How a US LLC Is Taxed When You're a Spanish Tax Resident: 2026 Guide | BMC

At BMC, this is the first question we hear whenever someone with a US LLC moves to Spain: “Do I have to pay tax on profits I haven’t taken out yet?” The answer depends on something neither the IRS nor the Delaware registered agent can settle for you: how Spain classifies your entity. This article walks through the full mechanics — check-the-box, the three-criteria test, two regimes that competing advisers routinely confuse, and a risk that almost nobody in this market develops properly — so you can arrive at a consultation with the right questions already in hand.

The Real Question: How Are You Taxed, Not How Is the LLC Taxed

The starting error in almost all the writing on this topic — and we see it regularly in clients who’ve been to other advisers — is framing the question the wrong way: “How is the LLC taxed in Spain?” The right question is different: “How am I taxed, as a Spanish tax resident, for being a member of this LLC?”

Spain does not tax the LLC. Spain taxes you. The LLC is a vehicle, and what matters is how your membership interest in that vehicle produces income under the Spanish tax system.

That has one immediate practical consequence: the LLC will not file taxes in Spain, will not obtain a Spanish tax ID number simply by existing, and will not appear as a taxpayer in its own right on Spanish filings. You are the one who declares — in your IRPF, under rules we determine by analyzing what kind of entity Spain considers this to be. And that analysis depends on a first step that most articles on this topic skip entirely: the classification of the LLC under Spanish law.

The Four Ways the IRS Can Classify an LLC — and Why Check-the-Box Matters (Even Though It Doesn’t Bind Spain)

Before getting into the Spanish rules, it is worth understanding your options on the US side, because that decision does have downstream effects on the US-Spain tax treaty.

By default — if you do nothing — the IRS classifies LLCs like this:

• Single-member LLC (SMLLC): disregarded entity for federal tax purposes. The IRS acts as if the entity does not exist: profits flow directly to the member’s Schedule C on Form 1040.
• Multi-member LLC (MMLLC): treated as a partnership by default. Files Form 1065 and issues a K-1 to each member.

These are the default classifications. But the IRS allows you to change them using Form 8832 — Entity Classification Election, colloquially known as check-the-box. With that form, an LLC can elect to be treated as:

• C-Corporation: taxed at 21% federal on its profits; dividends distributed to members are taxed again at the personal level (classic double taxation ).
• S-Corporation: available only to US citizens and permanent residents — this election cannot be made if any member is a non-resident alien (NRA). A pass-through entity, but with minimum-salary rules for active owner-members.

That covers the US side. Now comes the part that no competitor spells out clearly: the check-the-box election does not bind the Spanish tax authorities. The DGT applies its own classification rules regardless of how the IRS categorizes your entity. An LLC that has elected C-Corp treatment via Form 8832 will still be evaluated under the three-criteria test of Resolution BOE-A-2020-2108, not under its IRS classification.

[UNVERIFIED: This position lacks a specific binding DGT ruling that directly addresses the effect of the check-the-box election on Spain’s classification. It is the prevailing doctrine, but there is no binding ruling specifically on this point.]

The check-the-box election does matter for the US-Spain tax treaty (2019 Protocol, BOE-A-2019-15166): Art. 1.6 of the Treaty allows income attributed by a US-transparent entity to flow through to the Spanish member for treaty purposes. But that mechanism operates from the US side. The question of how Spain internally classifies the LLC is separate and runs in parallel.

Spain Does Not Accept the Check-the-Box: the Three-Criteria Test

The governing rule is Art. 87.1 of Ley 35/2006 (LIRPF), read together with the DGT Resolution of February 6, 2020 (BOE-A-2020-2108), published in the BOE on February 13, 2020.

Art. 87.1 LIRPF provides that foreign entities whose legal nature is “identical or analogous” to Spanish pass-through entities qualify as income-attribution entities under Spanish law.

Resolution BOE-A-2020-2108 specifies that the analogy is determined by three essential and cumulative characteristics — all three must be met:

1. The entity is not subject to a personal income tax in its state of formation.
2. The income it generates is fiscally attributed to its members under the laws of that state, so the members — not the entity — are taxed on it at the personal level.
3. That attribution occurs by the mere fact of the entity earning the income, with no relevance as to whether the income has actually been distributed.

The Resolution cites as verified examples of analogous entities: UK Limited Liability Partnerships, German Kommanditgesellschaft (KG), and Dutch Commanditaire Vennootschap (CV). US LLCs do not appear among the expressly recognized examples, and the analysis must be done case by case.

The practical upshot: if your LLC is disregarded by the IRS but has distinct legal personality in the US and its members are automatically taxed on its income under state law (criterion 2), you may satisfy the test. But if you elected C-Corp treatment, you almost certainly will not, and Spain will treat any profit distribution as a dividend.

When the LLC Is Opaque in Spain: DGT V3074-22 and Dividends

If the LLC does not meet the three criteria of the 2020 Resolution — or if the DGT, applying binding ruling V3074-22 (2022), recognizes that it has distinct legal personality — the tax treatment is that of a standard capital entity.

DGT V3074-22 establishes that a US LLC may possess distinct legal personality, and in that case the Spanish member does not automatically include the LLC’s earnings in their IRPF while they remain inside the entity undistributed. The taxable event only arises when the member receives distributions, and those distributions are classified as investment income (dividends) under Art. 25.1 LIRPF.

On the US side, dividends distributed by the LLC to the Spanish member are subject to US withholding under the US-Spain tax treaty. Withholding rates under the 2019 Protocol (BOE-A-2019-15166, Art. 10) are:

• 15% in general (individual member).
• 5% if the beneficial owner is a company holding at least 10% of the voting shares.
• 0% if the beneficial owner is a company that has held directly or indirectly 80% or more of the voting capital for the preceding 12 months.

For an individual Spanish tax resident filing under the general IRPF regime, the 15% US withholding can be credited against the Spanish tax on that same dividend, up to the amount of the Spanish tax, pursuant to Arts. 80 and 67 LIRPF.

When the LLC Is Transparent: the Income-Attribution Regime and Character Preservation

If your LLC meets the three criteria of Resolution BOE-A-2020-2108, it operates under the income-attribution regime of Arts. 87–88 LIRPF.

The key rule is Art. 88 LIRPF: attributed income “retains the nature derived from the activity or source from which it arises for each member.” This character-preservation principle determines how you report each type of income:

• If the LLC earns business income (consulting, professional services, software development), you report it as business income on your IRPF.
• If the LLC earns dividends from a subsidiary or interest on a deposit, you report it as investment income.
• If the LLC sells an asset at a gain, you report the capital gain proportional to your membership interest.

And here is the nuance that trips people up most often: income is attributed in the year the LLC earns it, not when it distributes. If your transparent LLC earns $100,000 in 2026 and distributes nothing, you still report it on your 2026 IRPF return. A later distribution does not create a second taxable event.

For treaty purposes, Art. 1.6 of the US-Spain Treaty (2019 Protocol) allows the Spanish member to invoke the Treaty directly with respect to attributed income, to the extent the LLC is transparent in the US and the member meets the LOB clause of Art. 17. An individual Spanish tax resident automatically qualifies as a qualified person under Art. 17.2.

Don’t Confuse This with the CFC Regime: Art. 91 LIRPF and When It Fires Without a Distribution

This is the most common error we see in competing advisers’ articles: conflating the income-attribution regime (transparent entity, Art. 87 LIRPF) with controlled foreign corporation transparency (Art. 91 LIRPF, CFC). They are two entirely different regimes with opposite logic.

The CFC regime operates on opaque entities: it forces the Spanish member to include certain passive income of a controlled foreign entity in their IRPF even though the entity has distributed nothing and is opaque to Spain. It is an anti-avoidance rule, not an entity classification.

Art. 91 LIRPF, in its current text following Ley 11/2021, of July 9 (BOE-A-2021-11473) — which transposed the ATAD II Directive (EU 2016/1164) — is triggered when four cumulative conditions are met:

1. Control ≥ 50%: the taxpayer, alone or together with related entities or family members up to the second degree, holds a participation “equal to or greater than 50% of the capital, equity, profits, or voting rights” of the non-resident entity at the close of its fiscal year. If you are the sole member of your LLC, this condition is automatically satisfied.

2. Effective rate < 75% of the Spanish corporate rate: the tax paid by the non-resident entity, of a nature identical or analogous to the Spanish corporate tax, is “less than 75% of the tax that would have been due” under Spanish corporate tax rules. The Spanish corporate rate is 25%; the threshold is 18.75%. A disregarded LLC that pays no entity-level US tax clearly meets this condition. A C-Corp at 21% federal does not in principle — but you need to calculate the actual effective rate after deductions and credits, which may well fall below 18.75%.

3. Insufficient substance (Art. 91.2): if the entity lacks “the corresponding organization of material and human resources for the exercise of its activity,” all of its income is attributed, regardless of category. This is the provision that directly hits the digital nomad running an LLC with no US employees and no US office.

4. Passive income > 15% (Art. 91.3): when substance is sufficient, only passive income — dividends, interest, capital gains, rents, royalties, income from related-party transactions with low added value — is attributed, if it represents more than 15% of the entity’s total revenues.

The Big Risk: Art. 8 LIS and the LLC That Becomes a Spanish Tax Resident

This is the most underrated risk in the market. The Big 4 and Andersen flag it in their client circulars, but none of the direct competitors we have analyzed in the Spanish market develops it with the depth it deserves.

Art. 8 of Ley 27/2014 (LIS), in the consolidated text BOE-A-2014-12328, provides that corporate income tax contributors include “legal persons” resident in Spanish territory. An entity is resident in Spain if it satisfies any one of these three alternative criteria (one is sufficient):

1. Incorporated under Spanish law.
2. Registered address in Spanish territory.
3. Effective place of management in Spanish territory, meaning the place “from which the direction and control of the entity’s activities as a whole is exercised.”

The third criterion is the one that matters here. If you are the sole member-manager of your Delaware LLC and you run the company from your home in Madrid — Zoom meetings, strategic decisions, contracts signed in Spain, the only computer the business uses sitting at your Spanish desk — the AEAT can argue that the effective place of management of that LLC is in Spain.

The consequences would be:

• The LLC would be taxed in Spain at the general 25% corporate rate on its worldwide income, just like any Spanish SL.
• Distributions to the member would qualify for the internal double-taxation exemption under Art. 21 LIS if the conditions are met (≥5% participation, held ≥1 year).
• The US-Spain tax treaty does not help you: Art. 4 of the Treaty also uses the effective place of management as the tiebreaker for corporate entities. If the place of management is materially in Spain, the Treaty itself confirms Spanish residency.

[UNVERIFIED: No binding DGT ruling has been identified specifically addressing a Delaware LLC managed from Spain. The rule in Art. 8.3 LIS is unambiguous in its text; its application to LLCs follows the TEAC’s doctrine on effective place of management, but without a specific binding DGT ruling on LLCs.]

Modelo 720: How You Report Your LLC Participation

DGT V0681-25 (2025) — the most recent ruling on this topic — confirmed that a participation in a US LLC with distinct legal personality is reported in Block 2 of Modelo 720 as a “value or right representing a participation in the capital or net equity of foreign legal entities,” pursuant to Art. 42 ter of Royal Decree 1065/2007 (RGAT).

For Modelo 720 purposes, the LLC is treated as an entity with distinct legal personality — consistently with the approach in V3074-22.

The reporting obligation is triggered when the value of your Block 2 participation exceeds €50,000. Valuation uses the greater of:

• Liquidation value at December 31 of the fiscal year.
• Proportional net equity based on your membership interest (per the LLC’s balance sheet).
• Market or quoted value, if applicable.

Once you have filed an initial Modelo 720, you are not required to re-file in subsequent years unless the Block 2 value has increased by more than €20,000 relative to the last year filed, or your ownership has been extinguished.

Also relevant here is FATCA: the Spain-US intergovernmental FATCA agreement (Model 1 IGA, in force) requires US financial institutions to report the accounts of Spanish tax residents to the IRS, which then shares that information automatically with the AEAT. In practice, Spain receives information about US participations and accounts held by Spanish residents. [UNVERIFIED: the precise scope of FATCA reporting for participations in non-financial LLCs has not been confirmed in an official Spanish source.]

Finally, if you have received income through the LLC — whether by attribution or as a dividend — verify that it is correctly reflected in your IRPF. The AEAT cross-references Modelo 720 data against income tax filings.

For a deeper dive on overseas asset reporting obligations, see our guide on Modelo 720 and Modelo 721.

When an LLC Is a Good Structure, When It’s a Trap, and What We Recommend

After everything above, the natural question is: is it worth keeping a US LLC once you are a Spanish tax resident?

The honest answer is: it depends on your profile — and the Spanish advisory market tends to oversimplify in both directions (“the LLC is useless in Spain” and “the LLC is the perfect vehicle for paying less tax”).

When an LLC can make sense:

• US clients or contracts with real US substance: if your primary economic activity is in the US — employees, office, US contracts — the LLC can be a legitimate structure, and the Spanish tax consequences will depend on whether it is opaque (taxed on dividends when distributed) or transparent (income attributed in the year earned).
• Under the Beckham regime during the six-year window: foreign-source dividends are, in principle, outside the scope of Spanish taxation under Art. 93 LIRPF. An opaque LLC that accumulates profits during the six Beckham years and distributes in year seven can produce a legitimate tax-efficiency window — with careful planning and advice from someone who knows both Art. 93 LIRPF and Art. 8 LIS.
• Holding participations in US companies: an LLC holding interests in US entities can make sense as an investment vehicle, with Spanish tax arising as a dividend when distributed.

When an LLC is a trap:

• Freelancer or consultant with no US substance: if you work from Spain for European or Spanish clients and invoice through a US LLC, the AEAT has every argument available to recharacterize the arrangement. Art. 8 LIS risk, CFC risk if the LLC has minimal substance, and potential undeclared-income exposure on the classification of income that was never properly reported.
• Accumulating passive income in an LLC without substance: if you use the LLC as an investment wrapper for passive assets (dividends, interest, real estate) without real organization, Art. 91.2 LIRPF attributes all income to you regardless of distribution.
• Managing from Spain without a paper trail: even if your activity legitimately belongs in the US, if you cannot document that decisions are being made there, Art. 8 LIS can be triggered.

What we recommend at BMC:

Before deciding whether to maintain, restructure, or wind down a US LLC as a Spanish tax resident, the analysis needs to cover four layers: (1) classification of the LLC under Resolution BOE-A-2020-2108 — opaque or transparent; (2) Art. 8 LIS risk assessment based on where management decisions are actually made; (3) verification of the Art. 91 LIRPF thresholds and the composition of the LLC’s income; and (4) outstanding reporting obligations — Modelo 720, Block 2. Only with those four layers on the table can we give you an informed recommendation.

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If you own a US LLC and have moved your tax residency to Spain — or are considering doing so — BMC’s international tax team can walk you through this analysis. We work with US structures on a regular basis and understand both the Spanish rules (LIRPF, LIS, the treaty) and the US-side implications. The initial consultation is the starting point for determining whether your current structure creates avoidable exposure or, on the contrary, whether there is room for legitimate optimization.

See also our guides on the Beckham Law 2026 and Modelo 720 for overseas assets.