ACM NTK seminar Fiscal obligations 2018 sevilla

Fiscal obligations of
U.S. Citizens Residents in Spain

Alejandra Pastor - Antonio Rodríguez
Fiscal Obligations of U.S. Citizens Residents in Spain
Form
1040
FBAR
FinCEN
114
IRPF
Modelo
100
Modelo
720
Fiscal obligations

Fiscal Obligations of U.S. Citizens Residents in Spain
Other fiscal obligations
Estate tax
Gift tax
Patrimonio
Sucesiones
donaciones

Tax residency in Spain
Tax year: from January 1st to December 31st.
Who is tax resident in Spain?
1. Individuals that are present in the Spanish territory for more that 183
days during the calendar year, or
2. Those who have the main center of their economic interest in Spain.
3. Thus, there is a presumption of tax residency when the spouse and
children are tax resident in Spain.
The status of resident or non resident will be held during all the natural
year.
5

Tax residents in Spain
Taxed for their worldwide income regardless where the income
has been generated or the tax residency of the tax payer.
Tax obligations:
• Personal Income Tax return (IRPF)
• Informative return for assets and rights held abroad (720)
Non tax residents in Spain
Taxed for Spanish source income.
Tax form 210
6
Tax residency in Spain

Income Limit Requirements
Employment income 22.000 € One payer (2 <1.500 €)
12.000 € • More one payer
• Compensatory payments from spouse
• No withholding
• Income subject to flat tax rates
• Investment income
• Capital gains
1.600 € Subject to withholding income.
• Imputed rental income
• Income Treasury notes
1.000 €
• Capital income
• Professional income
• Capital gains
1.000 €
• Capital loss < 500 €
12/1/2018
7
You do not have to file PIT if…

Tax form D-100 from April 4 to July 2 2018
Request your tax info and draft of the return to the AEAT (REVIEW
INFO)
Result of the return:
To be refund: include an account to receive the payment (>6 months
interest)
To pay:
Pay 100 % debt (possibility of domicile, before June 26, and
charged last day)
Request to pay in 2 installments with no interest
60% when filing
40% November 6th
Payment suspended on behalf of the spouse (marriage not
separated)
Filing requirements

Possibility of filing joint or individual return
Option to be taxed jointly (it applies to all members of the family unit)
Does not condition future tax years
Family unit
Marriage Spouses • Children under age
• children judicially disable
Non
marriage
Father and
mother
Children living with one or another
Family status

Personal Income Tax
General taxable base
Employment income
Income from economic
activities
Rental income
Imputed income
Capital gains not derived
from transmission of
assets
Special taxable base
Savings and other
investment income:
interest, dividends.
Capital gains.

TAX RATE APPLICABLE TO THE GENERAL TAXABLE BASE
FROM TO TAX RATE
0 12.450 € 19,5 %
12.450 € 20.200 € 24 %
20.000 € 35.200 € 30 %
35.200 € 50.000 € 37,5 %
50.000 € 60.000 € 38 %
60.000 € 120.000 € 46%
120.000 € - 48%
11
TAX RATE APPLICABLE TO THE SPECIAL TAXABLE BASE
FROM TO TAX RATE
0 6.000 € 19 %
6.000 € 50.000 € 21 %
50.000 € - 23 %
Tax Rates in Andalucía

• Wages and salaries received as compensation under a
labor contract paid in cash or in kind.
• Employment related income: maternity and paternity
pays; Social Security pensions, state pensions, etc.
• Directors fees, pension received from and ex-spouse.
Employment social security contributions are deductible.
Foreign tax relief: tax exemption for work made abroad
for non resident companies in countries with a double tax
agreement with Spain to the limit of 60.000 €
Earned income

Rental income
Taxed for the difference between income and expenses.
Deductions: ibi, community expenses, renewal expenses,
interest for mortgage, 3% annual depreciation on the cost
of the property.
60% deduction applicable to habitual residence.
Income for urban real estate not rented
1,1% on the cadastral value (2% not revised)
50% of the cost when no cadastral value
Income on Real State

+ Acquisition price
+ Investment and improvements in the assets
+ Expenses and taxes derived from the acquisition (except
interests)
- Depreciation (rental property)
= ACQUISITION VALUE
+Sale price
- Expenses and taxes derived from the sale (except interests)
= SALE VALUE
For acquisitions before 1994 some reductions apply.
Reimbursement of the capital gain derived from the sale of
the habitual home in another habitual home.
Capital Gains

12/1/2018
15
Personal allowances
Under 65 years 5,550 €
65+ 6,700 €
75+ 8,100 €
Child allowances
First child 2,400 €
Second child 2,700 €
Third child 4,000 €
Further child 4,500 €
Personal and family allowances

Pension contributions: limit 8.000 € or 30% of the work income.
Spouse pension contributions: 2.500 € (income < 8.000 €)
Acquisition of habitual home (acquisitions before 2013)
Rent of habitual home (before 2015) taxable base <24.107 €
International tax deduction
Maternity deduction (working and children under 3)
Large family deduction
12/1/2018
16
Other deductions

1. Family deductions:
a. Children under 3 years
b. International adoption
c. Single parent family
2. Disability support for tax payers and family’s.
3. Housing deductions.
a. Acquisition sponsored housing
b. For under 35 years old
c. Rent for under 35 year old
4. Domestic staff
12/1/2018
17
Andalucia deductions

Non tax residents in Spain are taxed for the Spanish source income
Employment income: subject to tax for work performed in Spain; income as
administrator of a Spanish company (24% tax rate for US residents)
Professional activities: to be taxed in the country of residence unless there
is a fixed base of business (exempt in Spain).
Pensions: taxed in Spain if derived from an employment in Spain or paid by
an entity resident in Spain.
12/1/2018
18
FROM TO TAX RATE
0 12.000 € 8%
12.000 € 18.700 € 30%
18.700 € - 40 %
Non resident Tax

Capital Income
Dividends derived from the participation in a Spanish company. (15% DTA)
Interest paid by residents in Spain (10% DTA)
Royalties paid by residents in Spain
5% the use or right to use any copyright of literary, dramatic, musical
or artistic work.
8% the use or right to use cinematographic, industrial, commercial or
scientific equipment.
10% other royalties
Non resident Tax

Rental income of property in Spain
Taxed for the income (no deduction of expenses).
24% tax rate.
Tax form 210 to be filed quarterly
Income for urban real estate not rented in Spain
1,1% on the cadastral value (2% not revised)
50% of the cost when no cadastral value
24% tax rate Tax form 210 to be filed annually
Non Resident Tax

Capital gain derived from immovable property:
Acquisition price plus expenses taxes
Sale price minus expenses and taxes
Tax rate 19%
The acquired of the property is obliged to withhold a 3%
on the sale price through tax form 211 (in one month) and
give a copy to the non resident.
The withholding will be deducted from the final tax.
Tax form 210. 4 months after the sale
Non resident Capital Gains

Special regimen: “Beckham law”
Tax regimen for incomimg qualifying professionals residents in Spain.
Thay can be taxed only for spanish source income at a 24% tax rate.
Requirements:
The individual must nos have been tax resident in the preceding ten
years.
The movement to Spain must be for:
An employment contract with a Spanish Company.
As administrator of a Spanish Company.
 The individual must not obtain income through a permanent
establishment
22

The tax regimen:
Taxation of Spanish source income except for employment income.
23
General From 0 a 600.000 € 24%
From 600.000 €: 45%
DIVIDENDS
INTEREST
CAPITAL GAINS
From 0 to 6.000 €: 19%
From 6.000 € to 50.000 €: 21%
From 50.000 € : 23%

The tax regimen applies during the tax year of change of residence and
the following 5 years.
The application of the tax regimen as to be requested through tax form
149 during the 6 months after the registration in the Social Security.
The AEAT will issue a certificate stating the application of the special
tax regimen.
The annual tax return is tax form 151 during april-june 2017
No obligation of declaring tax form 720.
24

Modelo 720
Fraud Prevention Law 7/2012
Form 720 of the – Agencia Tributaria AEAT: Report of all
assets abroad.
Every year before March 31st. Applications must be completed only OnLine
by authorized tax consultants or those with digital signature or 24hPIN
Penalty for not filling, filling incomplete, filing with non-accurate data, will
be punished with 100 euros per data with a minimum of 10.000 euros. And
non filers could be penalized with 150% of the total assets not reported.

Modelo 720
Since 2013, the Spanish Tax agency, AEAT, began to provide tax
information for citizens of the EU to their respective countries
through the Form 299 which is filled by Spanish Financial
Institutions, collected and processed by AEAT. Another 130
countries were included since 2017.
Modelo 720 must be filed by all Spanish tax residents owning
assets abroad, only if they are over 50,000€ in any of these three
blocks:
1. Bank accounts.
2. Investments.
3. Real Estate.

BLOCK 1 Bank accounts
Accounts in financial institutions abroad, which includes current accounts,
savings accounts, term deposits, credit accounts…
Information on each account should include the balance of these
accounts on December 31st, the average balance for the last quarter of
the year and the date of opening. Also if you are account holder,
authorized…
Holders and authorized holders, who have ceased to be during the year,
must indicate only the balance of the day ceased to be holders or
authorized holders.
Modelo 720

BLOCK 2 Stock and investments
Stocks, bonds, values, financial rights, and savings in insurance
companies, deposited, managed or obtained abroad. Information on the
investments should include the acquired date, purchase price and value
at December 31, sale price and date of disposition, capitalization and
rescue value at December 31.
Section 1
Securities or rights located overseas representative of participation in any type of legal
entity; values located overseas representative of the transfer of capital to third parties or
provided for its management or administration to any legal instrument, including trusts
though lacking legal personality, capable of acting in the course of trade.
Section 2
Shares and participations in share capital or equity fund of collective investment
institutions located abroad.
Section 3
Life insurance (savings not risk) or pensions or annuities, whose insurance companies
are located overseas.
Modelo 720

BLOCK 3 Real Estate
- All types of Real Estate and rights over Real Estate abroad, which
include ownership of the property, actual use or enjoyment and bare
ownership rights over real estate, timeshares, timeshares shifts, part-
time property or similar formulas on real estate, other rights in rem
over real estate.
Modelo 720

Modelo 720
This Consultation is published to be well with the
European Commission, which censured very hard that the
Law will treat practically the same those that does not
file the Modelo 720 and the ones that does it voluntarily
but out of time. It clarifies that people who regularize
their situation after the deadline voluntarily, without
prior notice, filing the pending Modelo 720 and paying
the IRPF will be required a surcharge (15-20%) and will
not be applied the sanction of 150%.
150% penalti  IRPF + 15-20% penalti
Binding consultation V1434-17

Form 1040 Individual Tax Return

U.S. citizens and resident aliens
U.S. Citizens
Resident Aliens
– Permanent Resident “Green Card”
– Substantial Presence Test
• Tax residency based on presence in the U.S.
– All days in current year, if more than 31 days;
– 183 days during the 3-year period: 1/3 days in prior
year; and 1/6 days in year before that
U.S. Persons
Non Resident Aliens

U.S. citizens and resident aliens
 Must report worldwide income
 Earnings from self-employment <$400
 Gross income: Single <65 $10,400 & MFS $4,050
 Due date: April 18th, automatic extension June 15th
 Special considerations for taxpayers abroad:
– Treaty between Spain and the U.S.A. on no-double taxation
– Foreign Earned Income Exclusion
– Foreign Tax Credit
– Foreign Information Reporting FATCA (entities, accounts,
investments, etc…)

U.S. citizens and residents - Treaty
 Treaty between Spain and the U.S.A.
– How and where to pay taxes
– Establishing the residency
– Anyone who resides in Spain over 183 days is presumed to be Spanish tax
resident. EXCEPTION: Those certified by the IRS as US Tax Residents.
– Earned income, interest, dividends, capital gains, pensions &
annuities
– New update 2013, pending of approval.

U.S. citizens and residents - FEIE
 Foreign Earned Income Exclusion
• Can exclude foreign earned income up to $112,100 for 2017.
Amounts adjusted for inflation annually
• Must be earned income to qualify
– Wages, Self-employment income, tips, etc...
– Does not include passive income, such as: dividends,
interest, capital gains, etc...
• Must be foreign income to qualify
– Key factor is where service performed, not source of payment
• i.e. salary from a U.S. employer can be excluded if your residence is in a
foreign country

U.S. citizens and residents – FEIE
 Eligibility for FEIE
Must meet one of two tests to qualify:
• Physical Presence Test
- Present in a foreign country or countries for 330 days in
a 12 month period. Days of travel to/from U.S. counted
as US day.
- 12 month period does not have to be a calendar year
• Bona Fide Residence Test
- Resident of a foreign country for an uninterrupted period
that includes an entire tax year
- Diﬃcult to qualify for first year abroad

U.S. citizens and residents – Foreign Tax Credit
 Foreign Tax Credit
• Credit in the U.S. for income taxes paid abroad.
• Must be paid during the applicable tax year.
• Cannot take FTC for amounts excluded under Foreign Earned
Income Exclusion
• Unused credit can be carried back 1 year and carried forward 10
years
• Foreign Tax Credit applies to self-employment tax through the
Totalization Agreement between Spain and the U.S. (Need
Certificate of Coverage - Autónomos)

U.S. citizens and residents – Foreign reporting FATCA
 FATCA - Foreign Account Tax Compliance Act
• Became Law March 18, 2010
• Used to report Foreign Financial Assets
– Foreign financial accounts
– Foreign stock or securities
– Ownership interest in a foreign entity
– Financial instrument or contract with a foreign issuer or
counterpart
• Must file Form 8938 with your tax return if threshold exceeded
• Single of MFS - $200K year-end/$300K anytime
• MFJ - $400K year-end/$600K anytime
• Special rules for allocating asset ownership between spouses.

U.S. citizens and residents – Foreign reporting FATCA
 FATCA - Foreign Account Tax Compliance Act
• Penalties for Failure to File
– $10,000 for failure to file
– Up to $50,000 if failure continues after IRS notification
– Unlimited statute of limitations
– 40% penalty based on underpayment of tax attributable to
unreported foreign assets
– Criminal charges
Foreign Banks will start reporting their American
customers in 2017 to the IRS. Modelo 290
How will the banks know which accounts are U.S.?
Answer: New account opening procedures & U.S. Indicia!

FATCA implications & others
 Modelo 290 - Foreign banks and Investment
institutions
• Bank accounts. Deposits
• Investments: Mutual Funds (Fondos de Inversión)
• Report of each PFIC on a Form 8621: which might result on
39,6% tax rate over the annual value increase.
• Report on Form 8865 and 5471 for owners of more that 10%
of an Entity.

Foreign Bank Account Report - FBAR

U.S. citizens and residents – Foreign reporting FBAR
Since 1970 any US person who has financial interest in or
signature authority over any financial account(s) located outside
the U.S. is required to electronically file a FinCEN Form 114,
former TDF 90-22.1, if the aggregate value of theses accounts
exceeds $10,000 at any time during the calendar year.
 Must report signature authority over or financial
interest in foreign financial accounts.
 Reporting threshold is $10,000 for aggregate
amount of highest values of all foreign financial acc.
 Must report joint owners of an joint account, even if
joint owner is a foreign person.

Foreign Bank Account Report - FBAR
Foreign reporting FBAR
- Answer FBAR related question on Form 1040 Schedule B
(interests and dividends) Part III, complete electronic version of
FinCEN wityh same due date as the 1040, available at
www.fincen.gov
- Penalties can include:
– $10,000 per year not filed.
– 50% of the balance of unreported accounts.
– Criminal charges.
– Penalties are per account, per year.

Foreign Bank Account Report – FBAR & Form 8938
Comparison of Form 8938 and FBAR Requirements
Form 8938 FBAR
Reporting Threshold (Total
Value of Assets)
Thresholds for individuals living
abroad:
UNMARRIED & MFS: The total
value of your specified foreign
financial assets is more than
$200,000 on the last day of the
tax year or more than $300,000
at any time during the tax year.
MFJ: $400,000 on the last day or
$600,000 at any time.
$10,000 at any time during the
calendar year.
When Due? By due date, including extension,
for income tax return Form 1040
Received by June 30 (no
extensions of time granted)
Where to File? File with Form 1040 Income tax
return.
File electronically through
FinCENs BSA E-Filing System. The
FBAR is not filed with a federal
tax return.

Filing Past-Due Tax Returns and FBAR
Streamlined foreign offshore procedure
• Eligibility
- Failure to comply was non-willful
- Meet non-residency requirement
- Failed to report and pay tax on income from foreign financial
asset
- Not under civil examination or a criminal investigation by the
IRS
• Requirements
- File up to 3 years tax returns
- File up to 6 years FBARs
- Pay back taxes and interest, if any.
- Sign certification
- No penalty

Questions?
Fiscal obligations of
U.S. Citizens Residents in Spain

ACM NTK seminar Fiscal obligations 2018 sevilla

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