Hello,
Moving to Spain can have significant tax implications, even if you currently pay no taxes in the U.S. on your Social Security and Roth IRA income. Spain's tax system treats different types of income differently, and as a resident, you would be subject to Spanish tax laws. Here’s a breakdown of what you might expect:
Tax Residency
Tax Residency in Spain: If you spend more than 183 days in Spain in a calendar year, or if your main economic interests or business activities are based there, you would be considered a tax resident.
Types of Income
Social Security Benefits:
U.S. Social Security: According to the U.S.-Spain tax treaty, U.S. Social Security benefits are taxable only in the country of residence. Therefore, if you are a tax resident of Spain, your U.S. Social Security benefits would be taxable in Spain.
Tax Rates: Spain taxes pensions and annuities (including Social Security) at progressive rates ranging from 19% to 47%.
Roth IRA Distributions:
Roth IRA: Roth IRA distributions are generally not taxable in the U.S. if the account has been open for at least five years and the distribution is made after the account holder reaches age 59½.
Spanish Tax Treatment: Spain does not have specific provisions for Roth IRAs. However, Roth IRA distributions may be considered as taxable income under Spanish tax law. It's advisable to consult a Spanish tax advisor for specifics, but generally, investment income could be taxed at rates ranging from 19% to 26%.
Other Considerations
Wealth Tax: Some regions of Spain imposes a wealth tax on individuals whose net worth exceeds certain thresholds. The rate varies by region and ranges from 0.2% to 3.5%.
Double Taxation Relief: The U.S.-Spain tax treaty helps prevent double taxation. You may be able to claim a foreign tax credit in the U.S. for taxes paid to Spain on your income.
Compliance: Ensure compliance with both U.S. and Spanish tax authorities by filing the necessary forms and declarations, including the FBAR (Foreign Bank Account Report) if applicable.
Everyone’s situation is different, so I recommend you fill out this form below and my tax team of professionals who specializes in international tax law to get precise advice tailored to your specific situation and to help you navigate both U.S. and Spanish tax obligations efficiently. https://share.hsforms.com/19A3yzsr9RBKhwZaGjd5pWg2oey6