# Investment/Tax planning advice for AMERICAN Ex-pats in Spain?



## libove (Feb 24, 2008)

Hi, it seems that most postings (all?) on this topic of investment/tax advice for we ex-pats in Spain relate to British ex-pats (and sometimes other EU).
The rules are very different for US citizens (or more generally US persons, per the US IRS, the US tax man).

Is someone else here an American ex-pat in Spain, with a sizeable investment portfolio, who has found competent tax and investment advice to manage the amount that Hacienda gets from drawing on US-based tax-advantaged investments (e.g. 401k and IRA plans), as well as to avoid paying Spanish inheritance/successions tax upon inheriting US-originated assets from a US person (in other words, the Spanish tax law would make the money subject to inheritance tax on the basis of the recipient's Spanish tax residence, despite the moral failure that the money never had anything whatsoever to do with Spain, and won't up until the moment that the inheritor chooses to bring any of it to Spain for use)?

US-based advisors are reticent to provide investment advice to US ex-pats now, due to complexities brought on by the ill-considered FATCA law.
The two Spanish advisories (both London-originated) with whom I've spoken seem to only structure their fees based on commissions they get from selling insurance based products. I need to look into this more deeply (and I am doing so) but that's so different from how all of my investments have always been structured in the US that it doesn't "feel" right to me at first look.

(I note, by the way, that I actively do NOT wish to give control over my investments to an advisor. I'm looking for advice to manage tax implications, and yes an annual portfolio review regarding global markets, but I don't plan to permit the investor to actually make investment decisions, have control over the money/assets, etc).

Thanks in advance for contacts from either US ex-pats or "US persons" (anyone, regardless of nationality, who is fully exposed to the US tax system, e.g. have a US "Green Card"), with substantial assets in the US, and who has found competent advice in managing the interactions between the US and Spanish tax systems.

Please feel free to reach out to me privately as well.


----------



## surabela (May 13, 2016)

Greetings. Have you gotten any responses? We are looking for the same information. Thanks.


----------



## libove (Feb 24, 2008)

surabela said:


> Greetings. Have you gotten any responses? We are looking for the same information. Thanks.


As of yet, nothing useful


----------



## abacus200 (Feb 7, 2018)

Ugh... I'm looking for similar info. Really bothers me that the governments of the world make things so extremely difficult for their respective citizens who want to live in another country. There's no government resource that I can find about anything involving taxes in these cases. 

Aba


----------



## skip o (Aug 1, 2011)

"who has found competent tax and investment advice to manage the amount that Hacienda gets from drawing on US-based tax-advantaged investments (e.g. 401k and IRA plans)..." 

There aren't many Spanish accountants who are going to be very familiar with the US tax system. My understanding is that retirement plans like 401ks and IRAs do not need to be reported on the 720, and do not need wealth taxed. HOWEVER, when you withdraw from those accounts, you need to report it as income on your Spanish income taxes. Also, I wouldn't be surprised if many Spanish accountants disagree on how to treat your US retirement accounts. 

"as well as to avoid paying Spanish inheritance/successions tax upon inheriting US-originated assets from a US person (in other words, the Spanish tax law would make the money subject to inheritance tax on the basis of the recipient's Spanish tax residence, despite the moral failure that the money never had anything whatsoever to do with Spain, and won't up until the moment that the inheritor chooses to bring any of it to Spain for use)?"

I am under the impression that when you are a tax resident in Spain, there is no way around the hefty inheritance tax.

If you find any interesting info from the Spanish accountants you end up talking to, it would be great if you post here about it.


----------



## Ifn (Jan 29, 2017)

Yeah, me too. I will be liable for the wealth tax after next year. It is a muddle.


----------



## martinPH2 (Feb 21, 2018)

I will be in similar shoes soon and due to the complexities you describe above my approach will be as follows:

- I will keep all my assets (post-tax and pre-tax investments) in the US investment institution (I manage them myself)
- I will be transferring my annual withdrawals to Spanish bank (more on these below)
- I am fairly familiar with US tax laws so that side will be easy
- I plan on getting advise from some expert in Spanish tax law. This person needs to know just the tax system and have knowledge of concepts like capital gains, dividends, interests, ... but does not need to be an expert in investing. Lots of info is available on line but I want to get into the gray areas.

The main thing is how to withdraw from the investment portfolio to maintain it in a healthy state and to minimize the taxation. This I plan on deciding myself based on all the information I have from the above.

I don't think that it is possible to find anyone who is an expert in multi-country taxation and at the same time is an investment expert fully understanding your special needs. If such person/service exists it will probably be uber-expensive. I also enjoy taking reasonable risks myself 

Cheers


----------



## torvista (Apr 13, 2013)

I am a british ex-pat, here for 20 years with my own business.

The concept is the same for everyone, whether US or UK.
If you are tax resident in Spain, Hacienda want to know about everything you have worldwide. Period. That is the damned 720 and you will to to hell if you don't declare it in the first tax year.
I understand the moral indignation of "what right do the spanish govt. have to my lifetime of assets and work in the US", but tough, their laws, like it or lump it, and the fines are literally ruinous.

Similarly for worldwide income, wherever it comes from, you have to declare it.
If you have already paid tax on it elsewhere, you can offset that in Spain on your declaration.
Where I think it gets more sticky for brits is the level (high) of financial communication there is between Spain and the UK to nail anyone that is hiding anything.
They are making big efforts to do all this with technology to get Joe Public, much easier than a real investigation into what a single politician has stolen.


----------



## Ifn (Jan 29, 2017)

martinPH2 said:


> I will be in similar shoes soon and due to the complexities you describe above my approach will be as follows:
> 
> - I will keep all my assets (post-tax and pre-tax investments) in the US investment institution (I manage them myself)
> - I will be transferring my annual withdrawals to Spanish bank (more on these below)
> ...


Do not fore sake us Americano. Whatever you find out, let us know.


----------



## martinPH2 (Feb 21, 2018)

torvista said:


> I am a british ex-pat, here for 20 years with my own business.
> 
> The concept is the same for everyone, whether US or UK.
> If you are tax resident in Spain, Hacienda want to know about everything you have worldwide. Period. That is the damned 720 and you will to to hell if you don't declare it in the first tax year.
> ...


I hope I was not misunderstood as suggesting to work around paying taxes where applicable. I barely was mentioning that I plan on getting expert advice from each specific area separately and combine it myself to create the best financial plan that provides necessary funds and minimizes taxation.


----------



## peterbk (Oct 14, 2015)

My situation is very similar to that of libove (the OP). After a lot of googling, reading and an email exchange with a Spanish bank, it seems clear to me that if you are a resident in Spain you will have to pay Spain's income tax on your 401k distributions, Social Security distributions, any other income and your capital gains and dividends. I have not been able to determine whether Roth IRA distributions are taxable by Spanish authorities even though that "income" is tax-free in the U.S.

Because Spain's taxes are so unfavorable for me and my wife, between income tax, worldwide assets tax, capital gains (and, potentially, inheritance tax), we have decided to spend less than 184 days per calendar year in Spain and avoid creating any of the scenarios that could result in Spain considering us Spanish residents. (We will spend the other 6 months of the year in Mexico.) As long as you spend less than 184 days in Spain, don't own property or a business their, don't have significant investments there, don't have dependents that live there, and don't have other factors that would make Spain appear to be center of your vital interests, you do not have to pay Spain's taxes. (I got confirmation of this from a rep at a Spanish bank when I asked if having a checking account in Spain would, by itself, result in us being considered residents. The answer, fortunately, is No.)

If you have your heart set on living in Spain year-round, then limiting yourself to 183 days won't be a good solution for you. Time will tell if that plan works for us. (We hope to start it later this year.)


----------



## gvb (Apr 1, 2017)

*US Social Security*

In reply to peterbk: We (US couple, mid-60ish) are planning to move to Spain this year and I am doing tax planning now. We will live in Spain less than 183 days this year so won't have to worry about Spanish taxes until after 2019. We both have US military pensions which are not taxable in Spain (although used to calculate our tax bracket) plus a small private pension and I will be getting Social Security by then. I have tried to get clear guidance of what Spain will tax but have not gotten far. I have read the tax treaty several times, and as far as I can decipher besides from the military pensions, Spain will tax our private pension. As to Social Security, I have heard both ways, but as I read the tax treaty, they shouldn't. Article 20 reads:

"(b) social security benefits paid by a Contracting State to a resident of the other
Contracting State or a citizen of the United States may be taxed in the first-mentioned State." 

Substituting US and Spain, I get;
"(b) social security benefits paid by a Contracting State (US) to a resident of the other Contracting State (Spain) or a citizen of the United States may be taxed in the first-mentioned State (US).

But can anyone who actually pays tax in Spain really confirm that? I am going to post this as a separate question, along with the question about how credit for tax paid on our private pension and social security to the US is figured and credited against our tax due in Spain. What a mess this all is.

It may very well be that we decide not to live in Spain more than 183 days in any calendar year as well, since we will still hove a tax home, property, and assets in the US.

Gail


----------



## peterbk (Oct 14, 2015)

LIBOVE: did you ever discover answers to your questions about Spain's taxation of 401k/IRA and inheritance? I have the same questions and have been similarly frustrated at not finding answers. Thanks in advance for sharing!


----------



## Elyles (Aug 30, 2012)

gvb said:


> In reply to peterbk: We (US couple, mid-60ish) are planning to move to Spain this year and I am doing tax planning now. We will live in Spain less than 183 days this year so won't have to worry about Spanish taxes until after 2019. We both have US military pensions which are not taxable in Spain (although used to calculate our tax bracket) plus a small private pension and I will be getting Social Security by then. I have tried to get clear guidance of what Spain will tax but have not gotten far. I have read the tax treaty several times, and as far as I can decipher besides from the military pensions, Spain will tax our private pension. As to Social Security, I have heard both ways, but as I read the tax treaty, they shouldn't. Article 20 reads:
> 
> 
> 
> ...




When you pay taxes on income in the US, including on IRA withdrawals, you don’t pay taxes on the same here. In RE to SS, the same applies. Once we pay taxes in the US we apply to the IRS for the form 8808 that states that we pay taxes in the US yada yada... This is only if the Spanish government asks for it, but we need to have it annually. It costs 65$ per taxable person. We have been through all of this. 


Sent from my iPad using Tapatalk


----------



## XTreme (May 17, 2008)

I think Sally at Valencia Expats may be able to advise on this.

Worth giving her a call!


----------



## rob90254 (Mar 2, 2020)

Greetings everyone -

This is my first post in the Expat Forum. While I have quickly reviewed the terms and conditions of membership, please let me know if I have failed to follow forum rules...

First, I recognize that this thread is beginning to age. However, I'm hoping this means that those who have gone before me have knowledge to share. This seems to be the thread with members who have dealt with the issues that I’m about to encounter…

My wife (who is originally a Spanish citizen) and I (a US citizen) moved from the US to Spain in early 2019. We know that we qualify as tax residents for 2019. And likely, we qualify for the wealth tax. We're aware of the Modelo 720 requirement and other tax dates. Neither of us work in Spain, we don't own property in Spain and we only have a Spanish bank account to which we transfer Euros converted from US dollars a couple times year. All of our investments and income are in the US. Similar to the Original Poster, I'm not looking for investment advice or assistance with my US taxes; I'm comfortable addressing both on my own.

I have some basic (and some more complex) questions regarding Spanish tax situations. Online research has either yielded no answers, wildly different answers or, in a few cases, answers that demonstrate a complete misunderstanding of the topic. We’re going to meet next week with a Spanish tax advisor who claims to have knowledge of US and Spanish tax situations but I thought I’d post here beforehand.

Here are some of my questions. Any feedback that you all can give would be great. I’m happy to post what I learn as well. By the way, I’m not sure that I have any rhyme or reason to how I ordered the questions but they’re items that daily roll around my consciousness. All of these questions assume that I qualify as a Spanish tax resident with only US income. Also, I’ve made up numbers because I’m looking for conceptual answers.


I believe that USD to EUR conversions are based on the European Central Bank rate as of December 31, 2019. I assume this rate also applies to all Spanish tax numbers when filing the 720 and returns (members, please confirm).
I have US income (it could be any income but we’ll assume earned income for this question) that has a total tax liability of US $20,000 but would have a tax liability of €40,000 in Spain. Obviously, I owe the $20,000 (~€17,800) in the US. In Spain would I have to also pay an additional €22,200 (the difference)?
The US-Spain tax treaty and tax credits have me confused. Could it be so awesome as this (using my example above):

Spain says that I owe them an additional €22,200 (~ $24,940) tax above the tax I paid on the income earned in the US.
Am I allowed to carry (or subsequently file for) a tax credit of $24,940 against my US tax liability?
If I misunderstood my liability in the above example than this example is moot, I know.
When you start including (US only) earned income, capital gains, dividends, etc. are there any US credits for taxes paid to Spain?

Spain has a hard deadline every year for income tax filing (versus the US where only the tax payment has a hard deadline). Is it better to complete your US taxes before completing Spain or vice versa? Please clarify the advantages and disadvantages of one versus the other.
Does Spain recognize carryforward capital losses? If I have a US capital gain of $30,000 in 2019 but a carryforward capital loss of $100,000 then I don’t pay any US tax on the gain but I instead reduce my carryforward loss going forward. How does Spain recognize the US gain/loss against tax due?
Are IRA and ROTH IRA accounts included in the Modelo 720? Are they included in the wealth tax? Does Spain recognize the US tax advantage of ROTH IRA distributions or do they tax distributions like ordinary income?
I often read about Spain’s generous tax deductions but I never see specific deduction examples. Can anyone offer any examples? I’m also confused about how Spain views US income deductions and/or tax credits. This might tie into my previous question about which return is better to file fist.

I suppose I should stop posting additional questions until I see whether I receive any replies. Our move to Spain was predicated on some medical issues with my wife’s parents so we didn’t have adequate time to consider the tax consequences. I’m not trying to avoid taxation but we’ll move back to the US this year (or at least limit our Spain time to less than the 183 days/year) if Spain is requesting too much taxation on our US income and assets from 2019.

Gracias in advance for any replies.

Rob


----------

