Spanish Businesses & Investments

Questions covered:

Opening a local business in Spain as a US citizen

Of course, before opening a local business in Spain, you must have the right to live and work in Spain. You will also need to obtain a work permit. What’s more, you must decide on your business structure and register your business with the Spanish tax authorities.

What types of local business structures are there in Spain, and what would be the US filing requirement?

Sole Trader (Empresa Individual)

As a Sole Trader, you are self-employed. You will need to report your self-employment to the IRS via form Schedule C.

SA,  SLNE,  SRL/SL,  SLA, SLL,  and SC

In Spain, there are six types of limited companies you can choose including Sociedad Anonima (SA)Sociedad limitada Nueva Empresa (SLNE), Sociedad Limitada (SRL / SL), Sociedad Laboral Anónima (SLA), Sociedad Laboral Limitada (SLL), and Sociedad Cooperativa (SC).

The main differences between these limited companies are the minimum number of shareholders required and the minimum investment amounts. These limited companies are reported to the IRS via Form 5471.

Sociedad civil/Partnership -

Expats planning to go into business with one or more people may decide to register their business as a partnership. You will be required to report the partnership to the IRS via Form 8865.

Pequeñas Y Medianas Empresas (PYME)

Small and medium-sized businesses (corporations) are reported to the IRS via Form 5471.

Your pension in Spain as a US citizen

Pension Structures: The Spanish pension system is made up of three pillars.

  • Pillar I: The Spanish state pension is compulsory for all residents working in Spain, with strict regulation on who can claim and when (i.e. Social Insurance and survivor’s pensions.
  • Pillar II: Company and employee pensions. Conditions and availability depend on the employer.
  • Pillar III: Private pensions make up the third pillar, which is voluntary and typically have more flexible conditions than the state Spanish pension (i.e.some allow you to withdraw your savings before the Spanish pension age.)

Spain Financial Accounts

Which types of Spain financial accounts the U.S. individual must report on FBAR / FATCA?

  • Individual bank accounts such as savings accounts, checking accounts, and time deposits.
  • Retirement accounts - balance on Pillar 2 and Pillar 3 accounts
  • Brokerage accounts, commodity futures or options accounts,
  • Insurance policies and annuity contracts with a cash value (i.e. such as a whole life insurance policy).
  • Business accounts where U.S person has a greater than 50 percent interest in the entity

If you have bank accounts at Banco Cooperativo Espanol (BCE), Banco Etcheverria, Bancaja, Banca Civica SA, Bankia, Banco Financiero y de Ahorros (BFA), Banco de Valencia (BVA) or at another bank in Spain or any other foreign country, you may meet the filing requirement to disclosure your foreign accounts on the FBAR. .

Which types of Spain financial assets are not required to be reported on FBAR / FATCA?

  • Social Insurance,
  • Real Estate Holding,
  • Precious metals held directly,
  • Collectibles,
  • Financial Account held at a US branch of a foreign financial institution.

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