# US citizen and Spanish citizen married couple looking for the best/cheapest way to buy a house in Spain.



## principalmusso (Jul 19, 2021)

US Citizen married to Spanish citizen here. We currently live in the USA and spend about 3-4 months per year in Spain. We are buying a house in Spain but because we both work remotely and because of my wife's Spanish citizenship we seem to have some flexibility on our fiscal residency. Per our bank (Sabadell) if we buy as US residents the morgage covers only 70% of house plus higher interest rates, and the house goes down as a second residence (even though we don't own a house in the USA). My wife could change her fiscal residency to Spain and we could get the mortgage to cover 80% with better interest rates. Likewise, for me to be on the mortgage I can get residency here pretty easily even though I'm still living in the US. We aren't really clear on what the implications of changing residency are though and don't want to do it if it ends up coming back to bite us harder than the savings we get from buying as a primary residence.

In an ideal world, we would do the paperwork of residency in Spain but continue to live in the USA mostly, usually visiting Spain for about 4 total months out of the year. We would hope the Spanish government just assumes we're living there but not be paying income taxes there since we work and pay income tax in the USA. Then we'd pay any pertinent taxes associated with the house in Spain (property tax, for example). Is this a pipe dream??

More specifically, here's what we're wondering:

-if she activates her Spanish fiscal residency, and I become a resident here as well, what are the tax implications? Right now we file jointly paying US taxes (she has paycheck withholdings and everything) and I know there are laws against double taxation but is there anything to watch out for that could screw us? Or will she and/or I just have to pay taxes as an EU resident and not pay anymore in the USA?

-if she does have to pay taxes as an EU resident, is it pretty much guaranteed she'll pay more taxes than she would in the USA? (We live in California, she makes $110k plus benefits as an employee for a company and I am self employed and make $60-70k gross, much less with expense write-offs).

-if I have my residency in Spain, will I also be expected to pay taxes in the EU?

Every Asesor and Lawyer specializing in international fiscal matters seems to be on vacation and unresponsive (gotta love Europe!) so I'm hoping someone here has some knowledge! I'm also not looking for a moral lecture; if you think this is a dirty move to try, then explain to me how I would get in legal or fiscal trouble for it but no need to make it personal.

TL;DR - US citizen and Spanish citizen married couple looking for the best/cheapest way to buy a house in Spain... wondering if we can fly under the radar by using her citizenship to be Spanish residents on paper while still living in the USA for most of the year or if we would get destroyed by taxes/unforeseen fees/legal problems by doing this.


----------



## timwip (Feb 27, 2017)

I am pretty much in the exact situation as you are. I am an American with my wife being Spanish. Eleven years ago, we bought our place in Spain; however, did not make the permanent move until 2 and a half years ago. By moving here, we changed our tax residency to Spain and, as a result, we are paying a much higher tax rate as Spanish residents. As an example, in the US were were paying around 21% tax rate and here it is around 35%

My advice would be to go ahead and buy your place in Spain now. Come to your house and work remotely less than 183 days per year. Pay the higher down payment as a non-resident. The interest rate is only very slightly higher. Furthermore, it is higher not because you are a non-resident it is because you are buying a non-primary housing. 

With respect to your immigration, you will have no problem getting residency once you are here. However, the big pain is your driver´s license. Spain does not have reciprocity with the US. As a result, you need to go through the whole process just like you did when you were 16 years old.


----------



## kalohi (May 6, 2012)

Basically what you're asking is if you can have your cake and eat it too, and I'm sure you know the answer to that. You can't pick and choose the parts of residency that appeal to you and ignore the others. This means that you can't declare yourself fiscally resident, but not be physically resident. You would be caught out on the first renewal of your residency permit (after 1 year) because you have to turn in a copy of every page of your passport. Your passport shows entry and exit stamps to Spain, and they check to see how long you've been out of the country. You're allowed a maximum of 6 months per year outside of Spain and a maximum of 10 months total in 5 years. And if the tax office catches any whiff of this they can ask for proof that you're actually resident in Spain - they onus is on you to prove it. 

As for your questions: if you are resident in Spain you first pay taxes in Spain, and then in the United States. It doesn't matter if the source of your income is from outside of Spain - as a Spanish resident you have to declare all your worldwide income to the Spanish tax man. And the US doesn't care where you live, you always have to file a tax return with them. Spain has a higher tax rate so you would almost certainly pay more tax than you do now. (That's not to mention if you'd have to set yourself up as a self-employed worker in Spain, which is a whole different can of worms.) 

I think you're going to have to bite the bullet and buy the house as non-residents. That's what you are, and you'd be able to sleep at night knowing that you've done the purchase on the up-and-up.


----------



## timwip (Feb 27, 2017)

My residency permit is for 5 years. I think it is because I am married to a citizen. Furthermore, after one year of residency, I can become a citizen. As a result, I will not ever have to renew mine.


----------



## kalohi (May 6, 2012)

timwip said:


> My residency permit is for 5 years. I think it is because I am married to a citizen. Furthermore, after one year of residency, I can become a citizen. As a result, I will not ever have to renew mine.


Better said, you can start the process to become a citizen. Be sure to leave plenty of time for it! It can take several years to be approved, then more months to get an appointment for the swearing in, and even more months to get your DNI and passport!


----------



## principalmusso (Jul 19, 2021)

kalohi said:


> Better said, you can start the process to become a citizen. Be sure to leave plenty of time for it! It can take several years to be approved, then more months to get an appointment for the swearing in, and even more months to get your DNI and passport!


Thanks for the info, both of you! Extremely helpful. Looks like we'll have to bite the bullet indeed as I'd rather pay more money toward a down payment on a house than to the Tax Man! Thanks so much for taking the time to respond.

Two follow up ?s: 
1) I've heard there was an update to the Tratado de doble imposición in 2019 that helps both Spain and USA. Do either of you have any knowledge of the ins and outs of that? Wondering if there's anything useful there but it's hard for me to understand the technical language there.
2) it appears my wife has already begun paperwork to change fiscal residency to Spain. I don't think she's gone all the way yet but I'd like to pull the plug on it asap and hoping she hasn't already gotten it. If she has, can she just "dar de baja" quickly without repercussions or has the damage been done?

What a mess!! Glad I'm getting good info on here!


----------



## timwip (Feb 27, 2017)

principalmusso said:


> Thanks for the info, both of you! Extremely helpful. Looks like we'll have to bite the bullet indeed as I'd rather pay more money toward a down payment on a house than to the Tax Man! Thanks so much for taking the time to respond.
> 
> Two follow up ?s:
> 1) I've heard there was an update to the Tratado de doble imposición in 2019 that helps both Spain and USA. Do either of you have any knowledge of the ins and outs of that? Wondering if there's anything useful there but it's hard for me to understand the technical language there.
> ...


As a response to your two questions:
1. For most people things are pretty straight-forward with respect to the treaty. As long as your source of income is pension and savings. It gets a lot more complicated, if not. I would just work with a good Spanish accountant.
2. Watch out with your wife applying for residency. Here is a key thing you need to worry about "If you have been living in Spain for six months (183 days) or more of the calendar year (not necessarily consecutively) or you have your main vital interests in Spain (for example, your family or business is in Spain), then you are classed as a Spanish resident for tax purposes. " So the potential problem would if your wife is a resident, would that be a vital family interest in Spain and pull you in?". Personally, I do not know the answer to tht.


----------



## timwip (Feb 27, 2017)

principalmusso said:


> Thanks for the info, both of you! Extremely helpful. Looks like we'll have to bite the bullet indeed as I'd rather pay more money toward a down payment on a house than to the Tax Man! Thanks so much for taking the time to respond.
> 
> Two follow up ?s:
> 1) I've heard there was an update to the Tratado de doble imposición in 2019 that helps both Spain and USA. Do either of you have any knowledge of the ins and outs of that? Wondering if there's anything useful there but it's hard for me to understand the technical language there.
> ...


Here is an alternate way to look at the tax situation, I pay 15% more as a tax resident in Spain as opposed to US. If the two of you earn say $170,000. You will pay an additional $25,500 in taxes as a result of living in Spain. However, to offset this, you will
-Not be paying rent on a US house.
-Not paying US utilities.
-Probably not need two cars, insurance, gas, etc.
-Will receive public health care for free in Spain.
-Your wife will be happy being back in Spain close to her family. (Remember-Happy wife means happy life!)
-Having been to Spain so much, you know what you are getting into.

These factors could very well off-set the higher taxes.


----------



## tardigrade (May 23, 2021)

timwip said:


> Here is an alternate way to look at the tax situation, I pay 15% more as a tax resident in Spain as opposed to US. If the two of you earn say $170,000. You will pay an additional $25,500 in taxes as a result of living in Spain. However, to offset this, you will
> -Not be paying rent on a US house.
> -Not paying US utilities.
> -Probably not need two cars, insurance, gas, etc.
> ...


Instead of the above he might be paying a higher monthly mortgage payment
Paying for high electricity prices and water prices here in Spain.
Will need 2 cars. Very expensive.
Her work should have a very good insurance policy which would also cover him.

Is it worth paying the extra 25500$ a year for Spain? 
Would the employment in the US of A be transferable here? even thru working remotely? You can not be working for a UK company if it has no representation here in Spain, why would an American company be different?

Your option is one or the other and the other may not let you work with the employment you currently have.


----------



## tardigrade (May 23, 2021)

Self employment here starts off with a small monthly payment - €60ish then ballons up to 300+ EURO a month at year 3 even if you do not earn a cent.


----------



## timwip (Feb 27, 2017)

tardigrade said:


> Instead of the above he might be paying a higher monthly mortgage payment
> Paying for high electricity prices and water prices here in Spain.
> Will need 2 cars. Very expensive.
> Her work should have a very good insurance policy which would also cover him.
> ...


I do not know the OP financial details. I was just suggesting the he do an analysis. Which costs more (1) have a household in each US and Spain or (2) just have a household in Spain and pay higher taxes. My wife and I did the analysis for our personal situation and we decided #2 was preferable.


----------



## timwip (Feb 27, 2017)

Another thing you should look at is the Guía del Retorno a España. 

Guía del retorno a España 2021 | Ayudas públicas 2021 | Loentiendo 

This is a helpful guide for Spanish citizens returning to live in Spain. When we came to Spain to live, there were some beneficial tax breaks that we received. Not sure if they still exist but it is worth reviewing this guide.


----------



## WanderingAgent (Jul 9, 2021)

How does the tax rate in Spain compare to high income earners from the US, and the addition of state taxes for individuals who have to pay them. If you live in California or New York and you are a high earner, you will pay more than 50 percent in total taxes.

So if you work remotely from Spain, you stop paying the state tax, and would have the federal 37 percent and the 6.5 ish for ss tax.. 13 for true self employed. I know only the 37 percent would count when factoring double taxation. And in the US the taxes also scale up gradually, so it isn't completely 37 percent. So it appears that the extra taxes you pay to Spain would only hit the amount before you reach the 2 highest tax brackets in the US.

The amount extra you pay Spain would potentially offset the amount you save from not paying state taxes in the states. Or am I looking at this wrong?


----------



## kalohi (May 6, 2012)

WanderingAgent said:


> How does the tax rate in Spain compare to high income earners from the US, and the addition of state taxes for individuals who have to pay them. If you live in California or New York and you are a high earner, you will pay more than 50 percent in total taxes.
> 
> So if you work remotely from Spain, you stop paying the state tax, and would have the federal 37 percent and the 6.5 ish for ss tax.. 13 for true self employed. I know only the 37 percent would count when factoring double taxation. And in the US the taxes also scale up gradually, so it isn't completely 37 percent. So it appears that the extra taxes you pay to Spain would only hit the amount before you reach the 2 highest tax brackets in the US.
> 
> The amount extra you pay Spain would potentially offset the amount you save from not paying state taxes in the states. Or am I looking at this wrong?


You really need professional advice when it comes to taxes. But I can say that you shouldn't assume that you won't pay state tax. California in particular is a real stickler about their filing obligations for ex-residents. You need to investigate the exact state in question for you.


----------



## WanderingAgent (Jul 9, 2021)

kalohi said:


> You really need professional advice when it comes to taxes. But I can say that you shouldn't assume that you won't pay state tax. California in particular is a real stickler about their filing obligations for ex-residents. You need to investigate the exact state in question for you.


I'm from a state with no state taxes so it wouldn't matter. And I only plan on avoiding staying long enough to pay taxes so that part wouldn't matter. And with other taxable assets I just don't see it being worth it to give up that amount of money.


----------

