A Limited Liability Company (LLC) in Spain presents one of the biggest tax challenges for those residing in the country who also have a company in the United States.
At Resitax, a tax consultancy in Mallorca specializing in international taxation, we help people who already own an LLC in the U.S. understand how to manage it correctly in Spain.
In addition, we explain the implications of tax residency in Spain, how to avoid double taxation, and what the Spanish Tax Agency (AEAT) and the IRS to comply with all legal obligations.
LLC in Spain: tax transparency vs. legal personality
First, an LLC in Spain can be considered either a "transparent" entity or a company with legal personality, depending on the country evaluating it. This is why the conflict arises between the US Internal Revenue Service (IRS) and the Spanish Tax Agency (AEAT) .
IRS Perspective in the United States
DisregardedEntity
In most cases, when an LLC has a single owner ( Single-Member LLC ), the IRS ignores it for tax purposes. Therefore, income and expenses are reported directly on the owner's Form 1040 (Schedule C) , following the pass-through principle .
Federal tax
On the other hand, if the LLC does not have effectively connected income(ECI), its profits are usually exempt from federal corporate income tax.
Even so, filing Form 5472 and pro forma Form 1120 to report foreign ownership remains mandatory.
AEAT's perspective in Spain
In contrast, the Spanish Tax Agency (AEAT) analyzes LLCs in Spain according to its legal and accounting criteria.
There are two main interpretations:
Conservative option: income attribution
In this case, Spain considers that, since the US does not recognize the LLC as a separate entity, the income attribution regime.
As a result, the tax resident in Spain must declare all profits from their LLC in their personal income tax return, even if they have not transferred them to their personal account.
Jurisprudential option: taxation by distribution
Furthermore, the Directorate General of Taxes (DGT) has recognized, through Consultation V0681-25¹, that the LLC can have legal personality in the USA.
Result: in this case, the Spanish resident only pays tax when he actually receives income (dividend, salary or profit distribution).
Tax obligations in Spain for an LLC
Therefore, if you manage an LLC in Spain, you are subject to the following tax and formal obligations:
| Obligation | Description | Key Detail |
|---|---|---|
| Personal Income Tax (IRPF) | Declare the LLC's net profits in the General Tax Base. | They are taxed at the progressive rate (up to 47% or more, depending on the autonomous community). |
| Self-employed contribution (Social Security) | If you carry out the activity from Spain, you are obliged to register as self-employed and pay the monthly fee. | The new system of contributions based on actual income is applied. |
| Model 720 | Informative declaration of assets abroad. | MANDATORY if the LLC account exceeds €50,000 as of December 31. |
| VAT (Value Added Tax) | It depends on the type of service or product and the customer's location. | If you sell B2C digital services in Spain, you must pay Spanish VAT. |
Reporting obligations to the IRS
Similarly, even if you reside in Spain, if you are a U.S. citizen or Green Card holder, you must keep your tax returns up to date with the IRS:
| Tax Obligation (IRS) | Purpose | Key Detail |
|---|---|---|
| Form 1040 | Personal income statement. | Use the FEIE or the Foreign Tax Credit (FTC) to avoid double taxation. |
| FBAR (FinCEN Form 114) | Report of foreign bank accounts. | You must include the LLC account if the balance exceeds $10,000. |
| Form 8938 (FATCA) | Foreign financial assets report. | Mandatory if assets exceed 200,000 / 400,000 USD depending on marital status. |
| Form 5472 + 1120 Pro-forma | Related party transactions. | Required for single-member LLCs owned by foreigners. |
Resitax: LLC tax experts in Spain
At Resitax, we don't create LLCs; instead, we advise tax residents in Spain who already own an LLC in the United States.
This way, we help them comply with their obligations to the Spanish Tax Agency (AEAT) and the IRS), avoiding penalties and optimizing their tax burden.
We help you to:
- Properly declare the profits of your LLC in your personal income tax return.
- Submit Form 720 and other reporting obligations.
- Coordinate taxation between Spain and the U.S.
- Avoid penalties for non-compliance or errors in interpretation.
More information at: Tax Advice in Mallorca | Resitax
Conclusion: How to manage your LLC correctly in Spain
In conclusion, having an LLC in Spain as a tax resident requires precise tax planning.
A misinterpretation can lead to hefty penalties from the Spanish Tax Agency (AEAT).
For this reason, enlisting the help of Resitax, a tax consultancy in Mallorca specializing in international taxation, guarantees secure, legal, and efficient management.
¹As a subsidiary reference, it is also possible to rely on the previous doctrine contained in consultations V2353-20 and V3311-13, both on the character of US LLCs as commercial companies with their own legal personality distinct from that of their partners.