# Tax questions from potential American expat



## Timoteo7 (Feb 15, 2016)

I am an American interested in settling permanently in Spain through the 'Residence Visa for Retirees.' I have researched taxation in Spain, and want to confirm my understanding of a few critical issues before proceeding further.

Please let me know If I'm wrong about any of the following three assumptions. 

(1) Spain has a wealth tax, but I gather that the wealth tax is only enforced in some areas. (In Catalonia, for instance, but not in Madrid.) An expat could expect to pay it in Barcelona, but not in Madrid. 

(2) The wealth tax is a controversial 'moving target,' and may be eliminated.

(3) Spain collects significant state and regional taxes for those residing in Spain more than 183 days/year, but these taxes are collected IN ADDITION TO the taxes I would pay to the IRS as an American citizen abroad.

Thank you!


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## snikpoh (Nov 19, 2007)

As I understand it, wealth tax is collectible everywhere. However, it only 'kicks in' if you have assets of over 700,000€ not including your main residence. You get an additional 300,000€ euros on your main residence - and that's per person. So, a couple, would need to have assets of over 2€million to have to pay any tax.

I think the tax will always be there as it would take a change in law to remove it or have it re-instated. What's more likely is that the levels may be varied.


As an American living in Spain, it's my understanding that (by Spanish law) you have to pay tax on your world-wide income but also pay tax in America. If there is a double taxation agreement between Spain and America, then you may well be able to offset one lot of tax against the other. Have you read this https://www.irs.gov/pub/irs-trty/spain.pdf


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## ExpatWannabee (Jul 6, 2011)

Actually, there is no wealth tax in Madrid. Well, technically there is, but the government gives you a credit equal to the amount tax owed so in practice you don't pay taxes. Ditto for Valencia. The tax was supposed to be a temporary measure for 2011, but given Spain's dreadful deficits at all levels of government, it's hard to see it being removed in the next decade or two.


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## skip o (Aug 1, 2011)

I agree that the wealth tax will stay. Spain has really high unemployment, tons of empty properties, low wages etc, and they like to continue the same bad policies that do nothing to help.

My recommendation is that you talk to many accountants about your situation because another thing that Spain likes is ambiguous laws that have high fees for breaking them, and very few acountants agree on how to navigate that minefield.


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## Elyles (Aug 30, 2012)

Timoteo, there is a tax treaty between the US and Spain that prohibits having to pay tax twice. We have a group we use here as well as our US accountants. Social Security is not taxed here and not considered income. It is actually a very easy system to follow and doesn't sting the American taxpayer all that much.


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## Bevdeforges (Nov 16, 2007)

Hop on over to the Expat Tax section here for more information about the US tax obligation. Expat Tax - Expat Forum For People Moving Overseas And Living Abroad Just ignore the more political threads and comments.

In a very simplified form, once you are resident in Spain, your "primary" tax obligation is to Spain (i.e. your country of residence). Then, you still have to file US income tax forms every year (that your worldwide income is above the threshold for your filing status) and you may well have to file FBARs and some "extra" forms if and when you have significant investments and/or other financial holdings outside the US.

What you pay to Spain in income tax (only "income tax" - not wealth or any other sort of tax) is directly applicable as a "foreign tax credit" against your US income taxes. There is also the US-Spain income tax treaty which should indicate whether you pay taxes on your pension income to Spain or to the US.

Anyhow, drop on over to the Expat Tax section of the forum if you have other questions on your US taxes or tax obligations.
Cheers,
Bev


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## Timoteo7 (Feb 15, 2016)

Thanks for the responses, one and all! I see that I have more homework to do, and shall click over to the forum mentioned by Bevdeforges for more study. 

With gratitude,

Timoteo


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## snikpoh (Nov 19, 2007)

ExpatWannabee said:


> Actually, there is no wealth tax in Madrid. Well, technically there is, but the government gives you a credit equal to the amount tax owed so in practice you don't pay taxes. Ditto for Valencia. The tax was supposed to be a temporary measure for 2011, but given Spain's dreadful deficits at all levels of government, it's hard to see it being removed in the next decade or two.




There absolutely is wealth tax is Spain - it's just that the level it kicks in at doesn't affect most people. I don't know of this sort of credit being given (can you provide a link please).

Friends of ours recently decided to become non-resident due to the hefty wealth tax bill that was coming there way!!!


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