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Thread: Work remote in Spain for a US employer on a non-lucrative visa: Where to pay taxes?

  1. #1
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    Default Work remote in Spain for a US employer on a non-lucrative visa: Where to pay taxes?

    Hello,

    I'm moving from the US to Spain, where I will work from home for my US employer, who will pay me in my US bank account. I have already obtained a non-lucrative visa for Spain.

    I know with a non-lucrative visa, you may not work in Spain. But I've read that this visa is only meant to prevent you from taking a job from the Spanish economy, and freelancers or remote employees of foreign companies may use it. I was very clear about my situation at my local Spanish consulate when applying for the visa, and they granted me the visa.

    But I don't know if I must pay income tax in Spain. I read that after 183 days in Spain, the Spanish tax authority will charge you income tax on world-wide income. But is this also true for people on a non-lucrative visa? The only information I can find says that residents with this visa will be taxed on capital gains from investments and "passive income", but they will not be taxed on pension payments (according to the US-Spain tax treaty). I think those are the two main types of people who use the non-lucrative visa: independently wealthy people and pensioners. But what about my situation? Must I pay Spanish income tax, despite being paid in the US by a US employer, and being ineligible for certain Spanish benefits on this visa such as public health care?

    I definitely must pay US income tax. If I must also pay Spanish income tax, the US-Spain tax treaty says that one must first pay one country, and then deduct that amount of tax when paying the second country. So if I pay Spain first, I'll probably owe the US nothing since taxes are generally higher in Spain. If I pay the US first, I'll probably still owe Spain some. But which country do I pay first? Since I'll be paid in the US, they will definitely withhold money from my salary for taxes. But the IRS (US tax authority) is also very clear that money earned while living in another country is "foreign" income, even if you're paid in the US by a US employer. So... which country gets paid their taxes first?

    I'd be very grateful to hear from anyone who has some insight here.

  2. #2
    Junior Member
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    Oct 2015
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    Hi SeanM,

    Unfortunately, I don't have an answer to your question, but your question did spark my interest. I'm a freelancer here in the States looking to move back to Spain for an extended period. I'd like to apply for the non-lucrative visa but am having trouble understanding the requirement about income. I don't have the savings to support myself for a year, though I do have sufficient monthly income. What exactly did you say to the Consulate when you explained your similiar situation to them?

    Thanks!
    Gabe

  3. #3
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    May 2017
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    Default

    I'd also be interested in knowing more about non-lucrative visas, anyone can give more info?

  4. #4

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    Hello Jim

    There is plenty of information about the Non Lucrative visa application on the Internet. Also, Spanish consular offices´ websites include a visa information section containing links to official websites listing the requirements and documentation request.

    The most important requirements are that you have clean medical and criminal records, that you are able to cover your living expenses ( and your relatives´ dependent on you, if you want to include them in the application), that you have hired private medical cover in Spain with full cover ( all medical specialties and hospitalization ) and that you have rented a property, or already own one where you and your family will reside. The major issues an applicant has are related to the financial situation and how to show their solvency, which vary among applicants.

    The best solution is to ask for professional advice as they will check whether your profile meets the requirements and will confirm the financial documentation you need to prepare.

    You can read useful information here. Also, please feel free to email us if you need more detailed information about this type of permit application.

    Regards,
    Patricia Martin
    Legal Assistant at Lawbird
    Check My Profile

  5. #5
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    Quote Originally Posted by SeanM View Post
    Hello,

    I'm moving from the US to Spain, where I will work from home for my US employer, who will pay me in my US bank account. I have already obtained a non-lucrative visa for Spain.

    I know with a non-lucrative visa, you may not work in Spain. But I've read that this visa is only meant to prevent you from taking a job from the Spanish economy, and freelancers or remote employees of foreign companies may use it. I was very clear about my situation at my local Spanish consulate when applying for the visa, and they granted me the visa.

    But I don't know if I must pay income tax in Spain. I read that after 183 days in Spain, the Spanish tax authority will charge you income tax on world-wide income. But is this also true for people on a non-lucrative visa? The only information I can find says that residents with this visa will be taxed on capital gains from investments and "passive income", but they will not be taxed on pension payments (according to the US-Spain tax treaty). I think those are the two main types of people who use the non-lucrative visa: independently wealthy people and pensioners. But what about my situation? Must I pay Spanish income tax, despite being paid in the US by a US employer, and being ineligible for certain Spanish benefits on this visa such as public health care?

    I definitely must pay US income tax. If I must also pay Spanish income tax, the US-Spain tax treaty says that one must first pay one country, and then deduct that amount of tax when paying the second country. So if I pay Spain first, I'll probably owe the US nothing since taxes are generally higher in Spain. If I pay the US first, I'll probably still owe Spain some. But which country do I pay first? Since I'll be paid in the US, they will definitely withhold money from my salary for taxes. But the IRS (US tax authority) is also very clear that money earned while living in another country is "foreign" income, even if you're paid in the US by a US employer. So... which country gets paid their taxes first?

    I'd be very grateful to hear from anyone who has some insight here.

    I am wondering if Sean ever got the answers to these questions. I am in the exact situation and have these very same questions .

  6. #6

    Default

    Hello

    You can certainly work as a freelance for your US employer but as a resident in Spain you will be in the obligation to declare your income in Spain every year. You need to notify the US authorities that you are now a Spanish resident.

    Please read these articles concerning double taxation treaty between Spain and the US. The aim of this treaty is to avoid being taxed twice.


    Article 15

    Independent personal services

    1. Without prejudice to the provisions of Article 7 (business benefits), income that a resident of a Contracting State obtains from the provision of professional services or similar activities of an independent character, may only be taxed in that State. However, such income may be taxed in the other Contracting State if that resident has or has regularly disposed of a fixed base in the other Contracting State for the performance of said activities. In such case, only the income attributable to said fixed base may be subject to taxation in that other Contracting State.

    2. The term "professional services" includes especially independent activities of a scientific, literary, artistic, educational or pedagogical nature, as well as the independent activities of Physicians, Lawyers, Engineers, Architects, Dentists and Accountants.
    You won´t have a right to social security as you won't be a registered worker in Spain. You need to omfomr the US Tax autjhjortes that you ara a fiscal resident in Spain. The purpose of the treaty is not to be taxed twice.

    Article 20

    Pensions, annuities, alimony and child support

    1. Without prejudice to the provisions of Article 21 (Public Functions):

    a) Pensions and other similar remuneration obtained by a resident of a Contracting State who is his or her actual beneficiary, by virtue of prior employment, may only be taxed in that State, and

    b) Social Security benefits paid by a Contracting State to a resident of the other Contracting State or to a citizen of the United States may be taxed in the aforementioned State.

    2. Annuities obtained by a resident of a Contracting State who is his or her beneficial owner may only be taxed in that State. The term "annuities" in the sense of this section means a pre-fixed sum paid periodically at specified dates during a given period of time, in accordance with an obligation contracted in return for adequate and full compensation (other than the provision of services).

    3. Maintenance payments paid to a resident of a Contracting State may only be taxed in that State. The term "alimony", as used in this section, means periodic payments made in accordance with a written separation agreement or divorce decree, separate maintenance, or compulsory aid, in respect of which the recipient is subject to taxation in accordance with the laws of the State of which he is a resident.

    4. Periodic payments for the support of minor children in application of a written separation agreement or a divorce decree, separate maintenance, or compulsory assistance, made by a resident of a Contracting State to a resident of the other Contracting State they can only be taxed in the aforementioned State.

    Regards,
    Patricia Martin
    Legal Assistant at Lawbird
    Check My Profile

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