles (Aug 30, 2012)

Putrijaya said:


> Hi everyone! I am an American, my wife is Chinese with a US Permanent resident card. We are in the USA now but want to move somewhere with nicer climate and due to high level of income we pay ALOT of taxes in the US. If we leave the US we can avoid paying state income tax (10%) and we would also get the Foreign Earned Income credit if we were outside of the US for 330 days a year. All in all this would save us $70,000 every year and possibly more as our income could increase. We run an online company and work remotely, and even though I could get a non-lucrative visa I would prefer not to run afoul of the law. Unless they revised the wording of this recently to allow for this? What kind of options exist for Spain visas or residency? If we invested 500,000 EUR in property and gained residence status would we have to then pay taxes on our income earned outside of Spain? What other options would exist for us to live in Spain full time and have a stable visa situation? Gracias!


 see my new posting


----------

