# Taxes on US earned income while residing in Spain



## LRJen (Dec 9, 2020)

Hello everyone, I'm hoping someone might be able to help me out with this or at least point me in the right direction.

I recently became a resident in Spain, but have been unable to find work here. As such, I am interviewing with a US based company that offers remote interpreting work, which is what I did before moving. Should I sign with them, I would be working freelance 20 hours a week at $15/h. I know I need to save a certain amount of income to be able to pay taxes when the time comes in the US, but I'm unsure of how it works while residing in Spain.

*Questions:*

Since I will be paying US taxes on US earned income, do I need to pay taxes in Spain as well?
Or, should I pay taxes in Spain and then file for tax exemption in the US to avoid double taxation?
Do I need to register as an autónomo to comply with Spanish freelance regulations?

Any advice is welcomed! Also if you know of any *tax advisors* that might be able to help me with this I would appreciate it as well.


----------



## Bevdeforges (Nov 16, 2007)

The general rule of thumb is that you are considered to be working in whatever country you are physically located in while you do whatever it is you do. And, as a US citizen (I'm assuming here), you will always have to file US taxes (at least as long as you retain your US citizenship). However, there is also the US Foreign Earned Income Exclusion, so that you declare, but then "exclude" your foreign earned income from your tax calculation. Take a look at IRS Publication 54 for more information. (There is also the option to take a tax credit for income taxes paid in Spain on the earned income.)

However, the bigger consideration /complication may very well be the social insurances (health care system, retirement, etc.) which you should be paying to the country where you are resident. US employers have a tendency to just treat you like a regular employee, and it's rare that you can claim back US social security or other "payroll taxes" and state taxes can become a huge problem.

If your "employer" doesn't have a Spanish office through which to pay you, you really should look into setting yourself up as an "independent" worker, where you will have to organize your own payment of taxes and social insurances. It's a very different system than back in the US.


----------



## Moulard (Feb 3, 2017)

If you are performing the work in Spain, (ie. the keyboard is in Spain) then the income you earn from the US company will be considered Spanish sourced.

As such Spain will have the Primary right to tax the income. You will be able to use the Foreign Earned income exclusion, or Foreign Tax Credits to offset any US tax liability.

I don't know how contracting works in the US (been away too long) but If the company intends to withhold federal income tax then you can file IRS form 673 to claim an exemption if you would otherwise be eligible to claim the Foreign Earned Income Exclusion.

There is a totalisation agreement which means you would be covered by the Spanish Social Security program.


----------



## LRJen (Dec 9, 2020)

Bevdeforges said:


> The general rule of thumb is that you are considered to be working in whatever country you are physically located in while you do whatever it is you do. And, as a US citizen (I'm assuming here), you will always have to file US taxes (at least as long as you retain your US citizenship). However, there is also the US Foreign Earned Income Exclusion, so that you declare, but then "exclude" your foreign earned income from your tax calculation. Take a look at IRS Publication 54 for more information. (There is also the option to take a tax credit for income taxes paid in Spain on the earned income.)
> 
> However, the bigger consideration /complication may very well be the social insurances (health care system, retirement, etc.) which you should be paying to the country where you are resident. US employers have a tendency to just treat you like a regular employee, and it's rare that you can claim back US social security or other "payroll taxes" and state taxes can become a huge problem.
> 
> If your "employer" doesn't have a Spanish office through which to pay you, you really should look into setting yourself up as an "independent" worker, where you will have to organize your own payment of taxes and social insurances. It's a very different system than back in the US.


Thank you for the information!


----------



## LRJen (Dec 9, 2020)

Moulard said:


> If you are performing the work in Spain, (ie. the keyboard is in Spain) then the income you earn from the US company will be considered Spanish sourced.
> 
> As such Spain will have the Primary right to tax the income. You will be able to use the Foreign Earned income exclusion, or Foreign Tax Credits to offset any US tax liability.
> 
> ...


Thank you for the information!


----------

