大咖福利影院

My question is regarding the wealth tax in Catalonia, Spain.聽 If you're a tax resident in Spain and have balances in a U.S. 401K and IRA but are not yet taking distributions, are the balances in those accounts still subject to the wealth tax?聽 聽I understand that distributions from these accounts are taxed as income.聽 聽Thank you.

@GeorginaJ

Hi! I have the same question. If you have any response could you kindly let me know? I have done research in Italy since I have dual citizenship and in Italy only the 鈥渋ncome and capital gains鈥� are taxed. Pretty sure (not 100%) Spain works the same way. We are planning to split our time between the two countries. Thanks!!!

You should just withdraw from Roth IRA before moving to spain. I had moved to finland at age 38 to retire early. but sucks that once i need to start withdrawing from my roth IRA i will be taxed 30% instead of 0%. sure am getting free healthcare for聽 the聽 rest聽 of聽 my聽 life. but no way is it gonna add up to 300k assuming the ROI is 6% from age 38-59. in the last 15 years i went to the doctor once to give birth and that was in America.

I cashed out my Roth before becoming a tax resident.聽 Now it exists as a savings and is not taxed as a retirement fund.聽 I can draw off the savings as though it we're income but it won't be taxed as income.聽 I leave my regular IRA invested but don't withdraw any thing until the mandatory withdrawal age.

@Zdravich can you recommend what lawyer you used?

@Zdravich

Hello

Could you please share the name contact information for your tax person in Spain.

Thank you!

Lola

@chasleslieb

Thr only downside I see with thus strategy is it will increase your networth for the wealth tax calculation. If left in the Roth account, even though聽 the gains are taxed as income, it would not be part of the wealth tax calculation as it is considered the same as a Spanish pension.

@Conor55

Fortunately or "unfortunately 馃榿" I am well below the wealth tax threshold so that it is not a concern.聽 But I suppose it could have an impact that you mentioned.

@lucysurf

Hello!聽 聽I met with a tax advisor from Balcells Group and she confirmed that the U.S. 401K and IRA balances are NOT subject to the Spanish Wealth Tax.聽 Great news!

@GeorginaJ

But the Roth IRA is not recognized as an IRA with respect to wealth tax?聽 Just traditional IRAs?聽 These are questions not answers 馃榿

@chasleslieb聽 I have a聽 traditional聽 IRA, didn鈥檛 ask her about a Roth IRA.聽 Thanks

@Conor55聽 I think IRAs and 401ks are not included in net wealth calculation ONLY if you are too young (under 59-1/2) to have access to them. The available online sources are not super clear on that.

@Conor55聽 聽It looks like IRAs and 401ks are not included in net wealth calculation ONLY IF聽 you are too young (under 59-1/2) to have access to them. The available online sources are not super clear on that.

@olszewskiandrzej

The question of the value of the Roth still remains.

It seems to me... purely conjecture... that since the Roth is not recognized as a retirement investment that it would be included in the wealth calculation.聽 Whether or not you cash it out before moving to Spain.

@Sannapho You are lucky you get free health care. As a couple, we pay $4,800 per year for health insurance in Spain.

@chasleslieb聽 聽 Your IRA withdrawals are taxed, including Roth. Your bank interest is taxed.聽 I'm not in wealth tax bracket, so I don't know about income tax declarations regarding IRAs. I do not report anything on income tax that is just sitting in an account.聽 I report the same things as reported on the US tax return.

But there is another form you must file - Modelo 720 that is separate from income tax declaration. Due by March 30--if you have over 鈧�50,000 in assets worldwide, you must file. You have to list every bank account you own in detail--including IRAs. If none of your accounts聽 increase by 鈧�20,000, you don't have to file the 720 again for 5 years. If any account increases by 鈧�20,000, you have to file again the next year, etc.

@electra777

I am aware of the Modelo 720 which is just a reporting of foreign assets.聽 I'm not certain as to the time frame of the 鈧�20,000 increase, whether it is an annual increase or whenever the increase occurs.

As far as I can tell, the Roth withdrawals are taxed as income along with the dividends, capital gains, etc. of the fund.聽 This is why I cashed out my Roth before coming to Spain.聽 It now is just a savings account and is no longer considered income (other than the dividend and interest earned on the account... which would be taxed anyway).

However, I am pursuing the course of dual tax resident and applying the tie breaker clause in the treaty seeking exemption from Spanish taxation. As we have a Non Lucrative Visa I cannot generate any income within Spain. I have obtained the necessary form 6166 from the IRS that states I am a U.S. tax resident with respect to the treaty.聽 I also have it apostilled by the U.S. State Department.聽 I have an appointment with an attorney in February when I complete and file my U.S. taxes to assist in filing this status with the Spanish tax authority.

@chasleslieb聽 聽Interesting. How can you claim tax residence in the US with the tiebreaker clause? I'd love to do that--but what is your argument for being a US tax resident if you don't mind my asking - we're also NLV and receive all of our passive income in the US and our accounts are there, but we definitely live here--haven't even been back to visit in 4 years--so I don't know how they decide.

@electra777

Disclaimer:

First of all... I've never done this ever as I just became a tax resident at the end of June.聽 Secondly, I am obtaining a legal tax service in Spain to apply for this exemption.聽 Thirdly... It requires some study and challenging reading in English to obtain an understanding of the treaty, IRS regulations, and all the steps required... it is not easy, but it is not impossible, and it requires work on the part of the taxpayer.聽 Fourth... I am not a lawyer or tax accountant, nor do I ever aspire to be one.聽 I gave up reading the U.S. Code of Federal Regulations (CFR's) when I retired from going to sea fifteen years ago.

You need to obtain IRS form 6166 that is a proof as per the treaty (If you are from the US) that you are really a resident in that country.聽 It is legal to have more than one tax residence.

You need to meet the criteria for having a legitimate and bonafide residence in the U.S..聽 For starters... you need to have a physical address that is a permanent residence that is available to you in the U.S.... not just a mail box address or mail forwarding service.聽 To obtain form 6166 you file the request with form 8802.聽 It is on that form that you justify your compliance with the treaty requirements.聽 Be prepared to show drivers licenses, voter registration cards, bank balances and other U.S. financial assets as well as your assets in Spain so that it shows your "economic relations" (treaty language) are weighted predominately in the U.S.

This issue is addressed in the tax treaty between the United States and Spain (I do not know any other treaty) section four which states:

"ARTICLE 4 Residence

1. For the purposes of this (TREATY) Convention, the term "resident of a Contracting State" (RESIDENT OF THE UNITED STATES OR SPAIN) means any person who, under the laws of (THE UNITED STATES OR SPAIN) that State, is liable to tax (IN THE UNITED STATES OR SPAIN) therein (THERIN = IN) by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of similar nature, provided, however, that this

term does not include any person who is liable to tax in that State in respect only of income from sources in that State. (ONLY FROM INCOME THE UNITED STATES)

2. Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his status shall be determined as follows:

(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests);

The location of an individual鈥檚 centre of vital interests is determined by examining his or her family and social relations, occupation, political, cultural and other activities, place of business, and the place from which his or her property is administered.

b) if the State in which he has his center of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;

(c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

(d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. "

So... this is to get you started.聽 It takes about 6 months from submitting request form 8802 to receive your 6166 and then it is another month or two to get it apostilled at the U.S. State Department.聽 So you need to start as early as you can to avoid extensions.聽 I file U.S. taxes electronically and form 8802 by fax.聽 I finish my taxes in Feb. and start the 8802 process at that time.

It may be more work than you wish to put out... but if not, then...

GOOD LUCK!!!