The Problem With Spain
What I tell clients when Spain is at the top of their list
I once spent two months in O Grove, a small fishing town on Spain’s Galician coast, learning Spanish.
I’ve been back many times since. Madrid, Barcelona, Andalucía, Santiago de Compostela, Seville.
I love the country, and I understand everyone who wants to retire there.
More than 50,000 Americans now live in Spain, the most ever, and the number grows every year.
All of this despite the fact that for a retiree with $1 million or more, Spain is one of the heaviest tax setups on the Mediterranean.
Portugal, Italy, and Greece (often) charge less (depending on the specific residency program).
Spain also comes up a lot on my client calls.
And I tell everyone on the call the same thing:
Great choice, if you set it up right.
Most people don’t, because the rules that decide what Spain costs are spread across visa and tax law.
There are some clever things you can do before and during your move to Spain, which will save you time and stress.
Today I’ll walk you through the eight things I make sure every Spain-bound client knows:
The visa rule and the holiday rule that decide your tax residency
Why Spain gives retirees no special tax regime, and what that costs you
The moves that make Spain work anyway: what to sell, when to arrive, where to live
Starting with the biggest one.
#1 Spain has no tax deal for retirees
Greece, Italy, and Portugal all created special tax deals for foreign retirees:
Greece taxes new foreign residents at a flat 7% on everything they earn abroad, locked in for 15 years (pensions, dividends, rental income, capital gains).
Italy charges the same 7% for 10 years, with a catch. To take advantage of it, you have to settle in a southern town with fewer than 30,000 people.
Portugal had the most famous deal of all, the NHR. It closed at the end of 2023. The replacement program targets researchers and startup hires, not retirees.
And Spain?
Spain has never run a program for retirees.
The only special regime it offers is the Beckham Law, which is a flat 24% for foreigners who move to Spain for work.
So from your first tax-resident year, your worldwide income can be taxed at up to 47% (and even more in some regions).
There are a few exceptions and workarounds for that rule, we’ll get there in the second half.
Takeaway: Greece and Italy have special tax deals for retirees, while Spain only has the Beckham Law for workers.
#2 The visa decides your tax status
Most Americans retire to Spain on the Non-Lucrative Visa.
It is the classic route:
Prove passive income, and agree not to work in Spain.
But the NLV is a residence visa.
To renew it, you have to prove you actually live in Spain, meaning more than 183 days in the country, backed by utility bills, bank activity, flight records, and your “padrón registration”.
And 183 days is the exact line where Spanish tax residency starts:
Go over it, and Spain taxes your worldwide income.
Stay under it, and you can’t renew the visa.
There is no version of the NLV where you hold the visa and stay a tax non-resident for long (your arrival year can be the exception, more on that in section 6).
If you’re planning to split the year between Spain and the US, this is the first thing to solve.
Takeaway: Renewing the Non-Lucrative Visa requires a 183-day stay that makes you a Spanish tax resident.
#3 Staying under 183 days is not enough
Let’s assume you are a snowbird, spending extended time outside of the US, and Spain is one of your destinations.
Two 90-day tourist stays put you in Spain for about half the year, and still under 183 days.
That alone doesn’t keep you out of the Spanish tax system.
Why?
Because the day count is only one of three tests.
Test one is the 183 days.
Test two looks at your life instead of your calendar.
If your spouse lives in Spain year-round, or your main economic interests are there, Spain can treat you as a tax resident no matter how few days you spend in the country.
Test three is the holiday rule called “ausencias esporádicas”.
Once Spain considers you “habitually based” there, your trips abroad count as days in Spain.
To be clear about what “based there” means:
A holiday home alone doesn’t make Spain your base.
Thousands of non-residents own Spanish apartments and never become tax residents.
The question is your pattern of life:
Where your family is
Where your money is managed
Where you spend most of the year
Day counting only becomes dangerous when the rest of your life already points at Spain.
The “good” news is, you’re a US tax resident by citizenship.
So wherever you live, you can request Form 6166 (Certification of U.S. Tax Residency) as long as you file your returns in the US.
The certificate is strong protection. But it only settles paperwork, not disputes.
If your life visibly runs in Spain, the country might graciously volunteer to be your tax home anyhow.
Takeaway: Staying under 183 days only passes the first of Spain’s three residency tests.
#4 The Roth problem
I’ve written about this before in How To Move Your Money Abroad, but it belongs in any honest article about Spain, so I keep it short.
With a Roth IRA, you pay tax on the money going in, and withdrawals are tax-free coming out.
That rule comes from US law, and it only applies abroad if a tax treaty makes the other country accept it.
Spain doesn’t accept it.
Spain treats your Roth like any other investment account, and the Spanish tax agency confirmed in a formal ruling that withdrawals are taxable.
I’m not a tax advisor, and I’m not claiming to be one.
Tax experts are still debating how exactly those withdrawals should be taxed (as savings income at 19% to 30%, or at the general rates of up to 47%), and I’ll stay out of that debate.
For your planning, two facts are enough:
Spain taxes Roth withdrawals that are tax-free in the US.
The Roth balance counts toward the wealth tax calculation.
There are ways to handle this, and they all involve acting before you become a tax resident.
We’ll look at those below.
Takeaway: Spain taxes Roth withdrawals that the US made tax-free, and no treaty protects them.
#5 What Spain can’t touch
Now the good news.