The LLC in Spain presents one of the most complex tax challenges for residents who own a U.S. Limited Liability Company while living in Spain.
At Resitax, a tax advisory firm based in Mallorca and specialized in international taxation, we help individuals who already own an LLC in the United States understand how to manage it correctly under Spanish tax law.
Moreover, we explain how Spanish tax residency affects the taxation of a U.S. LLC, how to avoid double taxation, and how to comply with both the Spanish Tax Agency (AEAT) and the U.S. Internal Revenue Service (IRS).
LLC in Spain: Transparency or Separate Legal Entity?
A U.S. LLC in Spain can be treated either as a “transparent” entity or as a company with its own legal personality, depending on the jurisdiction that evaluates it.
This difference in interpretation is the root of the tax conflict between the IRS in the United States and the AEAT in Spain.
IRS Perspective (United States)
Disregarded Entity
In most cases, when an LLC has a single owner (Single-Member LLC), the IRS ignores it for tax purposes.
As a result, all income and expenses are reported directly on the owner’s Form 1040 (Schedule C), following the pass-through taxation principle.
Federal Taxation
If the LLC does not have income effectively connected with the United States (Effectively Connected Income – ECI), its profits are usually exempt from U.S. federal corporate tax.
However, informational filings are still required, such as Form 5472 and the pro-forma 1120, to disclose foreign ownership.
AEAT Perspective (Spain)
In Spain, the AEAT analyzes how an LLC should be treated under Spanish law.
There are two main approaches used by the tax authorities.
Conservative Approach: Income Attribution
Spain may consider that, since the United States disregards the LLC for tax purposes, the entity should be treated under the income attribution regime, similar to a civil partnership.
Effect: Spanish tax residents must declare all the LLC’s profits in their personal income tax (IRPF), even if the money has not been transferred from the LLC to their personal bank account.
Case Law Approach: Taxation upon Distribution
The Spanish Directorate-General for Taxes (DGT) has acknowledged in rulings such as Consulta V3074-22 that a U.S. LLC may possess legal personality.
Effect: In this case, Spanish tax residents only pay tax when they actually receive income (salary, dividends, or profit distribution) from the LLC.
Tax Obligations in Spain for a U.S. LLC Owner
If you operate or manage a U.S. LLC while living in Spain, you must comply with several Spanish tax and reporting obligations.
Understanding them is crucial to avoid penalties.
| Obligation | Description | Key Details |
|---|---|---|
| IRPF (Personal Income Tax) | Report the LLC’s net income in your general taxable base. | Taxed at progressive rates up to 47% depending on the autonomous community. |
| Self-Employment Contributions (Social Security) | If you manage the LLC and perform activities from Spain, you must register as self-employed (autónomo). | The new contribution system is based on real income. |
| Form 720 | Informative declaration of foreign assets. | Mandatory if your LLC’s bank accounts or assets exceed €50,000 as of December 31. |
| VAT (Value Added Tax) | Depends on the nature of the services and the client’s location. | B2C digital services in Spain require VAT; B2B within the EU may apply reverse charge rules. |
🔗 Official Source: Agencia Tributaria
U.S. IRS Reporting Obligations
Even if you reside in Spain, as a U.S. citizen or Green Card holder you must maintain full IRS compliance, regardless of whether your LLC pays federal tax.
| Form (IRS) | Purpose | Key Details |
|---|---|---|
| Form 1040 | Personal income tax return. | Use the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC) to avoid double taxation. |
| FBAR (FinCEN Form 114) | Report of foreign bank and financial accounts. | Required if total foreign balances exceed $10,000 at any time during the year. |
| Form 8938 (FATCA) | Report of specified foreign financial assets. | Mandatory if total foreign assets exceed $200,000 / $400,000 depending on filing status. |
| Form 5472 + 1120 Pro-forma | Report of transactions with related parties. | Required for single-member LLCs owned by foreign individuals performing reportable transactions. |
Resitax: Experts in LLC Taxation for Spanish Residents
At Resitax, we do not create LLCs in the U.S.
Instead, we specialize in advising Spanish tax residents who already own an LLC in the United States and need to understand how to handle it correctly in Spain.
Our mission is to ensure full compliance with both the AEAT and the IRS, while minimizing tax exposure and avoiding penalties.
We provide expert guidance on:
- How to declare your LLC’s profits in Spain.
- Filing Form 720 and other foreign reporting obligations.
- Coordinating your tax situation between Spain and the U.S.
- Avoiding costly errors or double taxation issues.
Learn more at Tax Advisory in Mallorca | Resitax
How to Manage Your LLC in Spain Properly
Having an LLC in Spain as a tax resident is not a problem in itself.
However, it requires proper planning and a deep understanding of both U.S. and Spanish tax systems.
Incorrect interpretation or lack of reporting can result in significant fines from the AEAT.
That is why Resitax, a tax consultancy in Mallorca specialized in international taxation, helps you manage your LLC safely, legally, and efficiently, ensuring full compliance with all reporting obligations.
