If you’re a U.S. citizen living and working in Spain, you might be wondering how your employment taxation works. The rule of thumb when working abroad is paying employment social security taxes to your home country and host country, but what if we told you there’s a way to avoid that? With filing the right paperwork, you can essentially exempt your Spanish earned social security taxes.
Here’s how to make sure you don’t pay social securities taxes twice:
You’re paying into Spain’s social security system
If you’re registered as self-employed (aka autónomo) in Spain and you’re contributing to RETA–Spain’s social security system–then you’ve already paid into a retirement system. Who wants to pay twice for the same benefit?
That’s the foundation of your exemption. You need to be actively contributing to Spain’s system to qualify.
You get a Certificate of Coverage from Spain
Obtaining this certificate is your proof to the IRS that you’re covered by the Spanish system. It’s issued by Spain’s social security authority (Tesorería General de la Seguridad Social). You can request this document by filling out a form explaining that you’re a U.S. citizen working in Spain under the U.S.-Spain totalization agreement.
The turnaround may take a few weeks, but it’s essential. Without it, the IRS can deny your exemption and request a full U.S. self-employment tax from you.
You invoke the U.S.-Spain totalization agreement on your return
This step happens once you file your U.S. tax return.
Instead of completing a Schedule SE (which calculates self-employment tax), you attach a short statement to your 1040 explaining:
- That you’re self-employed in Spain
- That you’re active in Spain’s social security system
- That you’re invoking the U.S.- Spain totalization agreement
- That you have a Certificate of Coverage
Additionally, you can attach Form 2035 which is the official form for totalization treaty claims for backup. Although the IRS doesn’t always require this, it’s always good to have just in case.
Avoid paying taxes twice
This exemption is key to paying fair taxes — but it doesn’t happen automatically. You have to ask for it and prove that you’re eligible. This is a game changer for those working abroad, but keep in mind it only applies to social security taxes, not income tax. Make sure you’re not letting the IRS double dip – check your eligibility and file smart.
Leave a Reply