An American buying a home in Spain carries a complication no other foreign buyer does, and most discover it too late: the United States taxes its citizens wherever they live. A French or British buyer who becomes Spanish resident largely leaves their home tax system behind. An American never does. For the US buyer, Spain is not a replacement tax home; it is a second one layered on top of the first, and the whole plan has to be built around that fact.
Spain taxes the house, whether or not it earns a euro. The United States taxes the person, everywhere, for as long as the passport lasts.
Two tax systems at once
Become resident in Spain and you are taxed by Spain on your worldwide income and exposed to its wealth taxes. Remain a US citizen and you keep filing with the US on that same worldwide income for life. The two systems do not switch; they overlap. Relief exists to prevent the same dollar being fully taxed twice, through the treaty and foreign tax credits, but relief is not the same as simplicity, and the interaction has to be actively managed rather than assumed.
The treaty does less than buyers assume. The convention between Spain and the United States, as amended by the 2013 protocol in force since 27 November 2019, covers income taxes: personal and corporate income tax in Spain, federal income taxes in the United States. Spanish wealth taxes fall outside it, and so does inheritance and gift tax. Much of the Spanish cost of owning a home sits in that gap.
Article 1 lets a contracting state tax its own citizens, by reason of citizenship, as though the convention had never entered into force. What it preserves is the relief machinery: the United States credits Spanish income tax paid and re-sources income taxed by reason of citizenship, treating it as arising in Spain. That credit is the whole architecture, and it fails when payment dates refuse to line up.
Where the frictions hide
The friction rarely sits in salary, which the credit mechanisms handle reasonably. It hides in the mismatches: investment structures that are efficient in one country and penalized in the other, retirement and savings vehicles treated generously at home and harshly in Spain or the reverse, and reporting obligations, on both sides, that multiply with a foreign home and foreign accounts. An American who simply transplants their US portfolio into Spanish residence often finds parts of it are now working against them.
Both systems attach the reporting duty to the person, not to the income. A Spanish resident declares foreign assets under the eighteenth additional provision of the General Tax Law: accounts, securities, life policies, real property, virtual currency. The American runs the mirror image, reporting accounts on FinCEN Form 114 once their aggregate value exceeds 10,000 dollars at any moment in the year and specified foreign financial assets on Form 8938 above 200,000 dollars at year end for a single filer living abroad.
In its judgment of 27 January 2022 in case C-788/19 the Court of Justice held that Spain had failed in its obligations by treating undeclared foreign assets as unjustified capital gains with no limitation period, by imposing an automatic proportional fine of 150 per cent, and by applying flat-rate fines heavier than those for comparable domestic breaches. Spain removed all three. The declaration survived, and so did an ordinary penalty for not filing it: 20 euros per datum under article 198.1 of the General Tax Law, with a minimum of 300 euros and a maximum of 20,000. What went was the disproportion.
Every other buyer moves their tax life to Spain. The American adds Spain to a US tax life that never ends. Plan for two systems, not one.
Residence, and the Beckham question
How and whether to become Spanish resident is the first decision, and the favourable inbound regime can be attractive to the American who takes up genuine activity in Spain, as we describe in our note on the Beckham law, though its interaction with US filing has to be modelled rather than assumed. For the American who wants the home but not full residence, the residence tests matter enormously, and the traps are the ones set out in our note on Spanish tax residence.
Spanish residence is not elective. Article 9 of the personal income tax law makes a person resident on more than 183 days in Spanish territory in the calendar year, or where the main core of their activities or economic interests lies in Spain. It then presumes residence, subject to contrary proof, where the non-separated spouse and dependent minor children habitually live there. Keeping the day count down while moving the family does not escape the rule. It shifts the burden of proof.
Article 93 of the same law requires that the person was not Spanish resident in the five tax periods before the move, and it runs for the year of the change plus the five following, taxing general income at 24 per cent up to 600,000 euros and 47 per cent above, with dividends, interest and gains on asset transfers excluded from that scale and taxed on the savings scale instead. The provision that matters most to an American with capital is the easiest to miss: opting in makes the taxpayer subject to wealth tax over Spanish assets only.
The route that once bought residence has closed. The investor visa and its permits were left without content from 3 April 2025 by the twenty-first final provision of Organic Law 1/2025, as the consolidated 2013 entrepreneurs law records.
The purchase, and what the buyer is made to carry
Transfer tax on a resale is a regional tax in all but name. The transfer tax law applies the rate approved by the autonomous community where the property sits, and only where none has been approved does the state rate of 6 per cent apply. It fixes the base on the cadastral reference value unless the declared value or price is higher. A low declared price therefore buys nothing, and against that reference value the administration has no valuation check to run.
Where the seller is a non-resident without a permanent establishment, the non-resident income tax law obliges the buyer to withhold 3 per cent of the consideration on account of the seller’s Spanish tax, and the implementing regulation of that law allows one month from the transfer to pay it over. If it is not paid, the property itself stands charged with the lesser of that withholding and the seller’s tax. The new house secures somebody else’s liability.
The house that earns nothing still pays tax
An empty second home is taxed in Spain. Imputed income on a non-resident’s property is computed under the personal income tax rules, at 2 per cent of cadastral value, or 1.1 per cent where the municipality’s values have been revised under a general collective valuation taking effect in the tax period or the ten preceding ones. Nothing has to be earned.
The rate is where American ownership parts company with European ownership. It is 24 per cent generally, falling to 19 only for EU and qualifying EEA residents, and the rule allowing expenses to be deducted from Spanish source income is written for those same residents. So where a French owner lets the property and deducts interest, repairs and management, the American is taxed on gross rent at 24 per cent. Under the order governing the non-resident return, imputed income is declared between 1 April and 31 December of the following year.
Wealth tax, the solidarity levy and the Spanish representative
The wealth tax law reaches a non-resident over assets situated in Spain, expressly including unlisted shares in any entity at least half of whose assets are, directly or indirectly, Spanish real property. Only charges on the Spanish asset and debts for capital invested in it are deductible. The exempt minimum is 700,000 euros where the community has approved none of its own, and the habitual dwelling exemption of 300,000 euros does nothing for a second home.
Layered over it sits the temporary solidarity levy on large fortunes, a state tax not ceded to the communities, charging net wealth above 3,000,000 euros. Its exemptions and taxpayers track the wealth tax, the first three million are taxed at zero, and wealth tax paid is credited against it. A taxpayer resident outside the European Union must also appoint a representative in Spain before the filing period closes.
Selling, and passing it on
Under the convention, gains on immovable property may be taxed where it sits, so Spain taxes first and the United States taxes the same gain and credits the Spanish tax. But the exclusion of gain on the sale of a main home is capped at 250,000 dollars, or 500,000 on a joint return, and it applies only to a main home, not a holiday house. A sale untaxed in Spain can be fully taxable in the United States, with no foreign tax to credit.
When the American is the seller, the 3 per cent withholding runs against them. The buyer pays it over within a month, and the seller then has three months to file the definitive return and either pay the balance or reclaim the excess. A Spanish home also passes through Spanish inheritance and gift tax, and the second additional provision of that law lets non-resident heirs apply the rules of the community where the greater value of the Spanish estate lies.
Own the house with both flags in mind
The ownership of the property itself deserves particular care for an American, because a structure that looks efficient from the Spanish side can create disproportionate US reporting or worse from the American side. The right answer balances both systems at once, which is the theme of our note on holding a Spanish home. The American who plans the purchase, the residence and the ownership as one transatlantic problem gets the home and the life with the tax under control. The one who plans only the Spanish half meets the American half later, and it is the more expensive half to fix.
The reporting rules show why the structure question is never neutral. Foreign real estate held directly is not a specified foreign financial asset and never appears on Form 8938, which the IRS states in its own guidance. Put the same house inside a foreign entity and the interest in that entity becomes a reportable asset, counted against the same threshold. The structure manufactures an American filing that direct ownership would never have produced.
The Spanish side offers little in exchange. The annual special levy on immovable property held by non-resident entities, at 3 per cent of cadastral value, is confined to entities resident in jurisdictions treated as tax havens, so an ordinary American company escapes it. The convention itself lets Spain tax gains on shares in a company whose assets are principally Spanish real property, as wealth tax already does. To every rule that decides the bill, the veil is transparent.
Montclare advises international individuals and families on buying, holding and moving to Spain: the structure, the tax, the residence and the succession, handled as one plan. Our services are set out on our services page.
This article is informational and does not constitute tax, legal or immigration advice. Spanish regimes vary by region and change frequently, and treatment depends on personal circumstances. Each engagement is subject to scope and applicable regulation.