US Taxes for Spanish Residents: What You Need to Know

1. Federal Income Tax: Federal income tax rates vary depending on income levels, ranging from around 10% for low incomes to approximately 37% for high incomes.

2. State Income Tax: State income tax rates vary widely by state, with some states having no income tax and others with rates ranging from around 1% to over 10%.

3. Sales Tax: Sales tax rates are state-specific and can range from around 2% to 7.5% or more. Some cities and counties may also add local sales taxes.

4. Property Tax: Property tax rates depend on the location and value of the property, generally ranging between 1% and 3% of the property value.

5. Payroll Taxes: Payroll taxes include Social Security (12.4%, shared equally between employee and employer) and Medicare (2.9%, also shared between employee and employer).

6. Capital Gains Tax: Capital gains tax rates vary depending on the type of asset and the holding period, ranging from 0% to 20%.

7. Estate and Gift Tax: Estate and gift tax rates also vary by state, but at the federal level they can range from 18% to 40%, depending on the value of the estate or gift.

Having an LLC is 100% legal in Spain, the only obligations you will have are to inform the AEAT in model 720 if the set of assets of the LLC exceeds €50,000 and in case you generate yields, you as a member of the LLC must pay the corresponding IRPF on those profits.

You must also study if your business model is suitable to invoice it from abroad, if you have a restaurant, employees etc.. Hacienda will end up giving you a tap. However if your activity is online, e-commerce, trading, content creator, marketer, digital services etc.. In that case there is no problem.

In the United States, most taxes and filings are done 1 time a year, between April and May depending on the type of company and the residency of its administrators.

No, residents in Spain must report to the Tax Agency only if the set of assets of said LLC exceeds €50,000. In that case you must report in model 720 the LLC as an asset abroad. However, as a Spanish resident you are obliged to report the income obtained abroad and declare them in the IRPF. (Sif your LLC is not yet profitable you do not have to report to Hacienda) ;)

The states or the IRS do not inform foreign entities about companies incorporated in the USA. If "Hacienda" asks the IRS for information about your LLC they will surrender it without problem, but for this the LLC must incur an investigation.

The recommended activities to invoice from an LLC are generally those that have no physical nexus or employees. If your activity is online and you do not need an office, warehouse, employee.. to carry out your activity then invoicing from the LLC will not be a problem.

Restaurants, Real Estate, services that require physical presence, a warehouse or office with materials you need for the activity.. These are some of the examples that should not be invoiced from a company abroad.

E-Commerce as long as you subcontract everything, logistics, importation, customization etc.. Dropshipping in that case is viable to invoice with the LLC. Consulting, trading, digital services or products, freelancer, online training, content creator, affiliate marketing, media buyer. These are some businesses suitable for the LLC.

Be over 18 years old, have more than €500 to pay for the creation of the LLC and forms 1120 and 5472. A minimum of knowledge of your tax obligations, both with the IRS and with the AEAT. Passport and ID, usually they do not ask you for the data but sometimes it comes in handy for example for the Registered Agent.

Yes and no, if your billing to Spanish clientsdoes not exceed €10,000annually you are not obliged to request a VAT number. The invoices you issue to Spanish clients will be made without VAT.

No,if you are the owner of an LLC and you are a Spanish tax resident you are not obliged to be self-employed to declare that income, you can simply pay the corresponding VAT.

If all yourcore activityis in Spain, the Spanish tax authority (Hacienda) could try to tell you that you should pay taxes in Spain because all your clients are here, however in the case of LLCs this does not apply.

LLCs arepass-through companiesand deep down they do not separate your physical person from your legal person therefore it is not a company and you, are the same. Therefore, having entirely Spanish clients is the same as being self-employed.

The “ITIN Number” is an individual taxpayer identification number issued by the IRS in the United States. The IRSissues theITIN to individuals who do not have nor meet the requirementsto obtain a Social Security Number(SSN).

Nowadays it is usually requested to be able to create accounts in banks that require a tax identification number in the USA, either SSN or ITIN (passport not valid), PayPal or Shopify are some of the companies.