Tax considerations for American expats living in Spain

from a “retired” US citizen with a property in Spain: too many complications even if you become a “non-lucrative resident”.. Spain does subject retirement savings in IRA and 401k to Spanish taxes. 

@guynoir

The NLV (no lucrativa visa) is essentially the retiree visa (although it's more general, and applies to anyone with passive income including pensions, dividends, rents, and so on).

@guynoir

There are definitely American members here... and some have posted their experiences in the past. Hopefully, some will post again with the specifics you crave. :-)

My impression is that it's the "nature of the beast". In the sense that USA is one of these rare countries that charges income tax based on citizenship. Hence, any American relocating overseas will end up as a tax resident of 2 countries, which is obviously much less convenient than being a tax resident of only one! :-) Us Europeans tend to have tax based on location, so normally we're only tax resident in one country (and simply swap when we relocate elsewhere). But if you want to enjoy sunny Mediterranean beaches, a relaxed way of life, delicious food, and a low cost of living... then this is the downside that comes with it.

I imagine that many Americans when they relocate (whether it's Mexico, Costa Rica, Panama, or Spain) simply ignore the impact of their theoretical 2nd tax residency, and merely continue filing their USA taxes. I'd guess if you're not Brad Pitt or Madonna, the chances of an investigation are not very high. But I don't know how prevalent this is, or whether Spain is more aggressive about pursuing foreigners' tax obligations than, say, Mexico. Others, I suspect, keep their days in Spain below 183 days a year in order to avoid this complication.

@wanderer17 can you be more specific? So complicated it's not worth it? What do you mean exactly.

Thanks

@wanderer17 saw your post on the Spain forum, I'm retired and looking into buying an apartment in Spain, can I ask you a few questions?

Thank you,

Dan and Jill

California

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What is the secret to buying property in Spain and keeping the tax issue at a minimum? Is Airbnb-ing your property while you are away another big pita?

Rent for a couple of months and talk to a Tax Lawyer

Used to be many Americans working in Time Share and Property sales in Spain

If retired you will pay more Tax that is a definite

Thank you for the reply, I have been contacted by a Spanish tax expert, I'll be able to gain a better perspective with

Dan and Jill

Dan and Jill please post here about what you find. We are from Seattle thinking about buying second home in Valencia and not staying more than 183 days to avoid tax residency.

Thanks!

Maya

@guynoir

Hola Chico:

I am a retired Californian in my first year of residence in Spain and can give some information on your questions.  And i have a lot of additional questions of my own.

As far as visas go, i am the first year of a non-lucrativa visa.  That is the type of visa most relevant to retirees.

I am having trouble finding a tax advisor in Spain.  The two companies I have contacted that offer tax preparation help have not responded to emails and, in one case, an in-office visit.  To be fair they are large companies and are more oriented toward businesses.  But their web sites did say “individuales”.

Spain has a tax treaty with the USofA.  My Enrolled Agent in California was somewhat familiar with it but by no means an expert.  My impression is that you pay some taxes to the USofA and some to España.

You may also be liable for state taxes if you retire overseas.  California apparently has son a tax court case decreeing that if you move directly overseas from a California residence you are still liable for California state taxes. 

However, if you retire and can establish legal residence in a non-income tax state . . .  Check if your state has an ex-patriot tax law like that.

That’s why I use an Enrolled Agent.

As far as tax sheltered retirement income I only have vague information.  I have heard second hand (i.e., not from a Spanish tax professional) that tax deferred financial transactions are not tax deferred in Spain.  What I have heard is that if you buy or sell assets in a tax deferred account, they are not tax deferred from your yearly Spanish taxes.  They are treated as regular financial transactions.

That’s why I am seeking a Spanish tax professional.

I am not sure how that works in practice.  If I buy/sell assets in a 401(k) this year (2023) do I have to pay taxes in Spain on the transaction when I file this years taxes?  If I pay taxes to Spain on this year’s transactions but don’t make a withdrawal from the account until the following year (2024) do I have to pay taxes in the USofA?  Am I being taxed twice on one transactions?

That’s why I am searching for a tax professional!

Additionally, you should check with who-ever is administering your tax-sheltered account about changing your account to an “international” account.  Apparently under USofA and/or EU tax law their are restrictions on the type of transactions you can make as a non-USofA resident.  Apparently no ETFs &c.

That’s why I want to find a Spanish tax professional.

And finally, Spain has some interesting laws about pension income.  I have heard, but not verified, that Spaniards who receive pensions for public service employment do not have to pay income tax on that income.  I have no idea if that is true of ex-patriots who have retired from civil service jobs.  Or what the requirements are to qualify for tat exemption.

That’s why I want to find . . .

Well, you know the chorus of that song by now.

I have no information regarding how closely ex-patriot taxable income is monitored in Spain.  For example, under the tax treaty does the USofA government share with Spain tax documents like 1099s.

Until I find Spanish tax professional I am following the sage advice of Bob Dylan, “If you live outside the law you must be honest.”

Still thinking about going into exile?

Do it.

There are many problems.

None of them insurmountable.

And if you approach then as a daily adventure in “Simulación de España” it will make your transition fun.

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@guynoir

I am a retired American and I pay US income tax. I have US savings accounts on which I pay US income tax on the interest. Occasionally I transfer funds from my retirement accounts to my savings accounts, upon the transfer I pay US income tax on that money since it has not been taxed before. I also pay US income tax on my Social Security income. Those are my only source of income. I file US income tax forms every year and have never had to pay Spanish taxes because all my income has already had tax paid in the US. A US/Spanish tax agreement covers that. Since Spanish banks are starting to offer interest on savnig accounts I may need to pay Spanish inome tax if I have a saving account. Another note the saving accounts being offered are much like CDs. The interest will only be paid at the end of the CD life, if withdrawn before that no interest is paid. On my US saving accounts I receive interest monthly.

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Hello ronjonesnc,

No contact details should be shared on the forum, please.

Feel free to use the private messaging system to share such information.

Cheers,

Cheryl

Expat.com team

To any American expats finding this thread via Google in 2026:

I know this is an old post, but the US-Spain tax situation for retirees has strict rules that catch many Americans off guard.

First, Spain does have a de facto retiree visa: the Non-Lucrative Visa (NLV). However, since a recent immigration update, renewing the NLV strictly requires spending more than 183 days a calendar year in Spain. This automatically triggers Spanish tax residency, meaning Spain will tax your worldwide income.

Here is exactly how Spain treats US retirement income under the Double Taxation Treaty:

Social Security: This is fully taxable in Spain as ordinary employment income at progressive rates. The tax treaty states that the US "may tax" it, which grants shared taxing rights; it does not strip Spain of its right to tax you as a resident.

Traditional 401(k) & IRAs: Spain has primary taxing rights over these distributions. They are treated as general income and taxed at progressive scale rates (which can easily exceed 30% depending on your Spanish region and withdrawal size). Spain does not recognize the US concept of tax-deferred pension treatment.

Roth IRAs: Spain does not recognize the US "tax-free" nature of qualified Roth distributions. The Spanish tax authorities categorize Roth withdrawals as investment income, and they are fully subject to Spanish tax.

Navigating the progressive Spanish tax brackets (IRPF), dealing with US-Spain foreign tax credits, and figuring out what your actual net income will be after taxes is usually a massive headache.

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Hope this helps future retirees plan their numbers accurately before making the move!

Navigating the progressive Spanish tax brackets (IRPF), dealing with US-Spain foreign tax credits, and figuring out what your actual net income will be after taxes is usually a massive headache.

AGREED!   A discovery I made is that many or most of tax preparers do not understand the "forumulas".  Basically they punch numbers into a machine and whatever comes out, comes out.  I specifically asked for how the formulas were applied and this is what I was told.  I have so far not found anyone who can explain the steps of the process (where are the tax free amount is applied for example).  Frustrating.

Did you happen to find information about how to reduce your tax liability? 

I did ask for a step by step as you suggest (to a number of people).  They told me just what I stated, they punch in numbers and get the result, they don't know how the formulas are applied, they just punch in the numbers.  😎

What is AEAT?

Coming back to your question about reducing the liability, colette: the lever most preparers skip is the split between Spain's two tax bases. Interest, dividends and gains go in the savings base, taxed on its own scale starting at 19%, while pension income generally sits in the general base at the full progressive rates. So the mix of where next year's cash comes from can change the Spanish bill as much as the total does. How Spain classifies each kind of US account withdrawal is the question to put to a new preparer, then model a couple of mixes before December.

Thanks.  Do you have any resources that you wouldn't mind pointing me to ?

As for reducing liability, I am thinking of something that would work similar to a 401 investment in the US tax system.  You know, invest X thousands of dollars and that your reportable income is reduced by that amount.  Something similar withing the Spanish tax system.  I read something about investing in a business that might work like this, but I would need someone to walk me through the specifics. 

@coletteab88

The closest Spanish equivalent is a plan de pensiones: contributions come off your general taxable base, though the yearly cap is much lower than a 401k's. The business one you read about is the deduction for investing in new or recently created companies, a credit for part of what you put in, with conditions on the company and a minimum holding period. The catch for an American is the US side, since the IRS may not recognise the Spanish deduction and can treat Spanish funds and plans harshly, so you need a preparer who files in both countries. For reading, the Agencia Tributaria's Manual práctico de Renta covers both, and IRS Publication 54 covers the US side.