[ HTJ Podcast ] U.S. AND SPAIN TAXES FOR EXPATS with Derren Joseph and Ricky Gutiérrez – 21st January 2021

 

VOICE OVER:

This podcast channel is about you, successful international entrepreneurs, successful expats, successful in investors, sponsored by HTJ.tax

DERREN JOSEPH
All right. So thank you everybody again for joining us. My name is Derren Joseph. I run a semi-autonomous Tax team within a practice called Moores Rowland and we have about 30 offices across 12 countries. I think that will be so we are based primarily in Asia. So my team officially sits in Asia. So we are as far North in Beijing and all the way down to Australia. And I sit in Singapore and have been based in Singapore for thepast seven years or so. I'm not in Singapore right now, actually in Lisbon Portugal. So next door to you guys are assuming that it is the most severe in Spain, I know some of you who are still in the US and elsewhere from the messages that we've got welcome now, because I am licensed by the us department of treasury. I
am, of course, legally required to say, and you know how it goes, nothing we say here should be construed as advice. We are having a general conversation with general Principles. Anyone who thought, you know, I'm going to show up with a pen and paper, and at the end of an hour, I'm going to figure out how to do my tax returns. Nope. That's not how we work. Sorry to disappoint you. It is a general conversation and nothing should be construed as the US encouraging you to pay less than your Fisher taxes. And of course we haven't done writing. No one should get advice other than from someone who knows your situation inside out. So, they have a routine for that purpose. So I'm going to T, I'm going to come back to these two guys,because when people, eyes K if I don't know if I'm not like 100% compliant at my, it is going to happen to me. These two guys are brilliant case studies. And what happens when you're overseas and you're not quite 100% with your U S taxes, but we can come back to that. This is, these are the takeaways. I'm going to talk about citizenship based taxation. And then I'm going to talk about the mechanism that the IRS or the U S government in general has for keeping track of US taxpayers abroad, which is primarily something called FATCA. So that's really important to understand because that's how they find out what you're doing.

And then I'm going to tell you, what are your basic responsibilities? And we're going to touch on a stimulus payment. I'm just going to touch on it really, really lightly. And then we're going to jump over to Ricky's side of things. So citizenship-based taxation, what does that mean? So the US officially is one of the few countries in the world that has citizenship-based taxation. What that means is that even though you reside outside of the US for years and years, and years and years, you are still a U S taxpayer. Once you have the US passport or you have a green card, but that's the official line, unofficially, lots of other countries do it, including many European countries. There are situations where even though you are not living in whatever European country, it is including Canada, including Australia, New Zealand, even Singapore, what is supposed to be a tax Haven. There are situations where if you are a citizen or resident and you are not there, you can still be dragged back into the tax net, but for the US, it is perhaps pretty much impossible to get out of the neck, the U S TAX net, unless you'd give up your citizenship. And unless you give us a green card, which our practice does, we do have two or three people in each month giving us this citizenship. Oh, do you really have a green card? And then people asked, do you know what, how does the IRS going to figure out what I'm doing? And the answer is FATCA some, there's a lot of misunderstanding around the foreign account tax compliance act. It's not a tax. Some people seem intent on describing it as such. It is not, it is a framework for information exchange. So what the U S government has done is gone around the world and signed bilateral agreements with countries all over the world. Obviously Spain, but countries that you would not have thought that may sign like China or Russia. Basically everyone has signed this except for maybe North Korea, Cuba, Iran. You know, people who have real issues with the US. Everyone else's sign. And what it is, that means is that they have basically created an exception to their local bank secrecy rules, and they have to pass legislation to mandate or require all domestic financial institutions to go through their books and identify anyone suspected of being a US person. Like many of you, I have more than one passport. Many of you do as well. It's pretty typical these days. So even if you were to rock up to your local financial institution and that not just includes your band's, it can be like a broker. It could be, you know, any, any one, it sells financial products, certain Pension, citizenship, insurance and whatever. And even if you were to declare that you are not us, and you can give another passport, if that financial institution suspects that you are a US person, even if you deny it and you are, and the suspect that are, and the more goes into certain industries, they are required to report U to treasury. So that's all it works. That's the check and balance. And the system, a U S you know, being a US person, we mentioned passport green cards, substantial presence is a big deal because of the health crisis that we are all going through right now, many people have been stuck in to US for longer than they're originally intended, too, because of flight issues of travel restrictions. And they are inadvertently, maybe come US taxpayers because they had substantial presence. But we also deal with accidental Americans. These are people born to at least one US parent, even if they were born abroad and never registered their birth with the embassy, they don't have a social, they don't have a passport. They still are. US persons AND. We can also touch on if anyone wants to jump into that later, we can touch on those who are married to a non US spouse. For example, we marry a Spanish national who has no connection to the U S aside from marriage, you can elect for them to be treated as a US taxpayer. If there is a big interest in that we can go into how that can be a true advantage, but basically these, the, the ways in which we may become US exposed FOR for tax purposes and the responsibilities that come with that tax rate income tax, which includes capital gains. If you sell real estate, if you sell anything anywhere in the world, or you generate income anywhere in the world, you will be subject to income tax, but everybody knows that I'm not telling you anything new, but what means be less well understood is the transfer taxes. I used to gift taxes and estate Taxes. And if you are married to a US citizen, it's, the gift taxes are less of an issue, but for those in relationships, boyfriends, girlfriends, husbands, wives, partner, or a civil partnership, or whatever the case may be, and your partner is not a US person receiving a gift from them above a certain threshold, or gifting them an asset over a certain threshold that does create a, at least a the reporting requirement to the US government, and feel free to report a gift is up to 30% of the unreported value of that gift. You know, the unreported gift value. So please head up the attention. And, ah, I know it's a bit more bid, but state taxes are something to consider as well. If you are still US domiciled, it will be a worldwide asset that would be subject to the US as a state tax. If you are not USAID, all of a sudden we can get into that later there's questions around it, then it'll just be a U S Situs assets, which you'll be subject to you as the state Taxes somewhat come to intuitive is the reality that you may think, Hey, the IRS cares about one thing, getting paid,like pick a file your taxes, or give us some money. No, actually, I mean, it may come as a surprise, but know that the IRS as is evidenced by the, the, the, the penalty shed jewel, you know, what do they actually go after? And how onerous are the penalties? What you will find is that they are actually more interested in information is all about data, so, okay. You don't pay your taxes, okay. Interest in penalties, but we're in a zero interest rate environment. How much is that going to be? But you don't report your bank account in a bank in Spain. It could be up to 50% of the balance. That's not reported plus jail time. So you know why they it's just so happened that ever since nine11 with a Patriot act  and some of the pieces of legislation, the U S government has been more aggressively pursuing information than just tax revenue. So what I want you to take away from this is make sure and file all the requisite paperwork. Even though there is no tax, do you provide the information because failure to provide information could be, you know, pursued pretty aggressively, like, right. And here's a
little acronym that, you know, we use for US taxpayers at a broad do your best. So B stands for the bank accounts, but as I already mentioned, that includes financial Accountants. It includes a unit trust and includes, you know, ETFs. It includes mutual funds, anything outside of the US as the financial account, certain pensions, it includes certain insurance policies, whether the cost of surrender value with his cash in the policy. So financial accounts, but be banks, make sure to report them. EA estimated tax. The IRS is impatient. They do not like to wait until the following April to get their taxes. When  you were back in the U S you got paid in a W2, which is subject to withholding every month, as you get paid or fortnightly, depending on how you got your money, they are S expenses. Same one. You're not there. So they want at least a quarterly payments field to provide quarterly payments. If they do, we will be subject to an underpayment penalty. So please estimate the taxes state issues. Remember that you are 50 different States, 50 different rules, but most States are domicile States, which means that you need to often take a very specific action to bring domiciles with your state. And there is by the state, but please speak to your financial, yo you're a tax expert. You're a tax qualified tax professional to make sure that you don't have any surprises waiting for you. When you go back to the US  because, you know, people will say, well, I'm in SPAIN,I'm outside of what you are going to do? Probably nothing. But at some point in time, you may return home. You may reside in the U S and that's where you have a big surprise waiting for you in the form of a huge tax bill. And we've had to help clients deal with that in the past. It's not nice, it's nasty. And it's really a hassle avoided if you can, and T transfer taxes, which you mentioned before, again, it's unlikely, especially with gift Taxes that there would be any payments needed, but just the reporting. Remember it's about with the US government it's information. They want information. So give them the information, fill out those gifts, tax returns. I do not create problems for yourself at state Taxes. That is one form of taxation that can, that lends itself to proper tax planning. You get yourself a great, a state tax professional who can help you work around that. I know it's a bit morbid, but it's better to get in front of it. Then create problems for your loved ones. When unfortunately, to pass on, I'm going to touch really, really briefly on stimulus payments. Why 'cause for the vast majority of us persons outside of the U S a safe from this stimulus payments. There are other aspects of the care act and the other loans, and the other incentives really don't apply generally speaking for some people. Of course it does, but generally speaking, it's just about the economic impact payments, which is what they get the free money for. So we had a first-round last summer, which is around 1200 hundred for the taxpayer and early this month, we had at $600 per taxpayer. So this is all we needed. Just, you need a social. There are some people that don't typically file returns on whatever the point is that the Q and a on the IRS website is pretty comprehensive. So it's unlikely that any question you have would not have been answered by the IRS website, if you did not receive the similar payment from last year, you can claim it as a credit on your returns. What are we doing right now? The, the, the, the form 10 40 has been amended slightly to have a space for this stimulus payments. So if you receive it, you declare it and that's fine. It's not TAX. They just want to make sure you got it, if you did not get it, you still can, you can make that declaration and you will get a credit to the Taxes. What does that mean? If you had your refund now, you'd be, do you have a bigger refund? If you have the tax liability, the tax liability, you have reduced by the amount to the stimulus payments. So it's you may just make sure that it, you know, whoever you're working with remembers you, the stimulus payments components of it. And as I mentioned, the website is pretty comprehensive. Have a look, everything is there In terms of filing requirements, they change. Sometimes they change every year. So it's always worth having a look. And if you are, if you, if you think, well, you know, I don't make enough or whatever, depending on what filing your filing status is, the threshold for filing a return is as low as $5. So if you made more than $5 last year, you should have a look and speak with your tax professional. And just to make sure that you file
a return if it's needed. So it's just something to keep on there. Of all the clients are higher-income earners. And so as a result, they have most of the questions we get on whether they
need to file, but why they didn't get a stimulus check and nine times out of 10 it's because our clients earn too much. And then I guess it is just the price of success. Because as you can see, there are certain fees outs. So it, depending on what your filing category is, is finding States who say it begins to phase out and the amount is reduced until you get nothing. So if it is , you all are a higher income here in LA on a typical client. It's something to bear in mind. If you are kind of scratching your head, wondering where's my check, right? So I know, And I'm going to hit the pause button  please. There's a chat box below. You can write your questions there. And after Ricky, it's finished with this SPAIN side of things, we will go through you, the questions that you ask and in order. So with that, I will stop sharing and Ricky.

Ricky Gutierrez

So my name is a Ricky Gutierrez I'm from Gutierrez projects on Partners. We are in Spanish based. I'm from an international accounting tax or legal firm in Barcelona. A we are basically focused on, on International Clients so basically I'm going to be talking about TAXES for four experts in Spain, and I'm going to go over, through all the taxes In in Spain. Yeah. So the F the first thing, how, how, how the Spanish is TAX here runs basically in, in Spain, you have to do two different things. You have state tax in the region. TAX you have to be careful because this may differ depending on where you're a resident, where your region is, for example, taxes are different. If you are living in Catalonia or you are living in Madrid, severe fear, severe fines and penalties can be incurred if you fail to, to file your taxes. So it's very important that everybody knows how to file them or have somebody that can file him for them. Given that Spain has become a very popular destination for Expats, for Expats understanding this Spanish success is vital. It's pain is very intense. It has so many benefits for FOR people from outside the SPAIN because we all have double taxation treaties with over a hundred countries, which that's very, very beneficial. The two most important taxes for individuals are the income tax and the wealth gap. Okay. The most, one of the most important things. When do I know if I'm a tax resident in Spain, there are basically three roles with these three roles. We can know if we are tax residency or not the first row that we have two to confirm. If you have more than 193 days in Spain within a single calendar year, regardless of whether you are formally
registered, if you don't comply this, this rule, we will go to the second one, which is your primary activity. If they are conducted in Spain or not. And the third one, if your main interests are in Spain, for example, if you're a spouse or children, are still living there and they are dependent on you. The income tax, the income tax in Spain is basically one of the most important Taxes. The Spanish tax rate is in Spain income tax on their worldwide income. Non-residents only have to pay taxes there. Income generated in Spain of course you can have deductions on those and that income and the income tax rate for, for non-EU non-residents is a flat rate of 19%. And for the world, non-residents, it's 24%. The income tax can be divided into different categories. I do general activities. And saving's of course, as I mentioned before, depending on the region, you can have a special regime, such as a region, such as an IRA and the Basque country. They have special regimes and they pay into their own tax system. The Spanish, one of the, the important things to know is that it is a Spanish income tax, depending on the income that you have. It can go up to two 55 which is pretty high. Now we're going to go a little bit deeply. In into the income taxes from, from the savings. The income tax from the savings basically comes from Interest dividend payments, income from life assurance, policies from annuities gains made from the disposal or transfer of assets. Since 2016, the income tax rate of savings are, are, you guys can see the following incomes up to 6,000. You have a rate of 19% income from 6,000 to 50,000. It goes 21. And over 50,000, it goes 23%. The important part. Now it's the Spanish, the general income, this, this income is based. Your it's basically your income from employment, the salary, pensions rent, and this income, it can go. You will pay to come up to 12,000. FOR 450. It's 19% until 20 or 20,200 to 24, 35,200 is 3%, 60,037 and incomes over 60,045. But of course, depending on the, on the region, you're at, it can be higher than 45%. As we mentioned, for example, in Catalonia, it can be up to 54%. So that's like a general those, or like general rates, Some, a personal allowance in deductions to the one that you can have based on, on the, on your personal situation, Spanish TAX residents, they have personal allowances while non residents. They don't, you can have allowances if you have in your family, people like you, if you have in your family and live with you, people are over 65 years of age. You can have more allowance if it's over 70 or 75 years of age. And if you also have children that are underage or under 25, and they are living with you, you can also have a deduction from that. Okay? The Spanish wealth tax, which is pretty, pretty important, too, basically this TAX, it's designated for people who are all significant worldwide wealthy. School costs a lot of money. The declare assets after a tax allowance of, of 70 or 70 300,000 euros in Catalonia, the tax allowance is up to 500,000. But if you are living in Madrid, there were, there is no wealth tax. That's the difference between some regions and the other ones, maybe in some regions, you have a lot more benefits regarding one type of tax. And maybe in some other regions, you have more benefits regarding other types of Tax. For example, for your primary residence, you have 300,000 more of a tax allowance. And the tax rate goes from 0.2% to 2.5%. Okay. Now the form seven 20, the form seven 20 is basically like an informative form. It's a forum where you stayed or it's known overview of T individuals, worldwide assets in individuals that come to leave in SPAIN and become a Spanish. The students have to declare all their assets that are worth more than 500,000, 50,000. Sorry. They have to declare these assets in this form.But as I mentioned, it's just informative. A lot of people fail to do this thing when, whenever they come to Spain and then when they have to declare those assets somewhere else, and they are having filed this form, then the Spanish tax authorities would come after them. And they would have two to pay some fines and incur high penalties for not declaring these assets, The Spanish property tax, owning a property in a and living in SPAIN in there from January first, you are subject to AB it's a in Spanish is not a slight it in post <inaudible> do this. This is kind of, Tax a, it applies to both residents and non-residents. There are also some other property taxes, such as rubbish collection Tax. And when, for example, when you're selling a property, you are also TAX with, with transfer tax. Capital gains, the Spanish capital gains tax rules are not really straight-forward this, this stat, it's a tax on profits from selling properties or other investments Tax residents pay or pay capital gains on to the disposal of their worldwide assets. You mentioned before, or while the rates are from 19% for the first 6,000 profit 21% from the range from 6,000 to 50023% for three 50,000 upwards for a nontax resident, the PE Spanish capital gains on, or the gains made by the sale of a Spanish property, okay. Only for their income or the, the gains that they have in Spain. And of course, it's a flat rate of 19% Spanish capital gain seats. It's easier for FOR non-residents rather than the, than for students. Now we come to the corporate income tax. Nowadays the corporate income tax is 25%, but maybe in the future with the current government that we have, they, they want to put it higher up to 30%, but we'll see, ah, the newly formed companies, they pay 15% instead of 25, they paid the 15% for the first two years. Then the Spanish tax year. It goes from January to December and the corporate tax is paid the 25th of July of the following of the following year. Whenever yeah. Now we have the inheritance and gift tax, which is pretty complex as individuals are subject to tax when they transmit or they give us a tax resident can be taxed on their worldwide assets. But not as mentioned before, of course non- residents only on their Spanish assets. You can also have it based on the degree of kinship. For example, if you are giving something to your son, you might have a lower tax rate that if you are giving something to a person that you don't know, you can have some, some pretty, pretty high reductions, but it's a pretty, a pretty intense and pretty difficult text.

And finally, we, I'm going to talk about the special regime for foreigners, which is called the backroom law. This Law was incorporated in, in Spain where, because of the famous soccer player, they detect them. Most of you probably have heard of him. They became Law. It enables a nurse who moves to do the Spanish territory to, to pay a flat fee of 24% on the income stay, obtain in Spain instead of having a progressive Tax of their worldwide incomes, that goes from 19% up to a 54%. There's a flat, this flat rate of 24% is up to an amount of 600,000. And then you will have to pay for the 5% or more. Or if you are over 600,000 years, this is a Law. You can only use it for the first six years, your in the country, after that, you will become a Spanish sector president and you will have to pay taxes based on the on the progressive lines, the, to the ma the main requirements for FOR the vacuum Law is, is that the Expat can be, could have been a resident in Spain for the past 10 years. The forerunner must have a job contract and signed by a Spanish company. If it is a director, it can possess more than 24% of the company. And of course, the course of the work of professional activity must be in Spain. And that's it. If you guys have any questions, I will be glad to answer them.

Derren Joseph

Okay. And I see that we do have lots of questions. So what we'll do is up, okay, I'm going to work on this. Funds start in order. I'm going to scroll all the way back up to the top. And so someone is asking about section six, a one three G election. So this allows someone who is to a non-US spouse to elect, to have them treated as a US taxpayer. And you may ask that's a bizarre, why would someone bring a foreign spouse into the tax net? There are a number of reasons, but the two main reasons that we see with our clients are a tax. So as you would know, the FOR, whether we like it or not, the reality is that the US tax code favors married couples over a single. So if you, if you file separately versus married jointly, you would face a heavier tax burden filing US married separately, as opposed to Join li so depending on the situation of your non-US spouse, it might be to, you may save money on taxes and depending on your income level, we've seen clients save a four or five figures simply by electing to file jointly. So it's, it's, it's a scenario that you, that we run with clients to see where they are to their advantage or not. And the second reason is part of just immigration planning. This is for couples. So non-US. And the intent is at some point in time to sponsor a green card for the non-US spouse. And for them to both live in the US, as you know, when you land in the US and you have no credit history, you have, you can do anything. And because you are off the grid, basically in getting a cell phone plan or leasing a call or renting an apartment, that spouse is completely, you know, and they face an uphill battle until they are in the system. Now, if it is that you make a 600 to three G election ahead of time, like a year or two ahead of time, then they are filing a tax return and to get a tax ID to get into the system, they can prove their income in a way that U S credit shows will understand. So it is part of a strategy for pre immigration as in immigration to the US, and it could be a tax benefit. So, that's why the next question, if I haven't filed a 20, 19 to 2020 in the U S I live in Spain, can I get the stimulus checks? Yes, you can. But then that's you raising your hands and telling them, Hey, look at me, look at me, look at me. I'm here, I'm here. So it is that you were supposed to file a return, but you didn't, you would rather just go onto the IRS portal and kind of reason and get your hands and draw attention to yourself. You may want to file a tax return. If a tax return is due, you want to be filed. And even if a tax return is not, do you remember that one of your responsibilities as declaring foreign assets, chances are, you probably have a bank account in Spain. So just make sure that like you are 100% aligned or everything is, is, you know, one or 2% compliant. And if you genuinely have no need to father a turn, then absolutely go to the portal and register yourself to, to get a stimulus check. If a return should have been filed, please follow the return. There is a program which has amnesty at all, but is called a streamlined compliance procedure. With that allows you to do is to do the last three years. Sometimes FOR sometimes. So I have been basically three years and the last six years of <inaudible> and the IRS says, okay, you've come to us before we've come looking for you. And in return, because we're going to give you something as well. We will waive penalties, civil and criminal penalties. We will charge you interest in Taxes, but do you, you, you live in Spain. So chances are no taxes are due, but you know, you come to us, we waive civil and criminal penalties, and we turn a blind eye to everything that happened outside of that look back, period. So the lookback period, as three years for a return six years for <inaudible> and then you are good and you, you, you get going forward. So if it isn't, you have not been compliant, that is perhaps a strategy that you should look at with your preferred tax adviser. Next question. If I do earn less than the front end income exclusion and have no income tax liability in the US, will I still receive the same as payments? Okay. Okay. So you earn less than the foreign earned income exclusion, but chances are you earn more than $5. So you would have filed a tax return. So even though you properly file your tax return, I know taxes, or do you, yes, you will get the stimulus payment. But the important thing is that you file a tax return and earn less than the foreign earned income. Exclusion is not an excuse for not filing a US tax return. You earn money. And the threshold is pretty low, depending on your filing category, but once you're above whatever the requisite threshold is, even though it's less than the foreign earned income exclusion, a tax return is. And yes, and to answer the bottom part of the question, you can still receive this similar payment in the form of a rebate. So the refund, if you do a refund is gonna be a big refund. So the next question, can you talk about how tax brackets differ between the U S and Spain and impact to all the Taxes likely over to both countries? A lot about, about a while. Okay. That is a pretty tricky one. So obviously, well, not obviously it depends on the nature of your income because different types of income carry different tax calculations and different tax liabilities. When we spoke about transfer taxes, we spoke about capital gains taxes. We spoke about taxes on passive income. Well, there are dividends of Interest. We also spoke about taxes on earned income. So it really depends, but I think we have where you are going. And what people typically ask about is am I going to be double tax? If I'm just going to cut to the chase, that's what people are worried about. I'm not going to pay double tax. The answer is highly unlikely. Once you have a team that knows what they're doing in their talk to each other, we see people getting double texts and they approach a US TAX team that knows nothing about Spain because you know it. Yeah. And they think it's like a simpler jurisdiction, but no, you can't. I believe my personal opinion is that it is super difficult to do taxes for someone living in Spain and a US exposed person is living in Spain. If you don't understand Spain Taxes now SPAIN will TAX everything. And so when do you US so what we need to do or what, whoever is your chosen US Tax team needs to do is the need to invoke certain articles of the US Spain Tax Treaty. And that's how we relieve stress. We provide relief for most of the instances that have double taxation. So, in terms of going back to the question, it's kind of hard, right? Not to give a break down to the difference in tax bracket, because there are so many, and especially with SPAIN in Spain is the sum of the calculations as Ricky pointed out of the super complex. Right? But step back from that, once the team understands both sides, they shouldn't be able to work with you to ensure that you're not double taxing on either your earned income or pensions, a pension income as well, scrolling down a Spanish and Americans citizen. I'm a dual, my income is solely a government Pension here we go. We can have pensions. I understand in January the rates of tax and Spain is high and in the U S yep. And then one has to pay the difference. Right. But what a government pension, this does not apply. Is that true? Now? It really depends. I mean, generally, but generally speaking, you're correct. As we were seeing previously, you're not going to be paid Tax twice. You'll be paying the higher of the two amounts, which tends to be Spain doesn't always have to be, but it does tend to be Spain and you won't be, you are just going to be paying the difference. You're not going to be paying, you will not be taxed twice on the Pension income. Okay.

Ricky Gutierrez

Yeah. That is correct. And if you go over the Spanish American Tax 3d, if you go to the article 21.2, it basically talks about public pensions. And it says that generally there will be taxes in the US, but if the percentage is greater in The in Spain, you will leave the pane, that percentage that you are not paying in, in the U S so you wouldn't be paying double tax, which is what is most important.

Derren Joseph

Okay. Moving down. Next question. Referencing Spain okay. Ricky this one's for you. Can you see it from Allen referencing Spain savings income from gains, from disposal of assets TAX at 19 to 23%. Does that include US traded stock and option trading games? Is there a difference in a long- term versus a short-term holding period?

Ricky Gutierrez

I mean, we would have to, to go over the types of incomes. I mean, you mentioned from, from the disposal of, of, of assets, they do include US traded stock. I mean, we would have, we had, we would have to take a look at the US traded stock and C the gains that there's a difference if there are long term and short-term, you would probably be taxed on the on the short term. And when there are long term do then, you will be taxed on those long term or long. There are those long term assets

Derren Joseph

And just a kind of a support would Ricky you said Spain Taxes everything. And so it's unlikely. You can earn a full income that's been done, and taxes, things definitely we're going to tax it, but you sit with Ricky. Are you qualified? If your Spain qualified a tax professional to work out what the most tax efficient way of dealing with that would be, but it is going to be taxed you know.

Ricky Gutierrez

Of course BEFORE before giving an answer to everything we were, we would go over the information given and we would study it. And we would always try to give more than one solution to the, to the issue or the problem. The, the first we need to know what exactly we are asking. We would have to know all the information. And from there, once we have all the information we can assess, and we can give better advice, that's the best thing, instead of just giving random answers, like in a yes or no. I mean, of course the first thing we have to study, and then we will give you the best answer. Okay.

Derren Joseph

And the next one as well, probably for you really well, tax in Spain are all assets counted, including 401k’s.

Ricky Gutierrez

Okay. Do you mean assets above 400, a 400,000, right. Independent regarding the wealth tax that I mentioned before, it depends on the, on the region, your, your living, because for example, if your, if your resident in SPAIN in your living in Madrid, there's no wealth tax. So you wouldn't be paying for anything on those, on those assets. But generally in most of the regions, Spain, you have an allowance up to 700,000. So you wouldn't, you shouldn't have a problem with that

Derren Joseph

But, you know, just a follow up on that, assuming that someone lives in the relevant region and where there is a Tax and they are above the threshold, real have to take a careful look at the various pensions to see whether or not they would qualify in that situation. Right? Yeah. Yeah. Okay. The next one is for you as well. I have an SL you in Spain, 100% old, and I was told that I need to be on the ball to run this company. I'm just reading it so that the recording has it, right. Because the recording doesn't pick up the chat. Is that true? Can I pay myself a salary as a director or an operator? The company doesn't have any employees otherwise over to you?

Ricky Gutierrez

Yeah, that is totally correct, because they are, there are some losses here, here in the SPAIN. Yeah. The director of the company should be, or the owners should be an autonomous and it should be. Maybe instead of having a salary, maybe invoicing your own company would be a better solution, than having a salary. But of course, as I mentioned before, we would have too to study the, the, the information provided and try to give you the best answer, because maybe, or you could either invoice your company or pay a salary, but maybe both, both ways would be, would it be good?

Derren Joseph

Correct. Hmm. Okay. Thank you. Moving on to the next one for the US, what the level of gift can I transfer to my NRA spouse? Non-resident alien spouse without a trigger and the reporting climate I need to check specifically, and that number may change each year with, with indexing, but when you are transferring or receiving over a hundred thousand from an NRA spouse, then I would start and looking at whether there's a, a filing requirement, but bear in mind that it's not going to be from a us perspective is not going to be chatting. It's simply a filing requirement. Remember, the idea is just once the information, that's all, it's pretty harmless. You just fill in a pitch and you just bring in paperwork, but unless the month is substantial, I EA, it's more than your lifetime gift allowance, which right now is around 11 million a faster than the former administration. Then it's unlikely that any TAXES will be due. It's a simple, important appointment, scrolling down. Now this one's from Josh.

Hi, all, I have been a freelancer for U S clients for some time, but it was never making regular, a significant amount of income until recently when I registered as an autonomous, how to properly declare my Taxes since becoming Autonomo. I had declared in trimesters and Spain my income meet here and in the US but there are a few invoices that are from before I became autonomy. And I'm not sure how or if I should declare them.

Ricky Gutierrez

Okay. So you're a freelancer. I mean, of course you would have too to declare them probably, maybe. Hmm. Maybe we, we, we, we could add those or maybe change the status of those invoices AND or maybe do a 20 Note of those invoices and reimburse them again with your current status. Maybe that would be a good idea. The, probably, maybe will have to take a look at what your status was before becoming autonomous and see how we could add those invoices to your, to your current status. But of course, yeah, you would have you what you will have to declare them or otherwise maybe the Spanish tax authorities could come after you. Depends. Of course, depending on the amounts. I mean, if they are pretty low barriers, you have to do it, you have to declare those, those invoices.

Derren Joseph

Okay. A next one for you as well. Ricky, can you say, just say for those who may be listening to the recording, could you say your email address and then type it in the box below? Yeah.

Ricky Gutierrez

Yeah. My email I'm typing. My email address is Ricky@GPO.com. I typed it in the way I sent it just to you, sorry. And yeah, more than welcome to, answer any of your, of your questions.

Derren Joseph

All right. Wonderful. Next one is this software that can run simulation for the US in Spain. I will speak to a US in, obviously you speak to Spain. So in terms of the US tax code is arguably intentionally kept complex. And anytime someone comes through with an idea of simplifying it, there are some well-paid lobbyists in Washington who make sure that that's never going to happen. So therefore there's a reason why is that they want you to pay thousands of dollars. Like I do. My software bill is pretty high. So unless you're willing to shell out at least 3000 us dollars for software, the answers going to be no, there is a turbo tax, but as I tell everyone, the same company that offers to have a tax offers me pro series and assert, and some others, two of a Taxes designed for low-income domestic tax payers in the U S it does not have the calculations. It does not have all the forms for international taxpayers. And that is intentional. Why? Because of it, and I'm not criticizing anyone from making money, I'm trying to make money as well. They deliberately hold back on the feature that they want you to pay extra for. So in terms of a software solution, it exists, but it's going to be expensive for the US.

Ricky Gutierrez

Yeah. Okay. If there's a software program, a FOR re regarding software programs, I mean, there are many, many software programs here that can run a simulation here, and they can calculate your TAXES based on the scenarios that you do. You want to give it. So, I mean, we have many, I mean, at the moment we are in our firm, we are currently working with a pretty good program called Sage or other programs at a PSAP. There are many programs that can do simulations on your, on your taxes based on the, the things that you do. You want to want to give it. I mean, you can, you, you, you, you can, you can put many, many, many options to it, and it will give you a different rate and, and maybe sometimes it can give you options to, to optimize your, your Taxes.

Derren Joseph

And just to add to that, because of the interplay between the two tax systems and the need to involve the Treaty understood it's I really don't see. I can see a software solution to in Spain and doing it well, I can see a software solution to in the U S and doing it well, but the interplay between the two and at this stage before, I mean, until AI is designed to make it happen, and I'm sure they're working on it, you need a human being. You need a meeting, of course.

Ricky Gutierrez

Well, as you had mentioned, I mean, there, there is softwares that can do many things that are just some words. Yeah. So sometimes, or most of the times you need somebody to reboot the information, to speak to the other person that is a guy from abroad and, and to come together and try to find a way a better solution to solve for you can give you some numbers and you are going to be the one speaking to the client, not the software.

Derren Joseph

Great. Next question is above the refund. They are just to quickly answer, because I know we're running short on time, and we have a lot of questions to, to cover the IRS is in wrestling, backed up as In seriously backed up. And there is a mountain of mail and processing times are ridiculously long. So we advise all Clients if possible, if file you file you file. If you are sending stuff by standard mail, be prepared for long delays, or my client's are complaining. So your check is literally stuck. You find your file with this event will be available later. Yes, we will have it available later for the person who came late. I believe the reporting threshold for gifts to the IRS is 15,000 per year. That is yeah. Certain gifts, but that's not for spouses. Spouse's are treated differently. Those are the thresholds we discussed previously. A 401k retirement account is a specific type of retirement account in the U S all right. That was what I was referencing lead to, we heard that it was not included in all the chats because I hadn't started drawing on them yet.

Ricky Gutierrez

So yeah, here in Spain of course, if you are, if you are wanting to become Spanish secretary, you would have to, but of course, we would have to take a look at how much money you have in that account. A if you have over 50,000 euros, you will have to declare that on the form seven 20. And of course, we will have to study what type of assets we are now we are talking about. And then we will decide if the percentage of, of TAX you would have to, you we'd have to pay for that. Of course, if that money it's, because if that money doesn't, it depends on where you have the money, because it's not the same. If you have this in a company, or you're receiving this money, if an individual is just receiving this money, it's very different because maybe it's a company, maybe it wouldn't be taxed. That it's an individual who will probably be taxed. Then the taxes would be pretty high. We will have to see of course the amount and what type of assets are we talking about?

Derren Joseph

Yeah. So in other words, you, we lead a Ricky, his team will need to ask you these CFN standards, rather than just giving us a quick answer right now, David has been answered. Is it possible to opt out of paying social security? Dad is an Autonomo. If you ask, what are the advantages? What are the disadvantages of that? Can it be reinstated later on Ricky?

Ricky Gutierrez

I mean, if you are autonomous, you know, you have to pay social security,the social security for an hour, an hour, autonomous, you start with a pretty low rate. For example, most of the people start maybe paying 50 or 50 euros a month, and then it goes up and up. And sometimes maybe depending on the income you're earning EA, you can pay a lot of the Taxes. Sometimes it's better. If you can, regarding the, the employee it's, it's better not to be it's, it's better to be in regular regime rather than autonomous, because a, if you are in regular regime, the, the employer, the company is the one that is taken care of the, of the social security payments. What if you are an autonomous, do you have to be the one in charge of taking care of your social security payments? It's EA we would always have to study if it's better for one person to be in a regular regime or being autonomous. But for example, they are sometimes the, you can not be in a regular release team, for example, or a one person that the father is the owner of the company. And you are trying to work in that company, the sun and or the daughter's is trying to work in that company. For some Law here in Spain, you cannot be in a social regime and you have to act as an autonomous. Those are some rules here in Spain. Maybe it is not beneficial that you will have to follow them.

Derren Joseph

Okay. Next question is, how far in advance does it make sense with typical retirees to start tax-planning? We want to pair a Taxes is required, but I want to be as efficient as possible in my mind, part of retirement planning is tax- planning. So your choice of, of retirement or the call is to a large extent driven by Taxes. So the answer is yesterday, it, you know, as soon as possible, definitely. Is there any book, ah, this one's for you to Ricky, is there any bookkeeping software that links to Spanish banks and downloads transactions?

Ricky Gutierrez

Yeah. Yeah. Well, there are many software or the, the, the, to do that right now, and we are currently working with one of them. The name of it is called CEC. It basically downloads The you give the coach or the password, like the Between passwords. And it basically downloads all the, all the information from the bank. And then it gives you, it shows up in your, in your accounting, and then you just need to check the, all the, the accounting and all the bookkeeping, the the software is doing its right. And then if it's wrong,
you can change it. But yeah, we have those types of software here in Spain.

Derren Joseph

Okay. Next question. Is there any way to file, if you have an RA or a non-resident alien spouse, a non-American spouse should know ITIN, the answer is no, you need to get them a 19. My team where certified acceptance agents will be appointed by the IRS to help with the ITN application process. But I'm sure there are others who are closer to where you are. So if you get an ITIN, yes, you can have on file. And then the next question, let me, okay. Someone else is asking about an ITIN easy solution, get your spouse, an ITIN, and you're good to go. And it's a, it's a, if you use a Certified acceptance, Agent not necessarily US, you can Google it on the IRS website is a, you know, a hundred of us. So you can pick whatever you like. Once the, once we use a certified acceptance agent, not just an acceptance, Agent you wouldn't be able to help you with an ITIN application and you don't need to surrender your spouse, his passport, because otherwise you need to send it to the passport, to the IRS. If you use a Certified acceptance agent, they verify the authenticity of the passport. So your spouse can do it.

He his or her passport and you get your ITIN And you can follow the next round into the next cycle. The last, well, the last question at the moment, my, Oh, okay. Somebody's asking another question. Hold on. At the moment. Spanish girlfriend and I are planning to get married. Congratulations. I've never earned any income in SPAIN, but I do have a small bank in common. Spain a couple of hundred euros with money. I deposited from the US should this be claimed in my US TAXES never considered it previously with the AF boss, the foreign bank account report to the US there is a threshold. So it's not just one. Accountants your maximum aggregate balance if it exceeds 10,000 US so if you have 200 bucks, 200 euros in one kind of college and, you know, a thousand and another and so on and so on. And so on, If collectively the maximum balance for the calendar year exceeds 10,000. Yes. There are all reportable. Otherwise. No, they are not .And follow up on to that answer. Try getting an NRA spas and eights in to the IRS office. And they wouldn't let me, because it wasn't done in conjunction. Exactly. You need to do it while submitting a timely file in the U S tax return. So as parts of the application, you know, again, it's online just Google instructions to, so the parts of the application package includes a timely filed U S, which is so you do it. And at the same time that you're filing a tax return. And next question with an American and Portugal, a dual. OK. Input's you are living in Spain. Okay. So do you, well, US Portugal as a citizen living in SPAIN or Taxes to the U S Spain in Portugal. If there are retired living in the us social security and IRA, investment incomes. Definitely. We are living in Spain. So an income tax in Spain, you American, so we'll wait for income tax in the U.S. The Treaty helps to ensure that you're not going to be double Tax. Hopefully in terms of

Portugal in Portugal, there will be TAX to any Portugal's source of income, as long as you're not a tax resident in Portugal. And that's it. Thank you for your time. Thank you all for coming. All right. So please feel free to connect, to reach out to us, to connect with us on LinkedIn. I'm really active on LinkedIn and I post-tax advice, not, not just general tax advice every day, a, a LinkedIn, Instagram, Facebook towards, or a Ted talk, et cetera, for example. So please feel free to like, follow and subscribe. Thank you very much. On HTJ.tax you will see upcoming webinars and we are constantly having. Good evening, day morning, wherever you may be. See you next time. Bye.

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