Understanding U.S. Taxes and Business Structures for U.S. Expats in Spain
In this episode of Passport To Wealth®, host Arielle Tucker, CFP®, EA, welcomes Nicolás Castillo, CPA, founder of Rook International CPAs and Advisors, to unpack what it actually takes to manage complex U.S. tax obligations as an expat, especially when living and working in Europe. From Madrid, Spain, where he now lives, Nicolás shares practical guidance for anyone considering the same move.
How Moving Abroad Impacts Your U.S. Tax Responsibilities
One of the biggest myths U.S. citizens believe is that once they move abroad, they're no longer obligated to file a U.S. tax return. Nicolás quickly debunks this.
"Almost always, an American living outside the U.S. still needs to file a return. The question is whether they'll owe tax."
Even with the Foreign Earned Income Exclusion or the Foreign Tax Credit, many expats mistakenly believe they're off the IRS radar. But as long as you hold U.S. citizenship, you're subject to citizenship-based taxation, a system unique to the United States.
Remote Work Doesn't Mean International Work Approval
If you're planning to take your remote job overseas, think again. Just because your job is remote doesn't mean you can work from any country. Employers often deny international work requests due to added tax, payroll, and compliance obligations in foreign jurisdictions. Without formal approval, you could expose your employer, and yourself, to costly legal and tax complications.
The Real Cost of Self-Employment Abroad
Running a business as an expat isn't as simple as picking up a laptop and setting up shop overseas. U.S. expats earning even $400 in self-employment income trigger filing requirements, and compliance becomes exponentially more complex. Dual reporting requirements, international tax treaties, and social security agreements, or the lack thereof, can create major headaches for business owners, including VAT filing and local tax in Europe, U.S. quarterly estimated tax payments, and penalties of $10,000 or more for missed international tax forms.
Choosing the Right Business Structure Abroad
Many Americans default to using an S Corporation or setting up a U.S.-based LLC, but those structures often don't translate well across borders.
"An S corp in Spain or France? That's a tax disaster."
Instead, expat entrepreneurs need to evaluate local tax laws, residency requirements, and even wealth taxes before choosing a business entity. This is exactly the kind of decision where a general accountant back home isn't enough. An expat tax advisor who understands how U.S. rules like GILTI interact with foreign business structures can save you from a mistake that's expensive to unwind later.
Spain's Beckham Law and Digital Nomad Visas
As more Americans move to Spain, Nicolás breaks down the tax incentives available, like the Beckham Law, which offers a 24% flat tax on employment income up to €600,000 annually for up to six years. While this regime is off-limits to most self-employed expats, opportunities still exist, like the lesser-known Mbappé Law in Madrid, which grants tax breaks for those investing in the local economy.
Whether you're exploring the digital nomad visa or considering residency in Spain, the nuances here are exactly why so many Americans choose to work with a financial advisor for Americans in Spain before finalizing a business structure or visa strategy.
Expert Advice for New Expats
When asked what advice he'd give to someone preparing to move abroad, Nicolás gets personal.
"Integrate. Learn the language. Do activities that bring you into the community."
Beyond tax and legal logistics, building a fulfilling life abroad means leaning into the culture, connecting with locals, and intentionally crafting your new identity.
You May Also Like
- Why U.S. Academics Are Moving to Germany, on choosing a country for career reasons rather than lifestyle alone
- What U.S. Expats Need to Know About PFICs, on the investment mistake that trips up even well-prepared expats
- Helping Americans GTFO and Relocate Abroad, on picking a country before you've figured out the paperwork
About the Author
Arielle Tucker, CFP®, EA, is a cross-border financial planner, founder of Connected Financial Planning and the host of Passport To Wealth®, helping U.S. expats simplify their finances while building intentional, global lives. She brings firsthand experience navigating cross-border tax and relocation planning to every client conversation. Ready to build your own financial roadmap for life abroad? Schedule a paid expat expert coaching call with her directly.