If you’re a U.S. citizen moving to Spain under the Non-Lucrative Visa (NLV), you’re probably enjoying the idea of siestas, sangria, and sunshine. But what about taxes?
Spain is beautiful—but it doesn’t come tax-free. Once you’re considered a tax resident (meaning you spend more than 183 days in Spain per year), Spain will tax you on your worldwide income. That means all of your U.S. income is fair game.
What kind of U.S. income is taxed in Spain?
Being a Spanish tax resident, your global income includes:
- U.S. Employment or self-employment income
- U.S. Social security benefits
- U.S. Pensions (including IRAs and 401(k)s)
- Rental income from rental properties
- Dividends, interest, and capital gains from investments
Unfortunately, your retirement accounts and stock gains could also be taxed while living in Spain. While the U.S./Spain tax treaty helps you avoid double taxation, it doesn’t completely eliminate taxation, only coordinates it.
Spain sees U.S. LLC income differently
While transitioning to Spain should be smooth sailing, one of the trickiest parts of planning is working around LLCs. How Spain treats income from a U.S. Limited Liability Company (LLC) under the NLV can vary depending on how the LLC functions and how involved you are in the business.
1. Active LLC Owner
If you’re actively working and managing in your business, Spain is likely to ignore the U.S. “pass-through” treatment and reclassify your income as self-employment income. There are two tax consequences that can unfold.
- It may be taxed at progressive income tax rates, which rate up to 47%
- You may be required to register as an autónomo (a self-employed person) in Spain and pay Spanish social security contributions
This is more common for digital nomads, consultants, and remote workers who bill clients through an LLC.
2. Passive LLC Owner
If you aren’t involved in the day-to-day activities, the income is considered investment income. Spain might treat it as dividends or capital income instead.
- Avoids the need to pay Spanish Social Security
- Is taxed at capital income rates (19% to 28%, depending on how much is earned)
However–this treatment is less common and you’ll need to provide concrete proof you are not materially involved in the business.
Why it matters
Spain treats your tax situation different based on how involved you are in your business. That’s why its crucial that tax planning is taken care of meticulously and accurately. You could be caught off guard with higher tax rates and obligations without proper tax preparation.
Don’t get caught in the NVL confusion
Living in Spain is thrilling and has amazing perks. Don’t let the tax complexities sneak up on you! Work with a tax advisor who understands both U.S. tax law and Spanish residency rules, especially if you own an LLC or plan to work remotely. With the right guidance, you can enjoy life in Spain without tax surprises weighing you down.
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