Do I need to declare my U.S. bank accounts while living in Spain on the Digital Nomad Visa?

Yes, as an American living in Spain on the Digital Nomad Visa, you are required to declare your U.S. bank accounts. Spain requires residents, including those on a Digital Nomad Visa, to report any foreign accounts that exceed €50,000. Failure to comply with this requirement can result in significant fines and penalties.

Understanding Spain’s Tax Obligations

Spain has specific tax obligations for residents, which include the requirement to declare foreign assets. This applies to anyone who spends more than 183 days in a calendar year in Spain, thus becoming a tax resident. The Modelo 720 is the form used to report foreign assets, including bank accounts, securities, and real estate outside Spain.

What is Modelo 720?

The Modelo 720 is a mandatory declaration for Spanish tax residents to report foreign assets exceeding €50,000. This includes any U.S. bank accounts. It is crucial to file this form correctly and on time, as penalties for non-compliance are severe, sometimes exceeding the value of the undeclared assets. It’s important to understand that failing to declare or inaccurately reporting can lead to fines starting at €5,000 per missing or incorrect piece of data.

Who Needs to File Modelo 720?

Any individual who has become a tax resident in Spain and holds assets abroad exceeding €50,000 must file the Modelo 720. This includes digital nomads who have chosen to reside in Spain for more than half the year. It’s crucial to assess if your U.S. bank accounts, along with other foreign assets, meet the threshold that necessitates filing.

When and How to File Modelo 720

The deadline to file the Modelo 720 is March 31st of the year following the year in which you become a tax resident in Spain. The form can be submitted electronically through the Spanish tax agency’s website. It’s advisable to seek assistance from a tax professional familiar with both Spanish and U.S. tax systems to ensure compliance.

Implications of the Digital Nomad Visa

The Digital Nomad Visa allows remote workers to live in Spain while working for companies located outside of Spain. This visa is part of Spain’s effort to attract international talent and boost its economy. However, it comes with tax implications that must be considered when planning your stay.

Tax Residency: Key Considerations

It’s important to note that spending more than 183 days in Spain automatically makes you a tax resident, subjecting you to Spanish tax laws, including the requirement to declare foreign assets. This remains true regardless of the income source, including those working remotely under the Digital Nomad Visa. Being informed and prepared for these obligations is essential to avoid penalties and ensure a smooth transition to living in Spain.

Comparing Visa Options

While the Digital Nomad Visa offers flexibility for remote workers, it’s important to compare it with other visas like the Non-Lucrative Visa, which is ideal for retirees and individuals who do not plan to work while in Spain. Each visa has different requirements and implications for tax residency and asset declaration.

U.S. Tax Obligations

In addition to Spanish tax obligations, U.S. citizens must also consider their U.S. tax responsibilities. Americans are required to report their worldwide income to the IRS, which includes income earned while living abroad. The Foreign Account Tax Compliance Act (FATCA) mandates the reporting of foreign financial assets. Therefore, while in Spain, you must ensure compliance with both Spanish and U.S. tax laws.

Seeking Professional Help

Navigating the complexities of international taxation can be challenging. It’s highly recommended to consult with a tax advisor specializing in U.S. and Spanish tax laws to ensure compliance with both jurisdictions. Professional advice can help you understand your obligations, minimize tax liabilities, and avoid potential penalties.

Additional Resources

For more comprehensive information, consider reviewing resources about moving to Spain. Understanding the full scope of living in Spain, from visas to tax obligations, can provide a smoother transition. Many resources are available online, offering insights into every aspect of relocating to Spain.

For more details, check out our comprehensive guide – How to move to Spain – The Complete How To.

Planning your move to Spain? Reach out now or book a 45-minute Zoom consultation to get expert guidance tailored to your situation.