The definitive US expat tax guide for Spain — manage your simultaneous obligations to the IRS and the Spanish Agencia Tributaria

American citizens and green card holders are the only large expat group in the world who must file taxes in their home country regardless of where they live. Living in Spain means managing two complete tax systems simultaneously: the IRS taxes worldwide income under citizenship-based taxation, while the Spanish AEAT taxes all Spanish-source and worldwide income of Spanish residents. FBAR penalties for undisclosed foreign accounts can reach 50% of the account balance per year; missing a Beckham Law deadline permanently forfeits a six-year tax saving that can exceed $200,000.

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Why BM Consulting

Specialised advice and personal service

BMC advises US citizens and LPRs on their dual tax position in Spain: residency analysis, Beckham Law application and IRS interaction, FBAR and Form 8938 preparation, Foreign Tax Credit and FEIE optimisation, IRPF annual returns, Modelo 720, and coordination with a US CPA for IRS filings.

  • US citizens and green card holders are taxed by the IRS on worldwide income regardless of residency — the Spain-US Double Tax Convention (1990, BOE-A-1990-27170) mitigates but does not eliminate this obligation.

  • FBAR (FinCEN Form 114) must be filed if aggregate foreign financial account balances exceed $10,000 at any point during the year; wilful non-compliance penalties can reach 50% of the account balance per year.

  • Form 8938 (FATCA) reports specified foreign financial assets above $200,000 (non-US resident threshold) as an attachment to IRS Form 1040.

  • The Beckham Law (Article 93 LIRPF, Law 28/2022) is technically available to US citizens relocating to Spain for work but creates complex interactions with the IRS saving clause in the 1990 treaty that must be modelled individually.

How we work

From first contact to case completion

  1. Dual-system position analysis (IRS + AEAT)

    We map your entire income profile against both tax systems: Spanish IRPF residency determination, US citizenship-based taxation obligations, application of the 1990 Convention to each income category (employment, dividends, interest, capital gains, pensions, real estate income), and identification of the treaty's saving clause impact on each item. We identify any existing FBAR or Form 8938 non-compliance history for potential Streamlined Procedures.

  2. Beckham Law evaluation with IRS interaction modelling

    Where you are relocating for employment, we model the Beckham Law (24% flat rate, foreign-source income exempt in Spain) against your US tax obligations. We specifically calculate whether the foreign-source income exempt in Spain — but still taxable in the US — creates an overall disadvantage versus standard IRPF combined with maximum Foreign Tax Credits, taking into account your specific income mix and marginal US tax bracket.

  3. US compliance: FBAR, Form 8938, and IRS returns

    We prepare or coordinate with your US CPA: FinCEN Form 114 (FBAR) via the BSA E-Filing portal, Form 8938 (FATCA) as part of Form 1040, Foreign Tax Credit calculation (Form 1116), FEIE election analysis (Form 2555), Schedule B for foreign interest and dividends, and FinCEN/IRS Streamlined Procedures for non-filers where applicable.

  4. Spanish IRPF return and Modelo 720

    We prepare your Spanish IRPF return (Modelo 100) with correct treatment of US-source income: dividends from US stocks, interest from US bank accounts, gains from US mutual funds, and distributions from US retirement accounts. We file Modelo 720 for your US financial holdings (bank accounts, 401k, IRA, brokerage) and any US real estate, ensuring consistency with FBAR and Form 8938 disclosures.

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The problem

American citizens and green card holders are the only large expat group in the world who must file taxes in their home country regardless of where they live. Living in Spain means managing two complete tax systems simultaneously: the IRS taxes worldwide income under citizenship-based taxation, while the Spanish AEAT taxes all Spanish-source and worldwide income of Spanish residents. FBAR penalties for undisclosed foreign accounts can reach 50% of the account balance per year; missing a Beckham Law deadline permanently forfeits a six-year tax saving that can exceed $200,000.

Our solution

BMC advises US citizens and LPRs on their dual tax position in Spain: residency analysis, Beckham Law application and IRS interaction, FBAR and Form 8938 preparation, Foreign Tax Credit and FEIE optimisation, IRPF annual returns, Modelo 720, and coordination with a US CPA for IRS filings.

Process

How we do it

1

Dual-system position analysis (IRS + AEAT)

We map your entire income profile against both tax systems: Spanish IRPF residency determination, US citizenship-based taxation obligations, application of the 1990 Convention to each income category (employment, dividends, interest, capital gains, pensions, real estate income), and identification of the treaty's saving clause impact on each item. We identify any existing FBAR or Form 8938 non-compliance history for potential Streamlined Procedures.

2

Beckham Law evaluation with IRS interaction modelling

Where you are relocating for employment, we model the Beckham Law (24% flat rate, foreign-source income exempt in Spain) against your US tax obligations. We specifically calculate whether the foreign-source income exempt in Spain — but still taxable in the US — creates an overall disadvantage versus standard IRPF combined with maximum Foreign Tax Credits, taking into account your specific income mix and marginal US tax bracket.

3

US compliance: FBAR, Form 8938, and IRS returns

We prepare or coordinate with your US CPA: FinCEN Form 114 (FBAR) via the BSA E-Filing portal, Form 8938 (FATCA) as part of Form 1040, Foreign Tax Credit calculation (Form 1116), FEIE election analysis (Form 2555), Schedule B for foreign interest and dividends, and FinCEN/IRS Streamlined Procedures for non-filers where applicable.

4

Spanish IRPF return and Modelo 720

We prepare your Spanish IRPF return (Modelo 100) with correct treatment of US-source income: dividends from US stocks, interest from US bank accounts, gains from US mutual funds, and distributions from US retirement accounts. We file Modelo 720 for your US financial holdings (bank accounts, 401k, IRA, brokerage) and any US real estate, ensuring consistency with FBAR and Form 8938 disclosures.

5

Retirement account planning: 401(k), IRA, Roth IRA

We analyse the Spanish tax treatment of distributions from each US retirement vehicle under Article 20 of the 1990 Convention, model the timing of drawdowns to minimise combined IRS and IRPF liability, and flag the Roth IRA challenge (distributions are tax-free in the US but may not be exempt under Spanish law, as Spain has no equivalent vehicle).

1990
Year of the Spain-US Double Tax Convention (in force)
$10,000
FBAR threshold for foreign account disclosure
$126,500
2024 Foreign Earned Income Exclusion ceiling
24%
Beckham Law flat rate on Spanish-source income

I had been living in Barcelona for four years without filing my FBAR or declaring my US brokerage account in Modelo 720. BMC handled the Streamlined Procedures with the IRS, regularised my Spanish position, and set up a clean filing system for both jurisdictions going forward. The process was much less painful than I expected.

Sarah Mitchell VP of Product, Technology company, Barcelona

The bilateral tax relationship between the United States and Spain is governed by the Convention between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, signed in Madrid on 22 February 1990 and entering into force on 21 November 1990 (BOE-A-1990-27170).

The 1990 Convention follows the OECD Model Convention with important modifications for US practice, most notably the saving clause in Article 1.4, which preserves the US right to tax its citizens and residents as if the Convention had not entered into force — overriding most treaty benefits for US persons on their US-source income and certain foreign-source income. This clause is the defining feature of US tax treaties and the fundamental reason why planning for US expats in Spain is more complex than for nationals of other countries.

Key citation: Convenio entre el Reino de España y los Estados Unidos de América para evitar la doble imposición y prevenir la evasión fiscal respecto de los impuestos sobre la renta, BOE-A-1990-27170. No formal protocols of amendment have been adopted; interpretive notes exist on specific articles.

Citizenship-based taxation: why Americans are different

Nearly every country in the world taxes its residents, not its citizens. If a French citizen moves to Germany, France stops taxing their income (with limited exceptions). The United States is the great exception: US citizens and green card holders (Lawful Permanent Residents) owe US federal income tax on their worldwide income regardless of where they live.

This citizenship-based taxation (CBT) means that a US citizen who becomes a Spanish tax resident must comply with two complete tax systems simultaneously: Spanish IRPF on worldwide income, and US federal income tax also on worldwide income. The 1990 Convention provides mechanisms to prevent the same euro of income from being taxed twice — primarily through the Foreign Tax Credit — but the filing obligations in both countries are independent and the management burden is real.

The five core obligations for US citizens in Spain

1. IRS Form 1040: filing your US return from Spain

Every US citizen and LPR abroad must file Form 1040 annually. The automatic extension for overseas filers pushes the filing deadline to 15 June (from the standard 15 April), with an additional extension available to 15 October on request.

Your Form 1040 must include all worldwide income: Spanish salary, Spanish bank interest, dividends from Spanish or US stocks, capital gains from selling property in either country, and distributions from US retirement accounts. The mechanisms for reducing or eliminating US tax on income already taxed in Spain are real and effective — but require proper application and documentation.

2. FBAR: reporting your Spanish bank accounts to FinCEN

The Report of Foreign Bank and Financial Accounts (FinCEN Form 114), commonly called the FBAR, must be filed by any US Person who holds or has signature authority over foreign financial accounts with an aggregate balance exceeding $10,000 at any point during the year.

Living in Spain means you have Spanish bank accounts. If those accounts ever collectively hold more than $10,000 (approximately €9,200 at current rates), you must file the FBAR by 15 April (automatic extension to 15 October). The FBAR is filed electronically via the BSA E-Filing System — not with the IRS.

Penalties for willful non-filing are among the most severe in US tax law: the greater of $100,000 or 50% of the highest account balance per year of non-compliance. For a US expat with €100,000 in Spanish accounts who fails to file for three years, the theoretical maximum willful penalty is €150,000 — equivalent to the entire account balance.

3. Form 8938 (FATCA): reporting specified foreign financial assets

The Foreign Account Tax Compliance Act (FATCA, enacted 2010) requires taxpayers to report specified foreign financial assets on Form 8938, filed as part of Form 1040. For Americans living outside the US (as a non-resident filer), the filing thresholds are:

  • More than $200,000 in specified foreign financial assets on the last day of the tax year, or
  • More than $300,000 at any point during the year

Reportable assets include foreign bank accounts, foreign stocks, foreign investment funds, foreign insurance with cash value, and interests in foreign partnerships or trusts. Your Spanish investment portfolio, pension plan (plan de pensiones), and any financial assets held through Spanish entities are all potentially reportable.

4. Beckham Law for US citizens: opportunity and IRS tension

The Beckham Law offers professionals relocating to Spain a flat 24% rate on Spanish-source income for six years, with complete exemption on foreign-source income under Spanish law. For a US professional earning €150,000 in Spain, the annual saving versus standard IRPF is approximately €34,500.

The tension with US CBT arises specifically for the foreign-source income exemption: income that Spain treats as exempt under Beckham Law (e.g., dividends from US stocks, US bank interest, gains from US real estate) remains fully taxable in the US, and because no Spanish tax was paid on it, there is no Foreign Tax Credit to offset the US liability.

This means: a US citizen under Beckham Law with $50,000 of US dividend income pays 0% in Spain but remains liable for the full US federal rate (potentially 15-20% for qualified dividends plus net investment income tax). The analysis of whether Beckham Law is beneficial for a US citizen depends heavily on the ratio of Spanish-source to US-source income.

5. Modelo 720 and alignment with FBAR/Form 8938

Modelo 720 is Spain’s overseas asset disclosure form, requiring Spanish tax residents to report foreign assets above €50,000 per category. For a US citizen in Spain, this means disclosing:

  • US bank and brokerage accounts (Category 1 — financial accounts)
  • 401(k), IRA, Roth IRA, mutual funds (Category 2 — securities and financial rights)
  • US real estate (Category 3)

These same assets must also be disclosed on FBAR and potentially Form 8938. The three declarations must be internally consistent: the same account, same balance, declared the same way to the AEAT, the IRS, and FinCEN. BMC coordinates all three filings to ensure coherence.

Retirement account planning in Spain

The 1990 Convention’s Article 20 preserves the tax-deferred character of qualifying retirement plans:

VehicleSpanish treatment while accumulatingDistribution treatment in Spain
401(k) / 403(b)Deferred — no Spanish taxRendimiento del trabajo (employment income)
Traditional IRADeferred — no Spanish taxRendimiento del trabajo (employment income)
Roth IRADeferred — uncertainPotentially taxable — no Spanish equivalent
US Social SecurityArticle 19.1: Spain as residence stateTaxable in IRPF
US government pensionArticle 19.2: US retains taxing rightUS taxable; credit in Spain

Foreign Tax Credit vs Foreign Earned Income Exclusion

MechanismBest forLimitation
Foreign Tax Credit (Form 1116)Capital income, high-rate Spanish taxesExcess credits carry forward/back with rules
FEIE (Form 2555)Employment income, Beckham Law holdersCannot also use FTC on excluded income

Under Beckham Law: Spanish rate is 24% on employment income. If your US marginal rate is above 24%, the FTC will not fully cover the US liability on Spanish employment income. The FEIE excludes up to $126,500 of earned income entirely from the IRS base, which may generate a better outcome. Individual modelling by a professional who understands both systems is essential.

Working with BMC

BMC coordinates Spanish tax compliance (IRPF, Modelo 720, Patrimonio) with the US-side obligations handled by your CPA. We provide your CPA with the Spanish tax return and Form 720 documentation in a format designed for seamless IRS credit calculations. We also advise on Beckham Law applications and the full Streamlined Procedures process for non-filers.

Contact the BMC tax team for your initial US expat tax consultation in Spain.

What comes next

FAQ

Frequently asked questions

Yes. The United States applies citizenship-based taxation — one of only two countries in the world (along with Eritrea) to do so. All US citizens and lawful permanent residents (green card holders) must file annual federal income tax returns (Form 1040) and report their worldwide income, regardless of where they live. The 1990 Spain-US Double Tax Convention contains a saving clause (Article 1.4) that preserves the US's right to tax its citizens as if the treaty did not exist for most provisions. You may owe little or no US tax after applying the Foreign Tax Credit or the Foreign Earned Income Exclusion, but the filing obligation remains. Failure to file attracts substantial penalties.
The FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts) must be filed by any US Person who has a financial interest in, or signature authority over, foreign financial accounts with an aggregate value exceeding $10,000 at any point during the calendar year. Your Spanish bank accounts — checking, savings, brokerage, and pension accounts — are all reportable if the total exceeds the threshold. Non-willful violation: up to $10,000 per violation (per account, per year). Willful violation: the greater of $100,000 or 50% of the account balance per year. The IRS Streamlined Filing Compliance Procedures allow non-wilful non-filers to come into compliance with reduced penalties; BMC can coordinate this with your US CPA.
Form 8938 (Statement of Specified Foreign Financial Assets) is filed with your IRS Form 1040 and reports a broader range of foreign financial assets than the FBAR. For US persons living outside the US (like expats in Spain), the thresholds are: file if the total value of specified foreign financial assets exceeds $200,000 on the last day of the tax year or $300,000 at any point during the year. Specified assets include foreign bank accounts (overlapping with FBAR), foreign stocks and securities, foreign mutual funds, foreign partnerships and trusts, and foreign insurance contracts with cash value. Both FBAR and Form 8938 may be required for the same assets — they are complementary, not alternative, filings. Failure to file Form 8938 carries a $10,000 penalty per form, rising to $50,000 for continued failure after IRS notification.
You can apply for it — nationality is irrelevant to the Beckham Law eligibility test. The requirements under Article 93 LIRPF are: not having been a Spanish tax resident in any of the previous ten fiscal years, relocating to Spain for a qualifying reason (employment contract, startup visa, digital nomad work, or non-controlling directorship), and filing Form Modelo 149 with the AEAT within six months of starting activity. However, you must carefully model the interaction with your IRS obligations before applying. Under Beckham Law, foreign-source income is exempt from Spanish tax — but the 1990 treaty's saving clause means the IRS still taxes that income. Because you generate no Spanish tax credit on the foreign-exempt income, you may face US tax on it without an offsetting Spanish credit. For professionals whose income is predominantly Spanish-source, Beckham Law remains very attractive. For those with significant US-source income, individual modelling is essential.
Article 20 of the 1990 Spain-US Convention recognises the tax-deferred status of qualifying pension plans in the partner state. This means that while your 401(k), Traditional IRA, or SEP-IRA funds remain in the plan and undistributed, no Spanish tax applies to the accruing growth. When you take distributions, Article 19 (pensions and annuities) allocates taxing rights to Spain as your state of residence (except for US government pension income, which the US retains the right to tax under Article 19.2). Distributions are treated as rendimiento del trabajo (employment income) in your Spanish IRPF return. Roth IRA distributions present a special challenge: they are tax-free in the US, but Spain has no equivalent Roth concept and the 1990 Convention does not contain an explicit Roth exemption, so the AEAT may treat distributions as taxable employment income. Planning the timing and structure of distributions before establishing Spanish residency is strongly advisable.
The primary mechanism is the Foreign Tax Credit (Form 1116), which allows you to deduct Spanish taxes paid from your US federal tax liability on the same income. If your Spanish effective tax rate equals or exceeds your US marginal rate — which is common given Spain's progressive IRPF rates reaching 47% — the FTC will fully eliminate the residual US tax on Spanish-source income, leaving you paying only Spanish rates. For employment income, the Foreign Earned Income Exclusion (Form 2555) can alternatively exclude up to $126,500 (2024) of earned income from your IRS taxable base, which may be more efficient if your effective Spanish rate is lower (e.g. under the Beckham Law's flat 24%). BMC works alongside your US CPA to model both approaches and file both returns consistently.
Yes, almost certainly. Modelo 720 requires Spanish tax residents to disclose overseas assets exceeding €50,000 per category: bank accounts, securities and financial rights, and real estate. Your US bank accounts fall in Category 1, your 401(k) and IRA and brokerage accounts in Category 2, and any US real estate in Category 3. The values used must be consistent with those reported on your FBAR (FinCEN 114) and Form 8938. The Modelo 720 is a disclosure form — no additional tax is due on filing — but non-compliance attracts fixed penalties per item not disclosed, and the AEAT can treat undisclosed amounts as unexplained wealth subject to income tax in the most severe cases.

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Frequently asked questions

Questions about US Expat Tax Guide: Living in Spain 2026

Yes. The United States applies citizenship-based taxation — one of only two countries in the world (along with Eritrea) to do so. All US citizens and lawful permanent residents (green card holders) must file annual federal income tax returns (Form 1040) and report their worldwide income, regardless of where they live. The 1990 Spain-US Double Tax Convention contains a saving clause (Article 1.4) that preserves the US's right to tax its citizens as if the treaty did not exist for most provisions. You may owe little or no US tax after applying the Foreign Tax Credit or the Foreign Earned Income Exclusion, but the filing obligation remains. Failure to file attracts substantial penalties.
The FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts) must be filed by any US Person who has a financial interest in, or signature authority over, foreign financial accounts with an aggregate value exceeding $10,000 at any point during the calendar year. Your Spanish bank accounts — checking, savings, brokerage, and pension accounts — are all reportable if the total exceeds the threshold. Non-willful violation: up to $10,000 per violation (per account, per year). Willful violation: the greater of $100,000 or 50% of the account balance per year. The IRS Streamlined Filing Compliance Procedures allow non-wilful non-filers to come into compliance with reduced penalties; BMC can coordinate this with your US CPA.
Form 8938 (Statement of Specified Foreign Financial Assets) is filed with your IRS Form 1040 and reports a broader range of foreign financial assets than the FBAR. For US persons living outside the US (like expats in Spain), the thresholds are: file if the total value of specified foreign financial assets exceeds $200,000 on the last day of the tax year or $300,000 at any point during the year. Specified assets include foreign bank accounts (overlapping with FBAR), foreign stocks and securities, foreign mutual funds, foreign partnerships and trusts, and foreign insurance contracts with cash value. Both FBAR and Form 8938 may be required for the same assets — they are complementary, not alternative, filings. Failure to file Form 8938 carries a $10,000 penalty per form, rising to $50,000 for continued failure after IRS notification.
You can apply for it — nationality is irrelevant to the Beckham Law eligibility test. The requirements under Article 93 LIRPF are: not having been a Spanish tax resident in any of the previous ten fiscal years, relocating to Spain for a qualifying reason (employment contract, startup visa, digital nomad work, or non-controlling directorship), and filing Form Modelo 149 with the AEAT within six months of starting activity. However, you must carefully model the interaction with your IRS obligations before applying. Under Beckham Law, foreign-source income is exempt from Spanish tax — but the 1990 treaty's saving clause means the IRS still taxes that income. Because you generate no Spanish tax credit on the foreign-exempt income, you may face US tax on it without an offsetting Spanish credit. For professionals whose income is predominantly Spanish-source, Beckham Law remains very attractive. For those with significant US-source income, individual modelling is essential.
Article 20 of the 1990 Spain-US Convention recognises the tax-deferred status of qualifying pension plans in the partner state. This means that while your 401(k), Traditional IRA, or SEP-IRA funds remain in the plan and undistributed, no Spanish tax applies to the accruing growth. When you take distributions, Article 19 (pensions and annuities) allocates taxing rights to Spain as your state of residence (except for US government pension income, which the US retains the right to tax under Article 19.2). Distributions are treated as rendimiento del trabajo (employment income) in your Spanish IRPF return. Roth IRA distributions present a special challenge: they are tax-free in the US, but Spain has no equivalent Roth concept and the 1990 Convention does not contain an explicit Roth exemption, so the AEAT may treat distributions as taxable employment income. Planning the timing and structure of distributions before establishing Spanish residency is strongly advisable.
The primary mechanism is the Foreign Tax Credit (Form 1116), which allows you to deduct Spanish taxes paid from your US federal tax liability on the same income. If your Spanish effective tax rate equals or exceeds your US marginal rate — which is common given Spain's progressive IRPF rates reaching 47% — the FTC will fully eliminate the residual US tax on Spanish-source income, leaving you paying only Spanish rates. For employment income, the Foreign Earned Income Exclusion (Form 2555) can alternatively exclude up to $126,500 (2024) of earned income from your IRS taxable base, which may be more efficient if your effective Spanish rate is lower (e.g. under the Beckham Law's flat 24%). BMC works alongside your US CPA to model both approaches and file both returns consistently.
Yes, almost certainly. Modelo 720 requires Spanish tax residents to disclose overseas assets exceeding €50,000 per category: bank accounts, securities and financial rights, and real estate. Your US bank accounts fall in Category 1, your 401(k) and IRA and brokerage accounts in Category 2, and any US real estate in Category 3. The values used must be consistent with those reported on your FBAR (FinCEN 114) and Form 8938. The Modelo 720 is a disclosure form — no additional tax is due on filing — but non-compliance attracts fixed penalties per item not disclosed, and the AEAT can treat undisclosed amounts as unexplained wealth subject to income tax in the most severe cases.
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