Spain-US treaty: status and key articles
The Spain-US tax convention has been in force since 1990 with subsequent protocols. Coverage includes income tax, dividends, royalties, capital gains, pensions, residency tie-breakers, and limitation-on-benefits provisions.
- Article 7 (Business Profits): Spanish-resident operating profits are taxable only in Spain without US PE.
- Article 10 (Dividends): 5% for 10%+ ownership. 10% for some cases. 15% standard.
- Article 11 (Interest): 0-10% on portfolio interest.
- Article 12 (Royalties): 5-10% depending on type.
- Article 24 (Relief from Double Taxation): Spanish FTC mechanism.
Withholding rates by income type for Spanish residents
| Income type | Default US rate | Spain treaty rate |
|---|---|---|
| US-source dividends (10%+ ownership) | 30% | 5% |
| US-source dividends (standard) | 30% | 15% |
| US-source portfolio interest | 30% | 0-10% |
| US-source royalties (copyright) | 30% | 5% |
| US-source royalties (industrial) | 30% | 10% |
| Business profits without US PE | Generally not taxed | Generally not taxed |
How Hacienda treats US LLCs
Spanish tax authorities (Agencia Tributaria) may treat US LLCs as transparent (atribución de rentas / entidad transparente) or opaque (entidad no transparente) depending on facts. Outcomes differ significantly: transparent treatment passes income to your IRPF; opaque taxes the LLC and treats distributions as dividends.
Practical approach: most Spanish founders we serve work with an asesor fiscal to document the LLC's transparent treatment under Article 87 of the Spanish IRPF law. This requires consistent operating-agreement language and clear single-member control.
How to file W-8BEN-E from Spain
- Line 1: LLC legal name
- Line 4: Chapter 3 status: Disregarded Entity
- Line 5: Country of residence: Spain
- Line 6: Permanent residence address in Spain
- Line 8: US TIN (EIN)
- Line 9: Foreign TIN (your Spanish NIF)
- Part III: claim treaty benefits citing Article 10 for dividends
Common mistakes by Spanish founders
- Missing Modelo 720 (annual foreign asset declaration above EUR 50K threshold; significant penalties)
- Not filing W-8BEN-E with US payers (30% default applies)
- Missing Form 5472 + 1120 ($25K penalty)
- Not securing transparent treatment under Spanish IRPF rules
- Triggering CFC rules (Ley del IRPF) on passive holding structures
- Missing Modelo D-6 if total foreign investment exceeds EUR 1.5M