Americans in Spain

U.S. taxes for Americans in Spain: what to file, and how to catch up.

Americans in Spain still file a U.S. return every year, but Spanish tax rates usually mean little or no U.S. tax once credits apply. The work is in juggling two sets of reporting: the IRS wants to know about Spanish accounts, and Spain wants to know about U.S. ones. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.

Reviewed by Lewis Grunfeld, CPA

Get help from Spain

Spanish tax yearJanuary – December

Spanish return dueJune 30

Usual U.S. toolForeign tax credit

FATCA dataShared by Spanish authorities

Tax treatyYes

Sound familiar?

You retired to Spain and assumed U.S. filing stopped when you left.
You file your declaración de la renta and thought that covered you.
Your Spanish bank asked for a W-9.
You still have U.S. accounts and have heard about Modelo 720.

How does the IRS treat Spanish funds, pensions and accounts?

Every one of these goes on your FBAR. What differs is how the IRS taxes them.

Account	U.S. treatment
Spanish funds (fondos de inversión)	Usually PFICs (Form 8621), with complex reporting and tax rules.	Watch out
Plan de pensiones	The treaty doesn’t shelter it for U.S. citizens living in Spain. U.S. treatment depends on the plan, and it may not be tax-deferred in U.S. eyes.	Check first
Spanish bank accounts	Interest is taxable, and the accounts count toward your FBAR total.	Taxable
Spanish Social Security pension	Spain can tax it, and the U.S. can too, with a credit for the Spanish tax. The treaty doesn’t exempt it for U.S. citizens.	Mostly friendly
U.S. assets and Modelo 720	Spain’s own form for assets held outside Spain. It sits alongside your U.S. filing, not instead of it.	Plan ahead
Wealth tax	Spain’s wealth taxes aren’t income taxes, so they don’t reduce your U.S. tax.	Plan ahead

Which Spanish investments are PFICs?

Spanish fondos de inversión, SICAVs and the European ETFs that Spanish banks and brokers sell. For U.S. tax they’re passive foreign investment companies, or PFICs, with their own reporting and harsh default tax rules.

Each fund needs its own Form 8621 in most years, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
Switching funds tax-free in Spain (traspasos) is still a sale for the U.S., so each switch can be a taxable PFIC event.
Not PFICs: shares of individual companies, Spanish government bonds, and bank deposits.

What does the U.S.–Spain tax treaty actually say?

The treaty was signed in 1990, and a protocol signed in 2013 took effect in 2019. For Americans living in Spain, these parts matter most:

The saving clause. The U.S. can tax its citizens as if the treaty didn’t exist, except for the provisions the treaty lists.
Relief from double tax. The U.S. gives a credit for Spanish income tax (IRPF) on the same income, which is why most Americans in Spain owe little U.S. tax on a Spanish salary.
Pensions. The treaty doesn’t defer U.S. tax on a plan de pensiones while it grows, and doesn’t exempt the Spanish state pension for U.S. citizens.

Social security contributions are covered by a separate U.S.–Spain agreement, which generally means you pay into one system, not both. Read the U.S.–Spain tax treaty on IRS.gov.

When are Spanish and U.S. taxes due?

Both tax years run January to December, so each Spanish year lines up with one U.S. return.

	Spain	United States
Tax year	January to December	January to December
Annual return	The renta campaign runs from April to June 30	April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension
Paying the tax	Withheld from your salary, with any balance due with the return	April 15, even if you file later
Foreign accounts	Modelo 720 by March 31, for assets abroad over €50,000 in a category	The FBAR, due October 15, filed online

Foreign tax credit or exclusion: which wins in Spain?

Usually the foreign tax credit. Spanish income tax on a salary, with the regional part, is normally more than the U.S. tax on it, and the unused credit carries forward for up to 10 years.

The Beckham regime is the exception. It taxes inbound workers at a flat 24% on Spanish salary and leaves most foreign income untaxed in Spain, so there’s less to credit and the exclusion, up to $130,000 for 2025, can help.
Retirees living on U.S. Social Security, pensions and IRAs use neither much: that’s U.S. income, outside the exclusion.
Families with children usually keep the credit, because it allows the refundable part of the U.S. child tax credit, up to $1,700 per child for 2025.

We run your returns both ways before choosing. How we compare the exclusion and the credit.

A worked example: a teacher in Madrid

Laura is a U.S. citizen teaching in Madrid on €32,000 a year. She has a Spanish fund through her bank, a small plan de pensiones, and still keeps an $80,000 brokerage account in the U.S. She has never filed in either direction properly.

Item	How it’s handled
Salary	Spanish tax is higher than the U.S. tax on it, so with the foreign tax credit her U.S. tax on it is $0.
Spanish fund	A PFIC: a Form 8621 in each year filed.
Plan de pensiones	On the FBAR; we check how its growth is taxed for the U.S.
U.S. brokerage account	Nothing special for the U.S., but over €50,000, so Spain expects it on Modelo 720.
Catching up	Three years of returns and six FBARs under the Streamlined procedures, with no penalty if she qualifies. Her gestor handles the Spanish side.

Catching up from Spain

Most Americans in Spain who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.

Common questions

Do you file my Spanish return too?

We handle the U.S. side. We work with your Spanish gestor so the two returns line up and foreign tax credits are claimed correctly.

Do I pay U.S. Social Security tax in Spain?

Generally not if you pay into the Spanish system. The U.S.-Spain totalization agreement prevents paying into both systems for the same work in most cases.

Should I sell my Spanish funds?

Maybe, but not before getting advice. Selling has tax consequences in both countries. We’ll show you the U.S. cost of keeping versus selling.

Does Modelo 720 replace the FBAR?

No. Modelo 720 is Spain’s report of your assets outside Spain, like U.S. accounts. The FBAR is the U.S. report of your accounts outside the U.S., like Spanish ones. Most Americans in Spain need both.

I'm on the Beckham regime. Do I still file in the U.S.?

Yes. It lowers your Spanish tax, not your U.S. tax, so with less Spanish tax to credit, the exclusion may do more of the work.

Is my Spanish pension taxable in the U.S.?

The Spanish Social Security pension can be taxed by both countries, with a U.S. credit for the Spanish tax. A plan de pensiones depends on the plan, and we check how it’s treated before reporting it.