禁漫天堂

Here is a good explanation. One is not exempt from paying US or Spanish taxes but receives a tax credit.

@ronjonesnc

My reading of the treaty says if one satisfies "The tie breaker rules" one pays tax only one of the countries.

Not just living in Spain and paying U S taxes and Spain taxes and playing the double taxation rebate game.

It appears to me that I am in compliance with tie breaker rules to be exempt from Spanish taxes.

Thank you for the link.聽 I have contacted them to pursue this further.聽 However my hunch is they are a US company and cannot file the Spanish tax forms.

@ronjonesnc

I was correct.聽 After contacting the link their response was they only do US taxes.

Since the Spanish tax rates are higher I have been paying the Spanish income tax for years and then entering that amount on the US tax form as a tax credit.

@ronjonesnc

The point is to pay the least amount of tax.

My final tax rate in the US is 6.5%

Since I am a dual tax resident with a permanent home "available" (treaty language) "to me" in both countries and all my income i.e. "vital economic interests" are in the U S (I'm on a non lucrative visa so I cannot have a Spanish income ) the treaty specifically says I am exempt from paying the higher Spanish tax and I pay tax in only one country... the U S.

My question is, and no one seems to know, what is the Spanish tax form I need to file with Spain to claim the exemption.

@ronjonesnc

What does the tax credit buy you? Does it reduce your actual US tax liability dollar-for-dollar?

I'm thinking there's no way it would result in getting a tax refund from the US, of course...聽 right?

@jimoro

Let's say Country A has income tax of 30% and Country B has income tax of 20%. If you happen to be a tax resident of both, and there's no DTA, you would have to pay 50% of your income.

The DTA credits the tax paid in one against the tax due in the other.

I'm sure A and B will have some rules as to which tax return you should file first.

If you file A first, you pay 30% to A. This exceeds the 20% B requires, so you receive a credit for tax already paid, and pay B nothing.

If you file B first, you pay 20% to B. In your A return, you claim a credit for the 20% already paid, and pay B the difference, 10%.

Alternatively, the DTA might specify whether you really are a tax resident of both countries, or whether there's a "tie breaker" to decide your official tax residence country (and the other country ignores you). In which case, based on the tie breaker rules, you either file in A and pay 30%, or file in B and pay 20%.

@chasleslieb

This is a very interesting point, thank you. Is it your interpretation of the DTA or that of your tax accountant?

You might well be correct.

But I believe the tie-breaker condition is "centre of vital interests" rather than "vital economic interests". It's not just about income, other factors can be considered. And even income is not clear-cut, especially if comes not from current work/business but is a pension from past work.

For example, and purely for the sake of argument, if I had a $5m beachside villa (I wish, right) in Malaga and a $150k Florida studio, and I spent most of the year lazing with my lovely wife by my villa's pool... I'd have a tough job convincing the Spanish tax authorities that my center of vital interests was the USA, just because I was a recipient of an American pension and kept a bolthole there. Even though, indeed, I have no income in Spain. :-)

@gwynj

The treaty says "personal and economic relations are closer (center of vital interests)"

So what is a vital interest?

It's not defined specifically other than perhaps through precidence that only a legal expert has common knowledge of.

In my particular case, I have a permanent home available to me in pepetuity in the U.S

though I don't own it.聽 In Spain I have a temporary residence that is limited by rental agreement and subject to having my visa renewed.聽 I am s temporary resident.

One can also argue that I cannot spend money if I don't have any.聽 It is more vital to earn than to spend.聽 Thus my vital interest is where does my money come from.聽 My personal interest is who do I vote for...etc.

I'm going to seek legal advice on this issue as the idea was presented by a Barcelona lawfirm advertisement. And a reading of the treaty.

Sometimes with taxes it's "ask and you may or may not receive.... But if you don't ask it's guaranteed you won't receive." 馃榿

One can only present their case and see what happens.聽 The definitions come under the term "grey area".

I guess that's my trail blazing take on it.

It would be nice to hear other people's experience on the issue but people seem pretty silent on this and it is almost impossible to get some hard factual answers without paying someone for it.

As always thank you for your interest and response.

Your hypothetical example is well beyond my financial means.聽 I moved to Spain in part for economic survival.聽 I wish a wealth tax was a problem for me... it's absolutely irrelevant to my financial situation.

The other reason I moved to Spain was for happiness 馃槉

@jimoro

The idea is that because one meets the tie breaker criteria for dual tax residency according to the treaty, one pays tax in only one country, in this case the U.S.聽 You pay the full U.S. tax liability (which for me ranges from 6.5% to 8% of Adjusted Gross Income) INSTEAD OF THE HIGHER TAX RATE of taxes levied in Spain.聽 One is exempt from Spanish taxes while paying only U.S. taxes.

This is the idea as it seems presented to me.聽 In my case I have a physical residency (not just a Post office box) where my daughter lives and I live when I travel to the U.S.聽 The treaty defines a residency requirement of a permanent residence that "IS AVAILABLE" to you.

Any I am going to consult with a Spanish tax attorney as my next step in the process.

I got essentially the same read from a tax attorney in Atlanta, GA. But, he also said I should confirm it with a Spanish attorney and see if there is a Spanish form to file in addition to the IRS form.

Since a few of us are interested in this issue, I suggest if anyone gets advice from a Spanish attoney, his or her contact info be posted here.

Update on the process:

I have decided to go forward with obtaining the IRS form 6166 Letter of Residency.

I am submitting the request form 8802 via an online fax website and have paid the $85 fee electronically from my US bank account as per 8802 instructions.聽 It was straight forward and easy.

On line 10 of form 8802 I entered the recommended language in Table 2 of the instructions as I am requesting the document prior to filing my 2024 1040 form.聽 As I am also claiming to use the letter as a dual tax resident and invoking Paragraph 2a of section IV tie breaker rules I included supporting documents as requested.聽 I used an online law firm advicement on what is required to justify residency.

As I don't wish to have the request denied for missing information I sent the following: All US held savings and investment accounts along with the permanent address page from each institution; US drivers license front and back; US Passport (did not send the visa page); personal statement of justification for request quoting the treaty; voter registration cards; credit card statement with address; account balance in Spanish bank; copy of 2023 form 1040 and schedule B.聽 All support documents were signed dated along with the social security number.

If I am successful, I will have them mailed to my U S address where my daughter lives and she will get them apostilled at the US State Dept and send them to me via priority mail.

I will then contact tax attorneys in Barcelona to see what has to be done in Spain and ask exactly what documents I need to send to the IRS to claim residency as I admit I might have submitted more than I need (20 faxed pages including the cover and the form 8802.

That's it for now.

charleslieb,

I just read your post and in it you mentioned your sister live at the address you use in the US. Have you sold your home in the US or did you retain it? We are thinking of selling our home in the US and using either one of our relatives address or a "virtual" address.

Do you have a particular source you found for doing and understanding Spain/US tax issues and rules.

From the post I have seen about moving to Spain the process seems very daunting.

Just a couple of many questions...

@chrisengelart

It is my daughter that lives at my residency address.聽 I do not own the home but it is a physical address and a residence that is "available" .聽 Available is the exact language of the treaty.聽 I would personally question the use of a virtual address as being valid but do not have any information in that regard.聽 In my particular case, it is a residence that I conduct all my business transactions and is where I live when I return to the U.S. and if I leave Spain, the home that is permanently available to me to live.聽 Also having a relative at the residency is a "personal" connection also referred to in the treaty.

This advice is from a website called CPA Journal:

A closer connection means having more significant contacts with the foreign country, with the following among the criteria relevant to that determination:

The location of the individual鈥檚 permanent home

The location of the individual鈥檚 family

The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by the individual and his family

The location of social, political, cultural or religious organizations with which the individual has a current relationship

The location where the individual conducts routine personal banking activities

The location where the individual conducts business activities (other than those that constitute the individual鈥檚 tax home)

The location of the jurisdiction in which the individual holds a driver鈥檚 license

The location of the jurisdiction in which the individual votes

The country of residence designated by the individual on forms and documents

The types of official forms and documents filed by the individual, such as Form 1078 (Certificate of Alien Claiming Residence in the United States), Form W-8 (Certificate of Foreign Status), or Form W-9 (Payer鈥檚 Request for Taxpayer Identification Number).

From an Legal Firm in Barcelona

Obtaining a tax residency certificate from a third country

There is a specific type of proof that allows you to justify yourself before the Tax Agency and avoid being considered as a resident for tax purposes, thus avoiding the payment of many taxes in the Spanish territory.

A proof issued by your country of origin or country in which you have your main economic interest that has the aim to justify that you are really a resident there, and therefore you should not be taxed as a fiscal resident in Spain.

In the case in which an individual can obtain the so-called tax residence certificate in his country, then the Tax Agency will not consider that person as a tax resident, even if she is in Spain 183 days a year.

This certificate works according to the regulations of the agreement between Spain and that third country, generated through a double taxation agreement.

In addition, it is valid only and exclusively for one year. This means that it is valid just for the year in which you request it, and you will need to solicit it year after year to continue participating in this exception (if you wish to do it and your situation applies).

However, most European countries have the same tax criteria as Spain, so if you live in the Spanish territory for more than 183 days per year you will most likely not be granted the certificate.

Certificates from EU countries or the United States are always accepted by the Spanish Tax Agency, although those from Asian or Middle Eastern countries usually generate more difficulties.

I also obtained information from the IRS website concerning tax treaties.

This is not simple, but is doable and if you hire an attorney I'm sure you can delegate the headaches.

Hope I have stayed within the Forum guidelines.... and that this information is helpful.

Good Luck!

Thanks so much for the information. I can see one needs a lot of professional help in moving their residence from the US to Spain. We are thinking of a permanent move but that will require professional help.

Thanks again for taking time to respond--

@chasleslieb

Have you received your certification yet? And are you sure that it will override the "183 day" rule? I have searched the internet far and wide and consulted Spanish tax lawyers. Everyone (except for the singular website you quoted about the tax form) has said that the 183 rule prevails, and that it's pretty cut and dry. Put simply: if you reside in Spain 183+ days of the year, you are supposed to pay taxes in Spain.

Of course, I am also searching for a work-around for this rule. And it's true that the USA-Spain tax treaty doesn't mention the 183 day rule explicitly. I suppose my question is鈥攈as any Spanish lawyer told you that form 8802 + tiebreak rules is sufficient for not paying Spanish taxes, even if you reside in Spain the majority of the year?

Thanks for all your posts, they are helpful.

Update- I filed my form 8802 and paid $85 to the IRS.聽 I faxed the information to the IRS via an online fax service.聽 I sent in supporting documents i.e. bank account, voter registration, drivers license, passport, U.S. tax documents, etc. to the IRS.聽 I did this on Feb 22, 2024.

April 30, 2024 I got a letter at my U.S. residence address, that the IRS has received my form 8802, will review it and respond within 30 days.

I have talked with a tax consultant and my take on actualizing the treaty is that there is a lot of ignorance on the subject.聽 One needs to find an attorney or gestor that is familiar with this... otherwise they go into a default mode of thinking because they have no awareness or expertise with THE TREATY.

I am in Spain on a Non Lucrative Visa.聽 I cannot work here or earn money in Spain.聽 It specifically says that on my TIE.聽 Thus ALL my economic interests in generating an income are in the U.S.聽 I do not own property in Spain, I do not keep an amount in the Spanish Bank to require FBAR reporting.

Yes, after 183 days, I will be a tax resident of Spain.聽 That is a given.聽 BUT, I AM ALSO a tax resident of the U.S..... I have dual residency.聽 The treaty specifically addresses the situation of DUAL RESIDENCY.聽 I don't know if it mentions anything about 183 days... I think that is implied as it is a tax residency requirement for Spain.

Once I receive my letter from the U.S. State Department, I will get it apostilled and have it mailed to Spain. I will then contact the lawyer and/or gestor and find out if and how I can be exempt from Spanish taxation.

At this point I am waiting for the letter of U.S. tax residency from the IRS.聽 I will not be a tax resident in Spain until June 30 2024.聽 I have until 2025 to file... it is important to start the process as early as possible to stay on schedule.

More as events unfold.

This sounds unbelievably complicated.

Please do keep us updated on this subject鈥�

I will be in a similar situation in a few months when I

move to Spain on a NLV from the U.S.

@rdruby699

It's not "unbelievably" complicated considering the complexity of the Spanish tax system.聽 The complexity is manageable.聽 Just take it one step at a time and keep breathing.

Also, for your information, I do not have to concern myself with the wealth tax as I am well underneath the threshold.聽 I did cash out my Roth retirement before coming over so that the money I withdraw from those funds is not considered income as far as the Spanish tax system is concerned.聽 They would tax the dividends which doesn't drain the income pond.... that is my backup plan.聽 It's not a tragedy if the treaty plan doesn't work.聽 聽Keep in mind, that I am 71 years old and my retirement is entering the spending mode so I am managing my portfolio to responsibly enjoy the fruits of my prior savings.

It's much less stressful than taking the Spanish drivers license test.

I will keep this post going as events transpire.\

Best Wishes

Thank you @chasleslieb.

I too am not concerned about the wealth tax (since I don鈥檛 qualify,聽 lol).

But yes, I do hear taking the Spanish driver鈥檚 test is not a walk in the park.

Thanks again!

Update:

On February 22 I faxed my documents along with form 8802 to the IRS.

On May 29th I received a letter at my U.S. address that the IRS had received my fax and are reviewing it and will rule within 30 days.

On June 2nd they sent me another exact copy of the notice of receipt of form 8802 (I don't know why??)

One June 4th I received an approved IRS form 6166 stating that I was a U.S. resident taxpayer.

This should help plan a time line.聽 My tax filing date is one year from now so I have plenty of time... I do not anticipate having to request any extensions.聽 I file my U.S. taxes as early as possible.

I will mail form 6166 to the State Department to have them apostilled this week.聽 That process should take a few weeks.聽 Once I receive the apostilled form 6166 at my U.S. residency,聽 I will have them mailed to me at my Spanish address.聽 Once I have that in hand I will contact an attorney that is familiar with the process to apply for exemption.

I am in Spain on a Non Lucrative Visa.聽 I cannot work or earn money in Spain and I maintain a valid U.S. residence where I conduct my banking, U.S. taxes, and income.聽 It is not just a post office box or mail forwarding service... I have a legal representative at the address (daughter with power of attorney) that assists with correspondence.聽 I am maintaining a dual tax residency and intend to remain a U.S. citizen living in Spain.

Will post again when I receive the apostille documents in the U.S.

It takes about 10 days to two weeks to receive first class mail from the U.S.聽 I am very satisfied with the Spanish postal system.

UPDATE:

I received the apostilled 6166 form today (July 9) at our U.S. residence.聽 It took 31 days from mailing it the state department.

The next step is to ship the documents in a secure and timely manner to our residence in Spain.聽 I don't wish to use the USPS/Spanish postal system as there are some inconsistencies with service.聽 Sometimes the mail arrives in 8 to 10 days, other times I have waited a month and still have not received the letter...although so far, everything mailed has arrived.

DHL has only three express drop off points in my state of residence and they are all inconveniently located.

I am thinking of UPS document shipment but need to do some further research.聽 I think they have a saver rate that is reasonable cost.聽 I don't want to pay $80 to $100 to mail two pieces of paper.聽 I don't need them overnight, but at least within a week would be satisfactory.

Any suggestions would be appreciated.聽 I am going to the local UPS office here in town tomorrow and "practice my broken Spanish"

I am presently shopping for a tax service in Spain.聽 I am making sure they know about the treaty and what form 6166 implies.聽 I have one law firm in Barcelona that advertises this service but I am hoping to find some place closer to home so I can easily go in person rather than do it over a zoom conference... etc.

@chasleslieb

UPDATE REVISION:

I checked UPS and it was $108 for their basic service to ship a document.聽 This was a quote from their website.聽 I also saw an advertisement for about $65 to ship a document but maybe it was a generic quote not applicable to Spain or a "hook" like the airlines use by advertising a "$50 round trip ticket from Europe to the U.S." and when you go to search for it... it doesn't exist.

USPS has a Priority International Mail Flat Rate at about $46.聽 It is supposed to take about a week to get here, so I am going with them if I need to have the documents mailed here.聽 However, I may have them personally delivered by my daughter when she visits in November.聽 I do not require the tax documents until after December 31, 2024.

Meanwhile I will be searching for a tax preparer that knows and understands the treaty and this particular procedure.