ACM NTK seminar Fiscal obligations 2016

Fiscal obligations of
U.S. Citizens Residents in Spain

Antonio Rodríguez – P01491371 www.USTaxConsultants.net
Annual Report to Congress – Nat. Taxpayer Advocate Serv
Figures for thought
Some statistics to think about...
Americans living abroad:
More than 7.6M in FY2014
More that 8.7M mid FY2015
Total Ind. tax returns:
FY2014 > 147M
FY2015 > 149M
Filing FBAR >800,000 in FY2014 & FY2015
Filing 8938 >300.000 in FY2015

Annual Report to Congress – Nat. Taxpayer Advocate Serv
Miscellaneous data
 IRS eliminated the last 4
attaché posts abroad (IRS Paris
& London offices) at the
beginning of 2015.
 IRS terminated the Electronic
Tax Law Assistance Program in
October 2015.
 In FY2013, the average wait
time on the international phone
line was 10.5’ & 19.9’ in
FY2015, a 90% increase.
 In FY2015 the top five visitor
countries to the IRS website:
China, UK, Canada, Germany,
Spain.

Fiscal obligations of U.S. Citizens Residents in Spain

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

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 $10,300 & MFS $4,000
 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 $99,200 for 2014 and
$100,800 for 2015. 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 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 before June 30th 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

Modelo 100 – IRPF
- Do not need to file if earned income is less that 22.000€, if more
than on payer, the second is less that 1.500€ and total is less than
11.200€ **Foreign pensions & annuities.
- Do not need to file if passive income is less than 1.600€
- Minimum to file 5,550€ per person.
- From the beginning of April all tax payers will get a draft of your
Individual Return or/and the “datos fiscales” or you can download
them from the AEAT web page.
- Deadline for filing is June 30th every year.
- You can file your return on paper if it is prepared with the
Programa PADRE.

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.

Modelo 720
- Law 7/2012 approved transposes the Community Directive on
administrative cooperation in the field of taxation. Thus, reinforcing
cooperation in the exchange of information between countries needed
for the liquidation of taxes.
- The Government aims to deepen in up to 2017 in this type of
agreements for the exchange of information, both to improve the
collection of taxes, and to enhance the fight against tax fraud.
- Among other issues, is attributed to the Tax Agency competition to
formulate requests for mutual assistance to other States or
international organizations. This provides legal security to be achieved
greater agility in the process of mutual assistance.

Modelo 720
- And, already, since 2013, the 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.
- 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

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

ACM NTK seminar Fiscal obligations 2016

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