Spain and US Taxes: What American Expats Need to Know

Spain's top marginal income tax rate reaches 47% at the national level, with regional surcharges pushing it higher in some areas, so the Foreign Tax Credit usually covers the US tax owed on employment income. Spain offers a special flat tax regime known as the Beckham Law (Ley Beckham) to certain workers who relocate to Spain, taxing their Spanish-source income at a flat 24% for up to six years. Qualifying for the Beckham Law does not eliminate US tax obligations, and US citizens cannot use it to directly reduce their US tax, since the saving clause in the US-Spain tax treaty preserves the US right to tax its citizens. The US and Spain have a totalization agreement covering social security contributions, and the US-Spain treaty addresses pensions, dividends, and royalties. Spanish investment funds and ETFs are likely PFICs, which is worth knowing before you start investing locally.