Tax implications of moving to Alicante from the USA
Spanish tax residency, the US-Spain treaty, FBAR, FATCA, PFIC, Social Security and 401(k)s — the tax map every American mover to Alicante needs before arrival.
Tax is the single area where American movers to Alicante most often act on rumours. The reality is workable, but the US is unusual: it taxes its citizens on worldwide income regardless of residence. So once you live in Spain, you file in two countries every year — for life.
You become Spanish tax-resident if you spend more than 183 days in Spain in a calendar year, or if your main economic interests are in Spain. Once resident, you declare worldwide income to the Spanish tax authority (Agencia Tributaria).
The US and Spain have a comprehensive double-taxation treaty plus a totalization agreement on Social Security. In practice, you usually claim foreign tax credits on Form 1116 (or the Foreign Earned Income Exclusion on Form 2555 for active income) so the same dollar isn't taxed twice — but the credit doesn't always cover everything, particularly investment income.
Modelo 720 is Spain's informational declaration of overseas assets above €50,000 in three categories (bank accounts, investments, property). On the US side you also keep filing FBAR (FinCEN 114) and FATCA (Form 8938) — these don't go away when you leave the US.
PFIC is the trap. Most non-US mutual funds and ETFs (including UCITS funds your Spanish bank may suggest) are treated as Passive Foreign Investment Companies by the IRS, with punitive tax. American movers usually keep their investment accounts at US brokers (Schwab International, Interactive Brokers) instead of opening a Spanish brokerage.
Social Security, 401(k) and Roth IRA distributions are addressed in the US-Spain treaty but not always favourably — Roth treatment in Spain is the most-debated grey area. Restructuring before becoming Spanish-resident is almost always cheaper than after.
We coordinate the introduction to a dual US-Spain tax adviser as part of Settle in Alicante and Compliance Upgrade Bundle. Do not rely on a US-only CPA or a Spanish-only gestor for this.
Frequently asked questions
Do US citizens still file US taxes when living in Spain?
Yes. The US is one of the only countries that taxes its citizens on worldwide income regardless of residence. You file in both Spain and the US every year, using the tax treaty and foreign tax credits to avoid double taxation.
Are 401(k) and Social Security taxed in Spain?
Generally yes when distributed, with credits available under the US-Spain treaty. Roth IRA treatment in Spain is contested — get specific advice from a dual-qualified adviser before triggering Spanish residency.
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