Health care and American investment funds

Hello Seamus,

I am in a similar situation as you. I am also Irish US dual citizen although my wife is a Spanish US dual citizen.

Income taxes are higher in Spain, so matter how you structure your investments you are going to pay more if you become a resident in Spain for tax purposes.

Your Roth IRA or Roth 401K are not tax free in Spain. You will need to pay tax on any investment gains when you withdraw them.

We plan to stay US tax residents and keep a condo in our home state of Illinois which does not tax retirees. We will spend the winter in Spain and summer in the US. By then we may have American grandchildren so we will want to come back. What  I am not clear about is how I prove to the Spanish tax authorities I am not a full time resident in Spain.

Best of luck with your move

Conor

What  I am not clear about is how I prove to the Spanish tax authorities I am not a full time resident in Spain.
   

    -@Conor55

The safest way is to keep a diary of your dates in/out (ideally with some supporting evidence like plane tickets and/or stamps in your passport) so you can show that you spend less than 183 days in Spain (the "substantial presence" test, and one of the main triggers for Spanish tax residence).

@seamus452

It's very easy for you to relocate to Spain by virtue of your Irish passports, thanks to the EU's Freedom of Movement. You just need to do the EU Citizen Registration, which needs only proof of funds, proof of health insurance, and proof of (Spanish) address. You can book an appointment online, and you don't need an immigration attorney (but an interpreter might be useful).

As a resident, you can enroll in the Spanish health system, and make the appropriate contributions. And/or you can easily purchase private health insurance from many companies (we had policies with ASISA who are good, and relatively inexpensive). Private healthcare might be 1k-2k per year, depending on age/prior conditions.

Being a Spanish resident doesn't much change the management of your investments. You still have to look after your money whether you're living in USA or Spain. Certainly, there's no obligation to move stuff around... if you have a couple of mil in a USA brokerage account, you can leave it there.

If your financial situation is complicated, or you're very wealthy, and you think dual taxation will be a burden, then you should do further research. And, until you're sure, you can avoid this issue by keeping your stays in Spain to less than 183 days per year (the "substantial presence" test which is one of the main triggers of Spanish tax residence). Being a legal resident does NOT (normally) make you a tax resident.

Your American passport will mean you will not swap American tax residence for Spanish tax residence. You will instead add Spanish tax residence. There is DTA so you won't pay the same tax twice, but there might be some aspect of your income/assets which are taxed more generously by the USA (so you would still owe some additional tax to Spain).

That is very helpful.  I am still  a little confused by some aspects of your very complete reply. For example "DTA"?

When you say "taxed more generously" do you mean that for those aspects of income that US tax may be less or more than Spain?

Also it sounds like you can "reside" legally (ie. not a tourist) in Spain, less than 183 days and not pay taxes abroad, but we can by virture of our residency or EU citizenship access health care there.

Another question I had, if we were to reside overseas, and I was willing to pay the annual premium,  can I carry my American health care insurance indefinitely in case I need we  need to return to the US?

Again, thanks for your very good answers.

It all seems positive.

@seamus452

DTA = Double Taxation Agreement (or DTT, Double Taxation Treaty) which is an agreement between 2 countries. USA has them with many countries, including Spain.

Typically, they ensure that you don't pay tax twice on the same income.

However, if one country charges a lower tax rate (I agree, calling this "generous" is a bit confusing!), you might still owe a bit extra to the other (that charges a higher tax rate).

Exactly right! Becoming a legal resident (by doing your EU Citizen Registration) allows you to live/work in Spain indefinitely, and access the Spanish healthcare and pension systems. But there's no obligation to do so. (And, as Irish citizens, it's possible there might be reasons to access the Irish systems instead.)

You don't automatically become a Spanish tax resident by acquiring legal residence. As long as you keep your stays below the trigger level, you would remain only a US taxpayer/tax resident. Lots of folks (including us) have holiday pads in Spain and spend most of their time elsewhere.

Making the appropriate contributions to the Spanish healthcare system entitles you to public treatment in Spain. But you can request an EHIC (European Health Insurance Card) which covers you when travelling elsewhere in the EU. If you want faster service, you can carry additional private healthcare insurance, or simply pay for private treatment as required.

I've ended up mostly in Bulgaria, rather than Spain. Therefore, I registered in the Bulgarian health system. My status is "unemployed" which is about 15 euros per month, and entitles me to free or nearly-free treatment. And they gave me my EHIC which covers me when I'm in Spain. An additional private policy in Bulgaria is about 500-1,000 euros per year. Spain is obviously more expensive, but it gives you an idea relative to the USA.

I'm not knowledgeable about USA health insurance, other than it's typically pretty expensive. However, I don't see any reason why you can't keep paying your premiums, if you want to maintain continuity. I suppose you should check the policy to see if living abroad is a notifiable "change in circumstances" and see what level (if any) cover is provided outside the USA.

My US health cover was massively expensive, even when I was significantly younger, and in perfect health. And even then it had sneaky exclusions and very high annual deductibles. So I dropped it at the first opportunity! :-) But if you have a great policy from your employer, then I can certainly understand the rationale for keeping it.