Not becoming a tax resident.

If you look at the rules which determine if one is resident then ones family living in spain usually means one is considered as being resident.

I would suggest you seek professional advice

I was in this position for a number of years. I didn't file in Spain, and did file in the US, and did not have any problems. I recommend keeping a copy of your airline reservations and boarding passes with your tax information, as well as copies of your US return, showing you declared in the USA, in case you need them. In the unlikely event that you do have a problem, contact a Spanish asesor to respond. They are relatively inexpensive. I pay 80 to 100 euros a year to have taxes completed and filed in Alicante, where I am now a tax resident.

Just to clarify my case, my wife is a Spanish national and was working and declaring in Spain during this period. We filed as married filing separately. i mght add that I was unable to find a professional with US/Spain experience in Alicante.

claxnes wrote:

I was in this position for a number of years. I didn't file in Spain, and did file in the US, and did not have any problems. I recommend keeping a copy of your airline reservations and boarding passes with your tax information, as well as copies of your US return, showing you declared in the USA, in case you need them. In the unlikely event that you do have a problem, contact a Spanish asesor to respond. They are relatively inexpensive. I pay 80 to 100 euros a year to have taxes completed and filed in Alicante, where I am now a tax resident.

Thanks for the response. I will for sure be keeping all records etc.

In terms of the unlikely event of a problem........ Will having kids in an expensive private school trigger any checks to create a problem? We were planning to pay school and villa via our US account and not even hold a Spanish account. Likewise with our private health insurance. I got to wondering whether a private school has to report its kids and parents details to anyone.

Also when you did finally file in Spain did you then claim initial residency and not mention previous years?

Thanks for the input again. I am also trying to find a lawyer/accountant who has real expertise in the whole " center of vital interests" decision tree debate.

Can't answer the first question, as my kids all went to public schools. My guess would be no. Generally, the Spanish tax system is much simpler than the US, with less write offs, so I doubt that info would be reported to hacienda. As for declaring initial residency, I also don't know as  our Spanish accountant handles our Spanish returns.  However in my case, I did work for the Spanish government from 2002 til 2005, then returned to the US, and finally retired here 6 years ago. So I have been in and out of the system. There was one year where I forgot to declare income (a grant). Actually, I didn't know I had to declare it. I had to pay a fine and wife was angry about it. I don't think it was too much, but it was long ago and I dont remember.

Take professional advice.  Listening to others who got away with possibily not being legal is really not a good way to go

But it is your life

Johncar wrote:

Take professional advice.  Listening to others who got away with possibily not being legal is really not a good way to go

But it is your life

Yes no doubt that's the correct thing and I will do it and post here to say what I heard. Can't see any high earners or wealthy ever sending their kids to private school and university in Spain if there isn't a legal way around this.

So update on this: I spoke to a recommended lawyer in Madrid today for a good bit and I am good to remain a non-resident as per the US-Spain tax treaty and so is my wife. He is putting a plan together to ensure I meet all the requirements to adhere to the treaty and any tie-breakers in the unlikely case of it being an issue many years in the future. This will include keeping permanent home in US, job in US and finances in US and remaining a US tax resident. Apparently in reality he has never seen this ever come up as an issue with the US and told me not to worry about it.

You cannot pay water, electricity, trash, natural gas, phone or local health insurer bills, so probably also not local schools using an American bank account. You really need a Spanish bank for that. Nor can you use another European bank account (yet). The reason is that they require direct debits. Rent payment from abroad, if you have a landlord that doe snot require direct debit (recommended!) is possible if your use a service like Transferwise which gives you a virtual IBAN (European) bank account to pay from, but one cannot pay direct or the addressee will be charged serious fees here and it is also a set up for serious issues like money lost for weeks or forever. Spanish banks are the pits. They are not very modern in technology, well behind with thr rest of Europe. There is some hope that since January this year they may catch up a bit but I would first watch and see and their fees remain outrageous. Also, the banks in Spain report any money movements to the Spanish tax authorities. Be careful if you send your wife money from your account and your names differ. That would be asking for trouble. As to getting an assessor, I never heard of one charging a mere 80-100 euro annually. Commonly they charge 50-60 per MONTH if the work is not too complicated. Considering all the work they have on your return it makes no sense you get good work for 80-100 annually.
One thing to keep in mind is that if you get in trouble in Spain with Hacienda, the Spanish IRS, they will have no scruples to confiscated your Spanish bank accounts without notice, so it is not wise to have large amounst of money n Spanish bank accounts. No other country has as near lawless a tax authority. Bear in mind as well that Spain has the unusual regime that the moment you own at least 50,000 euros in assets WORLDWIDE, they consider you to be taxable, a very uncommon approach compared with the rest of Europe. It is why so many British expats left the country.
Make sure though to also remain a tax resident in the USA for another reason. Te USA with its horrible unique global taxation regime (Fatca etc) especially inspects anyone registered as expat so living abroad. It opens a can of worms and a lot of extra costs. And if your employer doe snot pay the dual returns to file then, you are at least our of another $700 year, or even far more if it is complex.
So get professional advice on both sides of the ocean and do not just take a regular assessor in Spain but one handling US expats for sure. Same in the USA where you will need a US CPA handling US expats.
As to playing Russian roulette with Hacienda, bear in mind they have you guys on record with every expenditure but supermarket purchases. In Spain, with any online purchase or local service one needs to provide one's Spanish tax id (the famous NIE).
And absolutely do not just hire a lawyer. Lawyers have  little knowledge of the intricate financial, especially tax, aspects of one's life. They may be helpful with certain legalities but a tax expert is far ahead of them. It is a different field of expertise.

Black Rabbit,    the professional who has advised you hopefully is competent in Spanish law to do so.   However from my knowledge of tax law in spain the advice sounds a little hit and miss

If you decide to take the route suggested I would get the opinion in writing with a guarantee that if AEAT question it they will provide free any assistance you may require and that they will pick up any penalties, fines, costs etc

In your position I would arrange a consultation with an AEAT tax inspector for you and your adviser, to get their blessings  on the scheme proposed.

   Better safe than sorry

The US/Spain tax treaty is available online and is relatively clear on this matter. We are in a similar situation; all of our income originates in the US, we are here in Spain on a non-lucrative visa, and our kid is in a private school.

We also consulted with an attorney who served on the team that drafted the update to the US/Spain tax treaty (said update is still sitting in the US Senate; the Obama Administration negotiated it and submitted it, and it's been stalled ever since, which is a shame; reasonable clarifications on various tax matters, such as pensions and IRAs and 401K plans and so forth really aren't a partisan issue, IMO).

She pointed out that because we have a permanent home available to us in the US, and the majority of our finances are there, we remain tax residents of the United States.

The treaty is clear enough for non-lawyers to understand. In Article 4, Section 2, it specifies people who are in our situation- seemingly tax resident in both nations, how does the treaty decide which nation we are "tax resident" in?

2(a) quite clearly lays it out. You're tax resident where you have a permanent home. If you have a permanent home in both nations, then you are "deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests)"

Thus, if you are keeping a home in the US (note- many interpretations of this indicate that you *cannot* rent that home out, because then it's not "available to you") and a majority of your money is there, you are tax resident in the United States, not Spain.

There is an IRS form you can file, IRS Form 8802. When you file that, the IRS will send you a certification that says you are tax resident in the US. You can take that to Hacienda (the nickname for the Spanish tax agency) and declare that you're not tax resident in Spain.

I haven't quite gotten through this process myself but my understanding is that even with that, you might still have some *declarations* that you must file with Spain; however, that's considerably different than actually being a tax resident. (It's similar to if you maintain a bank account in Spain, and the balance at any point during the year goes over the equivalent of 10,000 USD, you have to file a declaration of the account- but it's with the Treasury Department, not the IRS. My advice is just keep less than ten grand in your account, makes life easier.)

Anyway, what your lawyer told you tracks exactly with what ours told us. Of note is that there are some taxes (capital gains for personal investments being the most notable) that, if you're a tax resident in the US only, the treaty specifies that Spain won't tax you on them.

However, despite all the words that the American laws say you still have to abide by the Spanish laws too. That quite clearly states living in Spain you will also have to fill out the obligatory tax forms. Which one is dependant on your status in Spain.
https://www.agenciatributaria.es/AEAT.i … icio.shtml

RibeiraSacra wrote:

However, despite all the words that the American laws say you still have to abide by the Spanish laws too. That quite clearly states living in Spain you will also have to fill out the obligatory tax forms. Which one is dependant on your status in Spain.
https://www.agenciatributaria.es/AEAT.i … icio.shtml

Well, yes, like we said you have to file some declarations, too.

But it's important to note that much of what we're discussing aren't "just American laws". The US/Spain tax treaty isn't only American; it's Spanish, too, and thus what it says in it about taxation is also the law in Spain as well as the US.

Sorry but your post (12) was rather one sided. Written from an American view point.
Hence my quick post.

IANAL and I doubt if you are and I doubt if you have faced Spanish bureaucracy. I have, far too many times. It will be the Spanish bureaucracy that will win when you live in the country.
You have not explained several issues.

1) I the double taxation agreement I still cannot find anything that says that when you spend more than 183 days a year in Spain, you are exempt from filing various tax forms.  From what you are saying the rest of the family will be in Spain longer than that. Where is that stated in the agreement?
2) The tax treatment for different classes of income, I expect, vary in Spain and in the U.S. What are they?
3) Your family will be classed as tax residence. The Spanish will never believe they have no income during that time.
3) Reading post12, I feel you are perhaps going to make a huge  mistake and that  if there are zero taxes owed in the US you do not need to complete any Spanish tax returns. That is not true. If you are working outside of Spain (overseas) it is likely that you meet the filing requirements to file a tax return and must do so. Read point 1.

To live in Spain you have to have a visa of some sort. To obtain that you have to have to meet certain requirements. I hope that you and the family got those issues sorted out.

The agreement you refer too was written in 1990.  I understand a new agreement was signed in 2013. I cannot established if that agreement has been ratified by both counties. If that is the case then the older version is still in place. Since that time, especially over the past 5 or so years, Spain has made many changes to the way it can tax those from outside of the EU. It has even tried to change things for those who come from other EU countries. But have had to rescind those changes because the EU said they had too.
A link to the 1990 agreement.
The agreement as publish in Spanish law.

Oh BTW Hacienda is not a knick name.

RibeiraSacra wrote:

Sorry but your post (12) was rather one sided. Written from an American view point.

It's an American writing to another American about the tax treaty between America and Spain. What would you expect?

1) I the double taxation agreement I still cannot find anything that says that when you spend more than 183 days a year in Spain, you are exempt from filing various tax forms.  From what you are saying the rest of the family will be in Spain longer than that. Where is that stated in the agreement?

That's not what I said. I said the opposite, that indeed there might still be a number of declarations and forms to fill out.

The question is for whether or not someone will be declared to be TAX RESIDENT of Spain while in a certain set of circumstances.

The US/Spain tax treaty makes it very clear that if an individual has a permanent home in both nations that they will be TAX RESIDENT in the nation where most of their "personal and economic relations are closer".  Article 4, Section 2.

Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting
States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he has a permanent home
available to him; if he has a permanent home available to him in both States, he shall be deemed
to be a resident of the State with which his personal and economic relations are closer (center of
vital interests);

3) Your family will be classed as tax residence. The Spanish will never believe they have no income during that time.
3) Reading post12, I feel you are perhaps going to make a huge  mistake and that  if there are zero taxes owed in the US you do not need to complete any Spanish tax returns. That is not true. If you are working outside of Spain (overseas) it is likely that you meet the filing requirements to file a tax return and must do so. Read point 1.

Again, you are missing the point. The US and Spain have a treaty that works to clarify exactly these points. In many cases, people can be living more or less full time in Spain, but because they have a permanent home in the US as well has having most of their money there, they are NOT tax resident in Spain.

The opposite is also true. A Spaniard can live in the US, but if they also have a permanent home in Spain and most of their money is in Spain, they are not tax resident in the United States.

None of this means that someone is free and clear of all taxes, and that was never stated; but obviously if you are not tax resident in a nation, your tax liabilities are going to be much lower than if you are.

Regardless, this advice is not only published in the tax treaty, it also matches what two of us have been told by Spanish tax attorneys. My attorney is an expert on the situation, since she was one of Spain's representatives on the team that worked out the update (which is NOT in effect yet) to the tax treaty.

So I talked to an attorney at one of my UK clients today who does a lot of work placing executives around the world. He said 100% with advance notice you can basically choose whether or not to be a tax resident of Spain based on how you structure your area of "vital interests". This applies of course to people who have the means to do so by keeping a permanent home, finances, outside Spain etc and its called good tax planning.

He also said its applicable to many countries not just the US. This makes total sense to me as no way are people buying homes for multi million Euros in the Costa Del Sol to then fall under the global wealth tax laws. They would just buy homes in SoF or Portugal instead if there was no work around. Likewise there are many Spanish citizens living in Florida with kids in US schools/universities who remain non US tax residents out of choice.

Hello,
I just became a legal Spanish citizen as well as my native US citizenship and did much research on what you talk about. I spoke to lawyers in NY and Barcelona.
Where you spend 183 days a year, and have your financial interests seems to be the most important factors. However, when you go in and out of Spain, they often still count the days you left as days in spain.

Here is an attorney who helped me free of charge, with basic advice and who seemed very knowledgeable.
[email protected]

Robert Chemtob

From your posts you fully understand that without a fiscal number you cannot get anything in Spain. Fiscal number means you are in the tax system.
That is my final bit of advice  to you on the matter.

RibeiraSacra wrote:

From your posts you fully understand that without a fiscal number you cannot get anything in Spain. Fiscal number means you are in the tax system.
That is my final bit of advice  to you on the matter.

Again, nobody has suggested that someone wouldn't be in the tax system.

What has been pointed out is that "being in the tax system" and "being tax resident in Spain and therefore required to pay taxes" are two different things.

Plainly, Spain knows that someone on a non-lucrative visa is living here. There's the padron, residency cards, etc.

But that does not automatically make one a tax resident of Spain. Normally, 183 days or more a year of residing in Spain does, but not in all cases- which is what the tax treaty specifically says, and what we are discussing.

I have been in a similar situation as you and can shed some light on this matter. According to Spanish law by having your family in Spain, even temporarily, you are a fiscal resident in Spain and are supposed to pay taxes. However,  you do not have to do your income tax there if you can prove the Spanish government that you are a fiscal resident in the USA. To do so, you have to fill out form 8802 for the years under discussion, to have the treasure department to certify you as a US fiscal resident. You will have attach a letter to the form to explain the reasons you deserve to be US fiscal resident. You then keep the certificate in case you are required to present it by the Spanish government.  Good luck!

Jose Maldonado wrote:

I have been in a similar situation as you and can shed some light on this matter. According to Spanish law by having your family in Spain, even temporarily, you are a fiscal resident in Spain and are supposed to pay taxes. However,  you do not have to do your income tax there if you can prove the Spanish government that you are a fiscal resident in the USA. To do so, you have to fill out form 8802 for the years under discussion, to have the treasure department to certify you as a US fiscal resident. You will have attach a letter to the form to explain the reasons you deserve to be US fiscal resident. You then keep the certificate in case you are required to present it by the Spanish government.  Good luck!

Thank you Jose for the clarification, this is exactly what my lawyer told me.

My assumption is also that no proactive steps are needed if one continues for file US taxes and remain a US tax resident. In other words no Spanish tax filing needed period unless you own a home and/or income derived in Spain. Basically you are a tourist for tax purposes unless you own assets like a home then you file as a non resident.

The 8802 is required in case of being asked/audited and being required to show proof by Spain at a later date?

blackrabbit wrote:

Jose Maldonado wrote:

I have been in a similar situation as you and can shed some light on this matter. According to Spanish law by having your family in Spain, even temporarily, you are a fiscal resident in Spain and are supposed to pay taxes. However,  you do not have to do your income tax there if you can prove the Spanish government that you are a fiscal resident in the USA. To do so, you have to fill out form 8802 for the years under discussion, to have the treasure department to certify you as a US fiscal resident. You will have attach a letter to the form to explain the reasons you deserve to be US fiscal resident. You then keep the certificate in case you are required to present it by the Spanish government.  Good luck!

Thank you Jose for the clarification, this is exactly what my lawyer told me.

My assumption is also that no proactive steps are needed if one continues for file US taxes and remain a US tax resident. In other words no Spanish tax filing needed period unless you own a home and/or income derived in Spain. Basically you are a tourist for tax purposes unless you own assets like a home then you file as a non resident.

The 8802 is required in case of being asked/audited and being required to show proof by Spain at a later date?

The 8802 is the IRS form that you use to request the Certificate of Residency (https://www.irs.gov/individuals/interna … -residency)  which is IRS Form 6166. That form, the 6166, is the important one, because it is the biggest thing you'd use to defend yourself to Spain if they come to you and say "hey, you're living here and not paying taxes, that's against the law"...

Your response then is "nope, we're not tax resident in Spain even though we've spent XXX days here" (or "own a home here", or whatever) because of the tax treaty, and then you use the 6166 certification to back up that assertion.

IF Spain wants to, they can challenge that, and then we might have more burden of proof (bank accounts, etc) to show that under the tax treaty, the tiebreaker goes to the US, so to speak.

blackrabbit

According to Spanish law you become a tax resident once you life 183 days a year in Spain. However, there are some requirements according to US you can also meet. In these case, you have to look at the double taxation treaty, but best thing you can do is get legal advice from a firma like Goy Gentile. They are experts in Us-citizens in Spain.

This thread is very intetesting and I hope that expat keeps it alive for some time in the future. Just a quick reply to paper detectives post, I do pay 80 or 100 euros for my tax return to be completed and submitted to hacienda every year, but my return is pretty simple, just one source of income from a US retirement account. I do not believe I would pay much to HR block in the US to file my return. I would be interested in knowing how the filings turn out for black rabbit.

Blackrabbit,

The 8802 form will be needed only if "Hacienda" asks you why you did not do your taxes in Spain, when according to their laws you were supposed to. 

My family has been in Spain for several years and Hacienda has never come to knock on our door.  They  are the ones who told us at the beginning to get the fiscal residency certification in the US to avoid having to pay taxes in Spain. For that reason we do our 8802 form every single year.

In your particular case I would not worry much about it. If you ever have to get the US fiscal residency certification, you have a very solid case.  As mentioned by others in previous posts, according to the treaty the first test to establish fiscal residency is your "permanent home" You do not have a home in Spain; consequently, if you have a home in the US you can claim fiscal residency based on this test. If you do not own a home in the US either, then you have to go to the next test, which is "center of vital interests". That is, where you have your family and friends and where you earn you money and do your taxes. In my case I have family in the US and Spain; therefore, every time I have to go to the second  part of the test to explain that all my income and professional ties are to the US.  The form is very simple for that reason you have to explain your case in a separate letter.

Your assumption is correct, we own property in Spain and have to fill out non-resident taxes every year.

Jose,
Many thanks for the extra information and it aligns with what my lawyer has told me. I will be sure to also get the US tax certificate (fiscal residency) just in case for this coming year.

Thanks again for you help.

It's been a few years.  Did you ever figure out what to do with the 6166 form once you obtained it?

PapaLima wrote:

The US/Spain tax treaty is available online and is relatively clear on this matter. We are in a similar situation; all of our income originates in the US, we are here in Spain on a non-lucrative visa, and our kid is in a private school.

We also consulted with an attorney who served on the team that drafted the update to the US/Spain tax treaty (said update is still sitting in the US Senate; the Obama Administration negotiated it and submitted it, and it's been stalled ever since, which is a shame; reasonable clarifications on various tax matters, such as pensions and IRAs and 401K plans and so forth really aren't a partisan issue, IMO).

She pointed out that because we have a permanent home available to us in the US, and the majority of our finances are there, we remain tax residents of the United States.

The treaty is clear enough for non-lawyers to understand. In Article 4, Section 2, it specifies people who are in our situation- seemingly tax resident in both nations, how does the treaty decide which nation we are "tax resident" in?

2(a) quite clearly lays it out. You're tax resident where you have a permanent home. If you have a permanent home in both nations, then you are "deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests)"

Thus, if you are keeping a home in the US (note- many interpretations of this indicate that you *cannot* rent that home out, because then it's not "available to you") and a majority of your money is there, you are tax resident in the United States, not Spain.

There is an IRS form you can file, IRS Form 8802. When you file that, the IRS will send you a certification that says you are tax resident in the US. You can take that to Hacienda (the nickname for the Spanish tax agency) and declare that you're not tax resident in Spain.

I haven't quite gotten through this process myself but my understanding is that even with that, you might still have some *declarations* that you must file with Spain; however, that's considerably different than actually being a tax resident. (It's similar to if you maintain a bank account in Spain, and the balance at any point during the year goes over the equivalent of 10,000 USD, you have to file a declaration of the account- but it's with the Treasury Department, not the IRS. My advice is just keep less than ten grand in your account, makes life easier.)

Anyway, what your lawyer told you tracks exactly with what ours told us. Of note is that there are some taxes (capital gains for personal investments being the most notable) that, if you're a tax resident in the US only, the treaty specifies that Spain won't tax you on them.

It's been a few years PapaLima - did you ever figure this out / what to do with the 6166 once you obtained it from the USA IRS?

Just FYI, here's the relevant bit of the Spanish tax code. You should note there are three separate tests specified (physical presence, economic activities, spouse/children).

Information on residency for tax purposes

Section I – Criteria for Individuals to be considered a tax resident

a) An individual is resident in Spanish territory when any one of the following circumstances apply:

- They have stayed longer than 183 days in Spanish territory over the calendar year. In order to determine the permanence in Spanish territory, occasional absences are included, except if the taxpayer accredits their residency in another country. In the case of countries or territories labelled as tax havens, the Tax Administration can demand proof of stay in that tax haven over a period of 183 days within the calendar year.

- They situate the main base or centre of their activities or economic activities, directly or indirectly, in Spain.

- They have dependent not legally separated spouse and/or underage children who are usually resident in Spain. This latter situation accepts evidence to the contrary.

Otherwise, where none of the previous situations applies, an individual is considered as non-resident in Spain.

Jose Maldonado wrote:

Blackrabbit,

The 8802 form will be needed only if "Hacienda" asks you why you did not do your taxes in Spain, when according to their laws you were supposed to. 

My family has been in Spain for several years and Hacienda has never come to knock on our door.  They  are the ones who told us at the beginning to get the fiscal residency certification in the US to avoid having to pay taxes in Spain. For that reason we do our 8802 form every single year.

In your particular case I would not worry much about it. If you ever have to get the US fiscal residency certification, you have a very solid case.  As mentioned by others in previous posts, according to the treaty the first test to establish fiscal residency is your "permanent home" You do not have a home in Spain; consequently, if you have a home in the US you can claim fiscal residency based on this test. If you do not own a home in the US either, then you have to go to the next test, which is "center of vital interests". That is, where you have your family and friends and where you earn you money and do your taxes. In my case I have family in the US and Spain; therefore, every time I have to go to the second  part of the test to explain that all my income and professional ties are to the US.  The form is very simple for that reason you have to explain your case in a separate letter.

Your assumption is correct, we own property in Spain and have to fill out non-resident taxes every year.

Hi Jose, where do you live in Spain and how did you manage that with Hacienda?  Did you make an appointment to go in and have a discussion with them?  When you get the 8802/6166 every year, what do you do with it?

Thank you Jose, great information!!!

jessica82378 wrote:

Jose Maldonado wrote:

Blackrabbit,

The 8802 form will be needed only if "Hacienda" asks you why you did not do your taxes in Spain, when according to their laws you were supposed to. 
...

Hi Jose, where do you live in Spain and how did you manage that with Hacienda?  Did you make an appointment to go in and have a discussion with them?  When you get the 8802/6166 every year, what do you do with it?

If I understand correctly, you don't have to do anything with the 6166 unless asked to present it.