The double taxation treaty between Spain and the United States

The current text is the treaty signed in Madrid on 22 February 1990 and published in the BOE on 22 December 1990, modified by the Protocol and its Memorandum of Understanding of 14 January 2013, published in the BOE on 23 October 2019 and in force since 27 November 2019. When someone tells you the treaty is from 1990 and another says it is from 2019, the 2 are partly right: it is the same treaty with the Protocol incorporated.

Its scope is narrow and you should be clear about it from the start: it only covers income taxes. On the Spanish side, the Personal Income Tax and the Corporate Tax, and by extension the Non-Resident Income Tax that taxes those living abroad. On the US side, federal income taxes.

What it leaves out is where most of the trouble comes from. The treaty does not cover the Wealth Tax, it does not cover the Inheritance and Gift Tax, and it does not cover the income taxes charged independently by US states, such as California or New York. If you inherit from a relative in the United States, or if you have to declare wealth in Spain, the treaty does not protect you from anything and it must be resolved with the domestic law of each place.

In the Inheritance and Gift Tax there is not 1 single figure for all of Spain: each autonomous community approves its own rates and reductions, and Navarra and the Basque Country apply their own regional regulations. Knowing which regulations apply to you is the first step, and it is not always the one where the money is located.

This is the question that must be answered before any other, because the same operation is taxed differently depending on the answer. The tax resident in Spain declares all their worldwide income here, including the American one. The tax resident in the United States only declares in Spain what they obtain from Spanish sources.

The treaty does not invent its own criteria: first each country applies its domestic law. Spain considers you a resident if you stay more than 183 days in Spanish territory during the calendar year, if you have the main core of your economic interests here, or if your non-separated spouse and dependent minor children reside in Spain. Sporadic absences count as days of stay unless you prove your tax residency in another country with an official certificate.

If the 2 countries consider you a resident at the same time, a conflict opens up that is resolved by the tie-breaker rules of article 4 of the treaty, and they are applied in strict order, not by choice: first, where you have a permanent home available to you; if you have 1 in the 2, where your centre of vital interests is, which are your closest personal and economic relations; if it cannot be determined, where you habitually live; if you live in the 2 or neither, which country you are a national of; and only if you are a national of the 2 or neither do the authorities decide by mutual agreement. Nationality is the 4th criterion, not the 1st.

The Protocol adds an important nuance for those who have a US passport or a permanent resident card, the well-known green card: for the purposes of the treaty you are only considered a resident of the United States if you have a substantial presence there or if the tie-breaker attributes that residency to you. Having the passport, by itself, does not make you a US resident in the eyes of Hacienda (the Spanish tax authority).

If your case is borderline, do not resolve it by guessing. In the Tax Residency Analysis and Double Taxation Conflicts file we prepare a report with your personal and economic situation so that you can support your position before a requirement, and you can see the updated amount in that same file.

Here is the part of the treaty that moves the most money, and it is where the Protocol changed the rules. Dividends allow withholding in the country of origin with a general cap of 15% of the gross amount, which drops to 5% when the recipient is a company that owns at least 10% of the voting shares of the one distributing them.

The Protocol also introduced 2 cases of total exemption, with no withholding at source: when the receiving company owns at least 80% of the voting capital for a 12-month period ending on the date the right to the dividend is determined, and when the recipient is a pension fund exempt from taxation or subject to a 0% rate. Both cases require passing the limitation on benefits clause, designed to prevent a shell company from piggybacking on the treaty.

Interest and royalties are generally taxed only in the country where the recipient resides: 0% withholding at source. The exception is in the United States, which retains the possibility of taxing so-called contingent interest up to 10% of its gross amount and certain interest from REMIC loans according to its domestic law. For an individual with a normal fixed-income portfolio, the practical rule is that the interest does not carry US withholding.

If you are worried about the limitation on benefits clause, keep in mind that the treaty itself automatically considers any individual a qualified person. An individual does not have to fight that article: it is a filter designed for corporate structures.

The reduced rate does not fall on its own. You have to prove residency before collecting: the resident in Spain who invests in the United States gives the Form W-8BEN to their broker or payer, and the resident in the United States who collects from a Spanish entity gives them the tax residency certificate for the purposes of the treaty. Without that paper, the US payer withholds the general 30% rate provided by American law for non-residents, and the Spanish entity withholds without discount.

When too much has already been withheld, it is recovered: in Spain with the modelo 210 requesting the refund of the difference between what was withheld and the treaty cap, and in the United States before the IRS. They are 2 different counters and cannot be crossed: the Tax Agency does not refund American tax.

No. The treaty includes a saving clause by which the United States reserves the right to tax its citizens as if the treaty did not exist, wherever they live. Moving to Spain does not close your file with the IRS: you continue to file your annual American return for your worldwide income.

The practical consequence is harsh and almost no one knows it in time: if the United States taxes you because of your citizen status, that tax does not give you the right to a double taxation deduction in the Spanish IRPF. It is the United States, and not the Tax Agency, that must correct that double taxation, and it does so by discounting the tax paid in Spain on your American return. If you try to discount in Spain what you paid in the United States for being a citizen, they will reject it.

For that there is Form 1116, which applies the foreign tax credit on the American return, and Form 8833, which notifies the IRS that you are taking a treaty-based position. The saving clause has specific exceptions: it does not affect, among others, the double taxation deduction, non-discrimination or the mutual agreement procedure.

A warning for anyone who thinks that renouncing citizenship solves the problem: the express 10-year limit included in the original 1990 text was removed by the Protocol in force since 2019, so the way out is not resolved by letting a period pass. Whoever renounces remains subject to US expatriation regulations, and it is advisable to analyse the case before taking the step.

And reporting obligations are not waived. As a resident in Spain you will have to submit the modelo 720 and the modelo 721 if your assets, rights or virtual currencies abroad exceed the threshold, and as a person subject to American law, the FBAR when the aggregate balance of your accounts outside the United States exceeds $10,000. They are informative returns: you do not pay with them, but not submitting them is expensive.

You have to distinguish 3 things that the client usually puts in the same bag, because the treaty treats them differently.

The pension from a previous private employment is taxed only in the country where the recipient resides. If you live in Spain and collect a private American pension, you declare it here, in your modelo 100, and the United States should not tax it, unless you are a US citizen and the saving clause comes into play, in which case it is the United States that has to correct it.

US Social Security (Seguridad Social) payments follow another rule: the treaty allows them to be taxed also by the country that pays them, that is, the United States. You, as a resident in Spain, declare them here and deduct the tax borne there. It is the most repeated mistake in this matter, because many people assume that Social Security is exempt in Spain, and it is not.

The pension for having worked for the US Administration, the so-called public service pension, is taxed only in the United States, with 1 exception: if you are a resident in Spain and also a Spanish national, it is taxed only in Spain. When the pension is exempt here because the treaty attributes it to the United States, the Tax Agency still takes it into account to calculate the rate applied to the rest of your income. It is the exemption with progression: you do not pay for that pension, but it raises the rate of everything else, and that is why it must be declared even if it is exempt.

If you collect in dollars, the amount is converted to euros for the Spanish return. Managora does the calculation and the conversion, and checks which part of your pension is public and which part is not, which is what decides the applicable regime.

The gain from selling a property can be taxed by the country where the property is located, without a treaty cap, and also by the country of residence, which is the one that then has to eliminate double taxation by deducting what was paid abroad. It is shared taxation, not exclusive.

If you reside in the United States and sell a flat in Spain, the buyer is obliged to withhold 3% of the price and pay it with the modelo 211 within 1 month from the transfer. Then it is your turn to submit the modelo 210: the deadline is 3 months and does not start on the day of the sale, but once the month that the rule reserves for the buyer to pay that 3% has elapsed. In that period you have to calculate the real gain and, if the 3% withheld exceeds the quota, ask for the refund of the difference.

The treaty also allows Spain to tax the gain from selling shares or participations of a company whose assets consist, directly or indirectly, mainly of real estate located in Spain. Selling the company instead of the bricks does not take the operation out of Spain.

The rest of the capital gains, those that do not come from real estate or real estate companies or a permanent establishment, are taxed only in the country of residence. A resident in the United States who sells normal Spanish listed shares is not taxed in Spain for that gain.

And if you have an unrented flat in Spain and live in the United States, remember that Hacienda imputes an income to you for the mere fact of having it and it must be declared with the modelo 210 even if you do not earn a single euro with it. The deadline for that return has changed in 2026 and it is worth noting: you have it in the forms table.

The treaty provides for a mutual agreement procedure: you present the case to the competent authority of your country of residence and the 2 administrations try to reach an agreement. It is an independent route from internal appeals, and it can be requested even if the settlement is already final in the administrative route.

The novelty brought by the Protocol is that this procedure can no longer be left in a drawer: if the 2 authorities do not reach an agreement within 2 years, the matter goes to binding arbitration before a commission of 3 people, 1 appointed by each State and a president chosen by both. Before 2019 there was no deadline or consequence for not resolving.

Getting there is rare and almost always avoidable: most double taxation cases are resolved earlier, by properly proving residency, applying the withholding cap at source and correctly calculating the deduction. Managora prepares the file, submits the forms and, if necessary, drafts and submits the mutual agreement procedure request for you.