How Is Your IRA Taxed in Spain?
The short answer: Spain taxes traditional IRA distributions as ordinary income but a treaty between the US and Spain means you almost certainly won't pay twice. Here is exactly how it works.
You've spent years building your IRA. Now you're planning a move to Spain and a nagging question has taken up residence in your mind: is Spain going to tax it?
The fear most people arrive with is double taxation, the idea that you'll pay the US on your IRA distributions and then pay Spain on top of that. It's an understandable fear. But in most cases, it's wrong.
The United States and Spain have a tax treaty — the US-Spain Double Taxation Convention — specifically designed to prevent you from paying tax on the same income twice. Understanding how it applies to your IRA is one of the most important financial steps you can take before you move.
This post explains the framework clearly: how Spain treats traditional IRA withdrawals, what happens with Roth IRAs, what the treaty actually protects you from, and what steps are worth taking before you become a Spanish tax resident. It is not a substitute for personalised tax advice — your situation will have specifics that a general post cannot address — but it will give you the foundation you need to ask the right questions.
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Talk to an expertFirst: what kind of IRA do you have?
The tax treatment varies significantly depending on which type of account you hold. Before getting into Spain's rules, it helps to be clear about what you're working with.
Traditional IRA: contributions were made pre-tax. You haven't paid income tax on this money yet. Withdrawals are taxed as ordinary income in the US, and potentially in Spain.
Roth IRA: contributions were made after-tax. In the US, qualified distributions are completely tax-free. Spain's treatment of Roth IRAs is more complicated — more on this below.
Inherited IRA: received from a deceased account holder. Distributions are taxed as ordinary income, and the rules around when you must withdraw differ significantly from a standard IRA. These interact poorly with Spanish residency in ways that catch people off guard.
The rest of this post focuses primarily on traditional IRAs, as they are by far the most common account type among US citizens planning to retire in Spain. Roth IRAs and inherited IRAs each get their own section.
How Spain taxes traditional IRA withdrawals
Once you become a Spanish tax resident, Spain taxes your worldwide income, including distributions from your US traditional IRA.
Spain treats IRA withdrawals as ordinary income, the same way the US does. The money goes into your Spanish tax return (the IRPF — Impuesto sobre la Renta de las Personas Físicas) alongside any other income you receive that year. It is taxed at Spain's progressive income tax rates.
Here are the 2025 national income tax bands:
| Annual taxable income | Spanish income tax rate |
|---|---|
| Up to €12,450 | 19% |
| €12,450 – €20,200 | 24% |
| €20,200 – €35,200 | 30% |
| €35,200 – €60,000 | 37% |
| €60,000 – €300,000 | 45% |
| Over €300,000 | 47% |
Note that Spain's income tax system combines national and regional rates. The bands above are the national component — the total rate you pay will be slightly higher depending on which region of Spain you live in. Andalucía, Madrid, and Valencia all have their own regional supplements.
A worked example
Say you are retired in Madrid, your only income is €30,000 per year drawn from your traditional IRA, and you receive €12,000 per year in US Social Security (more on Social Security below — it is treated differently).
That is an effective rate of around 17.5% on the full €30,000 withdrawal — comparable to what many middle-income retirees pay in the US. The fear that Spain will "take everything" is generally not borne out by the numbers at moderate income levels.
The picture changes as withdrawal amounts increase. Here is how the calculation looks for someone drawing more heavily from their IRA:
At higher withdrawal amounts, Spain's progressive bands begin to have a more meaningful impact. This is why the region you choose to live in matters — Andalucía and Madrid both offer significant regional tax advantages compared to Catalonia or Valencia — and why withdrawal timing and sequencing is worth planning carefully before you move.
The US/Spain tax treaty — your protection against double taxation
Here is the critical piece most people don't know exists: the United States and Spain signed the Convention for the Avoidance of Double Taxation in 1990. Its purpose is exactly what the name says — to prevent the same income from being taxed in both countries.
Under the treaty, pension income and retirement distributions (including IRA withdrawals) are generally taxable only in the country where you are a tax resident at the time of the distribution. Since you will be a Spanish tax resident when you take your IRA withdrawals in retirement, those distributions are generally taxable in Spain — and you claim a Foreign Tax Credit in the US to offset any US tax on the same income.
In practical terms: you are not paying income tax twice on your IRA withdrawals. You are paying in one country and using the treaty mechanism to eliminate or significantly reduce the liability in the other.
One important timing point that catches people off guard: Spain's tax residency rules operate on the calendar year, not the date you physically arrive. If you move to Spain on 1 March and spend more than 183 days there by 31 December, Spain considers you a tax resident for the entire year — from 1 January. This means IRA withdrawals you took in January and February, before you even boarded the plane, may be included in your Spanish tax return for that year. The practical implication: if you plan to take a significant IRA distribution in your move year, the timing relative to your departure date matters. This is one of the first questions worth raising with a cross-border tax advisor.
How Spain treats Roth IRA distributions
This is where things get more complicated — and where a lot of generic expat finance content gets it wrong.
In the United States, the Roth IRA's core benefit is that qualified distributions are completely tax-free. You paid income tax on the money when you contributed it, so you don't pay again when you withdraw. The US honours this entirely.
Spain does not have an equivalent account type in its domestic tax system, and it does not automatically recognise the Roth's tax-exempt status in the same way the US does. The Spanish tax authority's treatment of Roth distributions is not as clearly defined as the treatment of traditional IRAs, and there is genuine legal uncertainty about how Spain handles the gains portion of a Roth distribution.
Some tax practitioners argue that the treaty provides protection for Roth distributions in the same way it does for traditional IRAs. Others take a more conservative position. The honest answer is that this is an area where you need specific, up-to-date advice from a cross-border tax specialist — not a general blog post.
What this means practically: if you have a significant Roth IRA balance and are planning to retire in Spain, the question of how Spain will treat those future distributions is worth exploring with a specialist before you move. The answer may affect whether converting some of your Roth back to a traditional IRA makes sense, or whether other planning steps are appropriate.
Inherited IRA: the situation most people haven't considered
If you inherited an IRA from a parent or spouse, the rules are different — and the interaction with Spanish residency can be particularly problematic.
Under US rules introduced by the SECURE Act in 2020, most non-spouse beneficiaries who inherit an IRA are now required to fully distribute the account within 10 years of the original account holder's death. This means potentially large, forced distributions during years when you may be a Spanish tax resident.
Spain taxes inherited IRA distributions as ordinary income, just as it does traditional IRA withdrawals. The difference is that with a traditional IRA you have some control over the timing and size of your distributions. With an inherited IRA under the 10-year rule, large distributions in specific years may be unavoidable — and those distributions will be included in your Spanish taxable income for those years.
If you hold an inherited IRA and are planning to move to Spain, the timing of your distributions relative to your move date is worth planning carefully. A cross-border financial advisor can help model the most tax-efficient withdrawal schedule.
Got 401K or IRA questions about moving to Spain?
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Talk to an expertForm 720: the Spanish declaration most people don't know about
This is the section that makes most people stop and read it twice.
Once you become a Spanish tax resident, you are required to declare all overseas assets above €50,000 per category to the Spanish tax authority on a form called the Modelo 720 — Form 720. This includes your IRA, any 401(k) or other retirement accounts, overseas bank accounts, and overseas property.
The declaration is not a tax — you are not paying additional tax just by filing it. But you are required to disclose the existence and approximate value of these accounts to Spain. The purpose is transparency: Spain wants to know what assets its residents hold abroad.
The penalties for not filing Form 720, or for filing it late or incorrectly, have historically been severe — among the highest in the EU. While some penalty provisions were reduced following a European Court of Justice ruling in 2022, non-compliance still carries meaningful financial risk.
What Spain does NOT tax: the Social Security distinction
Before going further, it is worth drawing a clear line between IRA distributions and US Social Security — because they are treated very differently.
Under the US/Spain tax treaty, US Social Security benefits are taxable only in the United States. Spain cannot tax them. This surprises a lot of people who assume that once they live in Spain, Spain has a claim on all their US income.
If you receive both Social Security and IRA distributions in retirement, your Spanish tax return will include the IRA withdrawals as taxable income — but not the Social Security payments. This distinction can significantly affect your overall Spanish tax liability and is worth factoring into your retirement income planning before you move.
What to do before you move: the Roth conversion window
One of the most discussed pre-move planning strategies for people with significant traditional IRA balances is the Roth conversion — converting some or all of your traditional IRA to a Roth IRA before you become a Spanish tax resident.
The logic: while you are still a US tax resident, you pay US income tax on the converted amount. That tax may be at a lower rate than what you would pay in Spain on future distributions (depending on your income level and which region of Spain you choose). Once the money is in a Roth, qualified future distributions are tax-free in the US — and the question of how Spain treats them (discussed above) becomes relevant but is a known variable you can plan around.
Whether a Roth conversion makes sense in your specific situation depends on several factors:
Your current US marginal tax rate vs your expected Spanish rate in retirement
The size of your traditional IRA balance
How many years you have before you plan to move
How Spain's treatment of Roth distributions evolves — this is an area of active discussion among cross-border tax practitioners
Your other income sources in Spain (pension, rental income, Social Security)
This is not a decision to make based on a blog post. But it is a decision worth raising with both a US tax advisor and a Spain-based cross-border specialist before your move date — ideally at least 12–18 months in advance while you have flexibility.
What happens to your IRA account itself when you move?
The tax treatment is one question. The practical management of your IRA once you're living in Spain is another — and it catches a lot of people off guard.
Your IRA custodian — Fidelity, Vanguard, Schwab, Edward Jones, or whoever holds your account — may restrict what you can do with the account once you become a non-US resident. Some custodians allow you to keep existing holdings but won't let you make new purchases. Some restrict trading entirely. A small number close accounts for non-resident clients.
This is a regulatory issue, not a punitive one. US-based financial advisors and custodians are often not licensed to serve clients outside the US.
Do you need specialist advice?
Yes — but here is what to actually ask for, rather than a vague recommendation to "speak to a professional."
You need two separate conversations, ideally before you move:
1. A cross-border tax consultation
This covers: how your specific accounts will be treated in Spain, whether the treaty protections apply cleanly to your situation, what your Spanish tax liability will look like based on your expected withdrawal amounts, and whether a Roth conversion is worth exploring given your income levels.
What to bring to the consultation: a list of all your US retirement accounts (IRA, Roth, 401k, inherited IRA) with approximate balances, your expected annual withdrawal amounts in retirement, your anticipated move date, and which region of Spain you plan to live in.
2. A cross-border financial planning conversation
This covers: what happens to your accounts at the custodian level when you move, how to structure your investments compliantly once you're a Spanish resident, whether you need to move to an international investment structure, and how to manage the currency exposure between your USD assets and your euro expenses.
These are different conversations from different types of advisors — a tax specialist and a financial planner. You need both, and they should ideally know each other's work.
Got 401K or IRA questions about moving to Spain?
Get a free call from an expert to help manage your savings, investments, and retirement accounts for a smooth transition abroad.
Talk to an expertSummary: the five things to know about your IRA in Spain
Spain taxes traditional IRA distributions as ordinary income at Spanish income tax rates (19%–47% depending on your income level).
The US/Spain tax treaty generally prevents double taxation — you pay in one country, not both. The Foreign Tax Credit is the mechanism that makes this work.
Roth IRAs are more complicated — Spain's treatment of Roth distributions is not as clearly defined as traditional IRAs. Get specific advice if you hold a significant Roth balance.
Form 720 requires you to declare all overseas assets over €50,000 to the Spanish tax authority annually. Non-compliance carries real penalties. Most people don't know this form exists until someone tells them.
The Roth conversion window — converting traditional IRA to Roth while still a US tax resident — is a planning strategy worth exploring before your move, not after.
This article is for informational purposes only and does not constitute tax or financial advice. Tax rules change, and individual circumstances vary significantly. Nothing in this post should be relied upon as advice specific to your situation. Before making any decisions about your retirement accounts in connection with a move to Spain, speak with a qualified cross-border tax advisor and a licensed financial planner with experience in US-Spain matters.
Have questions about your IRA in Spain?
Getting clear on your specific situation before you move is one of the most valuable things you can do. We work with two specialists who focus entirely on US expats making this transition:
Carlos — For specific tax questions about how your IRA, Roth, or inherited IRA will be treated in Spain, how the treaty applies to your situation, and whether Form 720 applies to your accounts. His consultation covers exactly this kind of question.
Rob — For the financial planning side: what to do with your IRA and other US accounts once you are living in Spain, how to structure your investments compliantly, and how to manage currency exposure between your dollar assets and euro expenses.
Reach out through the contact page and we'll make the right introduction.
