When a founder or investor who is a Spanish tax resident receives an offer for their US LLC or C-Corp, the first question that lands on my desk is always the same: can Spain tax that sale? The answer is yes — and the second question, which is the one that actually matters, is how much and how to structure it so the tax outcome is as efficient as possible within the law. This article covers the three main scenarios (general regime, Beckham, and holding/ETVE), US-side obligations, and the pre-sale planning structures that apply when there is enough runway to execute them.
Three mistakes that cost hundreds of thousands on an LLC sale
I’ve seen these same mistakes repeated by founders who came to Spain with their LLC intact and sold without planning:
Mistake 1: assuming that because the LLC is American, the US taxes the gain and Spain can’t touch it. Wrong. The US–Spain Double Tax Treaty (CDI, BOE-A-2019-15166) assigns Spain — as the state of residence of the seller — exclusive taxing rights over capital gains on interests in non-real-estate entities. The DGT confirmed this in unambiguous terms in V2353-20.
Mistake 2: not accounting for the currency impact. If you acquired the LLC for $500,000 when EUR/USD was 1.20, your cost basis in euros was €416,667. If you sell for $2,000,000 when EUR/USD is 1.05, the sale proceeds in euros are €1,904,762. Your taxable gain is not $1,500,000 (the dollar difference) but €1,488,095 (the euro difference). In this example, the dollar’s appreciation actually reduced the euro gain in your favor — but currency movement can just as easily work against you.
Mistake 3: conflating §1446(f) with the NIIT. The NIIT (§1411, 3.8%) applies only to US citizens and permanent residents. But §1446(f) — the 10% withholding on partnership interests sold by foreign persons — applies to every non-US seller who disposes of their interest in a multi-member LLC treated as a partnership. These are two distinct rules with distinct scopes. Mixing them up leads to incorrect closing preparation and escrow problems.
The baseline rule: Art. 13 US–Spain treaty — Spain taxes the gain
Article 13.4 of the Convention between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation (BOE-A-2019-15166, consolidated text with the 2019 Protocol) provides:
“Gains derived by a resident of a Contracting State from the alienation of property other than that referred to in paragraphs 1, 2, and 3 shall be taxable only in that State.”
Paragraphs 1, 2, and 3 cover real estate, permanent establishments, and ships/aircraft. Interests in a non-real-estate LLC or C-Corp fall under paragraph 4: exclusive taxation in the state of residence of the seller.
Binding ruling DGT V2353-20, dated July 14, 2020, applied this rule directly to a US LLC. The taxpayer, a Spanish tax resident, was a member of a Delaware LLC. The DGT concluded that the capital gain from the disposal of those interests “may only be taxed in Spain (the state of residence of the seller)”, regardless of the fact that the LLC was organized under Delaware law and operated in the US.
This exclusive Spanish taxing right has an immediate practical consequence: the tax planning for the sale is done through the lens of Spanish IRPF or IS, not the US Internal Revenue Code. The scenarios differ dramatically depending on the seller’s situation.
Scenario A: individual, general regime — savings base 19–28%
For an individual taxpayer under the general IRPF regime, the gain qualifies as a capital gain and is allocated to the savings tax base, taxed at the following rates (scale in effect for 2026):
| Gain tranche | Rate |
|---|---|
| Up to €6,000 | 19% |
| €6,001 – €50,000 | 21% |
| €50,001 – €200,000 | 23% |
| €200,001 – €300,000 | 27% |
| Above €300,000 | 28% |
Calculation basis. The acquisition cost is the original amount paid, expressed in euros at the official exchange rate on the acquisition date. The sale proceeds are the price converted to euros at the exchange rate on the closing date. Expenses and fees directly related to the acquisition and the disposal are deductible. There is no inflation adjustment for movable assets.
Loss offsetting. Capital losses from other assets (other shares, funds, crypto) can be offset against the LLC gain within the same savings base, reducing the effective taxable base.
Formal obligations. The gain is reported on Form 100, in the section for capital gains from foreign securities. If the LLC is a CFC or meets the controlled foreign company transparency criteria (Art. 91 LIRPF), prior income attributions may reduce the final capital gain.
Scenario B: individual, Beckham regime — foreign-source income, exempt
The special regime of Art. 93 LIRPF ( Beckham Law ) converts the taxpayer, for tax purposes, into a non-resident during the six years of the regime. The scope of taxation is limited to Spanish-source income.
Capital gains from the disposal of interests in entities incorporated under US state law are, by definition, foreign-source income. They do not enter the Spanish IRNR taxable base. The result: full exemption on the LLC gain throughout the six years of the Beckham regime.
In practice, this is the most extraordinary tax advantage of the regime for founders with interests in foreign entities: a €5 million gain on an LLC sold in Beckham Year 4 is taxed at zero in Spain.
Conditions for a robust exemption: (1) The interest must be in an entity domiciled outside Spain — a Delaware or California LLC qualifies without question. (2) The gain must not be reclassified as employment income: founder or investor interests without vesting tied to services rendered in Spain are capital gains from a foreign source. (3) The taxpayer must hold Beckham status in the tax year of the sale; in Year 7 they are taxed entirely as a general resident.
Scenario C: holding/ETVE structure — Art. 21 LIS 95% exemption
If the interest in the LLC or C-Corp is held through a Spanish holding company — particularly a Foreign Securities Holding Entity (ETVE) — the sale of that interest may qualify for the exemption under Art. 21 of Law 27/2014 on Corporate Income Tax (as amended by Law 7/2024, which reduced the exemption from 100% to 95%).
Art. 21 LIS requirements for capital gains:
- Minimum ownership of 5% (or acquisition cost exceeding €20 million), held for at least one year before disposal.
- The investee must have been subject to a tax equivalent to the Spanish IS at a minimum nominal rate of 10%. The Federal Corporate Income Tax (21%) meets this threshold for C-Corps. For pass-through LLCs, the DGT accepts the effective tax borne by the members, but requires case-by-case analysis.
- Does not apply if the investee is in a non-cooperative jurisdiction (tax haven). US states do not carry that designation.
Practical effect. 95% of the gain is exempt. The remaining 5% is taxed at the standard IS rate (25%), producing an effective rate on the total gain of 1.25%. In the Scenario A example (€1,600,000 gain), the IS liability would be €20,000 versus the €439,610 under the general IRPF regime.
The ETVE adds a further advantage: dividends distributed by the ETVE to non-resident shareholders out of exempt income are not subject to withholding in Spain (Art. 14.1.h LIRNR), making the structure particularly efficient for founders who will repatriate capital to their home country.
US side: §1411 NIIT and §1446(f) withholding
§1411 NIIT (Net Investment Income Tax, 3.8%)
IRC §1411 imposes a 3.8% additional tax on net investment income of US citizens and permanent residents (green card holders) whose modified adjusted gross income exceeds the applicable threshold ($200,000 for single filers / $250,000 for married filing jointly in 2026). It does not apply to foreign nationals without US status. For US citizens resident in Spain, the double taxation is managed through the Foreign Tax Credit (Form 1116): Spanish IRPF paid is credited against the US liability, including against the NIIT.
§1446(f) WHT (Withholding on partnership interest sale, 10%)
IRC §1446(f), enacted by the Tax Cuts and Jobs Act of 2017 and fully operative since 2023 for both publicly traded and non-publicly traded partnership interests, requires the buyer (or the partnership as withholding agent) to withhold 10% of the amount realized when the seller is a foreign person disposing of an interest in a US partnership .
A US multi-member LLC treated as a partnership for federal tax purposes is a partnership for §1446(f) purposes. It does not apply to C-Corps (whose sales are governed by §1445, FIRPTA, which is only relevant where there are substantial US real property interests, and in that case applies a 15% withholding on proceeds for foreign sellers).
Operational mechanics. At closing, the buyer withholds 10% of the sale price and remits it to the IRS (Forms 8288 / 8288-A). The seller claims that withholding as a payment on account in their US tax return. If the actual gain is less than 10% of the sale price — a common situation when the LLC has minimal US taxable assets — the seller can file Form 8288-B before closing to request a withholding certificate (reduced withholding), which the IRS typically issues within about 90 days.
Legal pre-sale structures: E&P push-up, interposed holding, Beckham timing
Pre-sale planning works when executed with enough lead time. Three levers are most effective:
1. Earnings & profits push-up (C-Corp)
A C-Corp with accumulated undistributed earnings and profits (E&P) has those profits embedded in the value of the shares. If the Spanish-resident shareholder sells the C-Corp for $5M, part of that price reflects the accumulated E&P. Under the general regime, the entire gain is taxed as a capital gain at 19–28%.
A dividend distribution prior to the sale — a push-up — extracts the E&P as a dividend before those profits get baked into the sale price. Under CDI Art. 10, US-source dividends are subject to withholding at source of 15% (5% if the recipient holds at least a 25% interest). For a Beckham taxpayer, that withholding is the total cost. For the general-regime resident, US dividends also fall in the savings base, but the 15% US withholding is creditable as double taxation relief. The comparative analysis — how much E&P to distribute versus how much to leave in the price — requires a simulation against the rates applicable to each scenario.
2. Interposed holding / ETVE
If the shareholder has at least one year before the sale, interposing a Spanish holding company that acquires the LLC interest allows access to the Art. 21 LIS exemption at the 1.25% effective rate. This makes sense when the expected gain exceeds €500,000 and the shareholder’s Beckham regime is close to expiring or has already expired.
Risk: The AEAT may apply Art. 15 LGT (conflict in the application of the rule — the Spanish general anti-avoidance provision) if the holding company lacks genuine economic substance beyond the tax saving. The holding must have a real business rationale: investment management, strategic decision-making, minimum resources.
3. Timing around Beckham Year 6
Year 6 is the last year with the exemption. The regime expires automatically at the end of that tax year — no extension, no renewal. If an M&A process could close in Year 6 or Year 7, agreeing a closing date before December 31 of Year 6 can mean millions of euros in difference. This timing negotiation must begin when the LOI is signed, not when the SPA is being negotiated.
Case study — “Vincent”: California LLC founder, $8M valuation, sells in Beckham Year 5
Profile. Vincent is a French national who has been a Spanish tax resident in Madrid since January 2022 (Beckham Year 1). He is the sole member of a California LLC (single-member LLC, disregarded entity for US IRC purposes, but treated as an opaque entity for Spanish tax purposes per DGT guidance). Acquisition cost: €150,000 (initial contribution). In 2026 (Year 5 of the regime) he receives a purchase offer for $8,000,000.
Exchange rate at closing: EUR/USD 1.08. Sale proceeds in euros: €7,407,407. Capital gain: €7,257,407.
| Scenario | Structure | Spanish tax liability | Effective rate |
|---|---|---|---|
| A – General regime (Year 7, after Beckham expires) | Direct sale, individual | ~€2,020,000 IRPF | 27.8% |
| B – Beckham Year 5 | Direct sale, individual | €0 | 0% |
| C – ETVE (holding with 18 months of ownership) | Holding sells LLC | €90,717 IS | 1.25% |
Scenario B in detail. The gain is exempt foreign-source income. On the US side, §1446(f) withholds $740,741 (10%) in the closing escrow. Vincent files Form 8288-B demonstrating that his LLC is a disregarded entity and his net American gain is minimal; partial or full refund from the IRS in approximately 90 days.
Scenario C in detail. The holding applies Art. 21 LIS: 95% of the €7,257,407 is exempt, leaving an IS taxable base of €362,870 and an IS liability of €90,717. If Vincent distributes the dividend while still within his Beckham regime, that dividend is Spanish-source income taxed at 19% IRNR — so the ETVE structure is more efficient if he defers the distribution or reinvests within the holding.
Case conclusion. Beckham Year 5, a direct sale is optimal for anyone repatriating capital. The ETVE wins if Beckham has already expired or if the shareholder plans to reinvest and defer the distribution.
Plan the sale before you sign the LOI
Selling a US LLC or C-Corp as a Spanish tax resident is a transaction that, with proper planning, can move from a 28% effective rate down to 1.25% — or to 0% — without circumventing any rule: the treaty, Art. 21 LIS, and the Beckham regime are legal instruments designed exactly for these situations. The difference between using them and not using them, on a $5–10 million transaction, can exceed two million euros.
The time to plan is not when the buyer has already signed the SPA. It is when the term sheet or the LOI is signed, with enough runway to execute structures that require minimum holding periods — one year for Art. 21 LIS, closing before December 31 of Beckham Year 6 — and to manage Form 8288-B with the IRS well in advance.
At BMC we work alongside our clients’ US tax advisers to coordinate both jurisdictions from the very first stage of the M&A process. If you hold an interest in a US LLC or C-Corp and are exploring a sale, request an initial consultation to review your scenario with the real numbers.
