How to Legally Avoid Wealth Tax in Spain as a US Citizen
When it comes to wealth tax in Spain, the rules are confusing, the regional differences are significant, and the implications for US retirees can be costly if you don’t prepare. To help provide more clarity, I’ve gathered insights from Rob, Senior Financial Advisor at SJB Global, and Konnor, Sales Desk Lead at Advisors Capital Management (ACM), two of our trusted partners who specialize in cross-border financial planning for Americans in Spain.
Rob brings years of experience advising US expats on retirement planning, tax exposure, and portfolio structuring across jurisdictions. Konnor adds expertise from the investment management side, focusing on customized portfolios that stay compliant with both US and European regulations.
Together, they’ve guided hundreds of Americans through the transition to Spain, ensuring their assets are protected, their income strategies are efficient, and their tax liabilities are minimized.
What is Spain’s wealth tax, and does it apply to Americans?
Spain’s Impuesto sobre el Patrimonio, commonly called wealth tax, is an annual levy on your net assets. That means the Spanish tax office looks not just at your income, but at the total value of everything you own, both inside and outside Spain, and applies a progressive tax.
Who is subject to it?
Residents → If you spend more than 183 days a year in Spain or your “economic center” is here, you’re considered tax resident. As a resident, you’re taxed on your worldwide net wealth, including US bank accounts, brokerage portfolios, IRAs, 401(k)s, and even US real estate.
Non-residents → Only taxed on assets located in Spain, such as property.
Exemptions and allowances
According to Rob, many Americans underestimate the thresholds:
A general exemption of €700,000 per person applies nationwide.
Your main residence in Spain is exempt up to €300,000.
Married couples often combine these allowances, but if their worldwide wealth still exceeds the limit, the taxable base kicks in.
Tax rates and regional differences
Wealth tax is progressive: the more you own, the higher the rate applied. Nationally, rates range from 0.2% to 3.5%. But as Connor explained, the real twist is Spain’s 17 autonomous regions:
Madrid and Andalucía currently offer a 100% rebate — meaning even multimillionaires legally pay zero.
Catalonia and Valencia enforce stricter rules with lower exemptions, so Americans with significant portfolios can face annual bills in the tens of thousands.
Other regions follow the national default unless they’ve passed local variations.
What counts as taxable wealth?
This is where many US citizens are caught off guard. Rob stressed that Spain doesn’t just look at your Spanish property:
Retirement accounts (IRAs, 401(k)s, Roths) → fully included in your net wealth calculation, even if you’re not withdrawing.
Brokerage accounts → balances and unrealized gains are counted.
Real estate → valued based on the higher of the cadastral value, purchase price, or official tax value.
Cash and deposits → counted at face value, whether held in Spain or abroad.
💡 Key insight: Unlike income tax, the US–Spain tax treaty does not protect you from wealth tax. So there’s no way to credit or offset it against your US tax return. It’s an additional layer of taxation that applies simply because you live in Spain.
Let’s take a high-net-worth American couple moving to Spain with the following assets:
€1.8M in retirement accounts (IRAs + 401(k)s)
€900,000 in a US brokerage account
€500,000 main home in Spain
Total assets: €3,200,000
Step 1: Apply exemptions
General exemption: €700,000 per person → €1.4M for the couple
Main residence allowance: €300,000 (applied once)
Total exemptions: €1.7M
➡️ Taxable wealth after exemptions: €3.2M – €1.7M = €1.5M
Step 2: Apply regional rules
Catalonia (strict region): Wealth tax applies at progressive rates. On €1.5M, the annual bill could be €20,000–€25,000, depending on exact brackets.
Madrid (100% rebate): The same couple would owe €0 in wealth tax.
Step 3: Add income tax layers
On top of this, when they start withdrawing from their IRAs at retirement age, Spain will tax those distributions as income. So without planning, this couple could face:
Annual wealth tax on the account values
Income tax on withdrawals
💡 As Rob highlighted in our webinar:
“Two retirees with the same portfolio can end up with completely different outcomes, purely based on the region where they register tax residency.”
Connor added:
“That’s why we always start with an intake, what assets do you have, where are they held, and which Spanish region makes the most sense for you? If you don’t align those pieces, wealth tax alone can cost you tens of thousands every year.”
Regional Wealth Tax Comparison for a €3.2M Portfolio (Couple)
| Region | Exemptions Applied | Taxable Base | Annual Wealth Tax | Notes |
|---|---|---|---|---|
| Madrid | €1.7M | €1.5M | €0 | 100% rebate — no wealth tax |
| Andalucía | €1.7M | €1.5M | €0 | Full rebate since 2022 |
| Catalonia | €1.7M | €1.5M | ~€20,000–€25,000 | Stricter rules, higher effective rates |
| Valencia | €1.7M | €1.5M | ~€18,000–€22,000 | Lower thresholds, enforcement applies |
| National Default | €1.7M | €1.5M | ~€15,000–€20,000 | Used where no regional rebate exists |
How does wealth tax affect US retirement accounts?
This is one of the most confusing — and frustrating — issues for Americans moving to Spain. Clients often ask me:
“If my IRA stays in the US, do I still owe wealth tax on it?”
The answer, confirmed by both Rob and Connor is yes.
Why IRAs and 401(k)s are included
Spain looks at your worldwide net wealth once you become tax resident.
Retirement accounts like IRAs, Roth IRAs, 401(k)s, 403(b)s, and pensions are treated as financial assets — just like brokerage accounts.
The full account balance on December 31st each year is included in your wealth tax calculation, even if you’re not taking any distributions.
👉 That means a $2 million IRA is considered taxable wealth in Spain, even if you don’t touch it for another 10 years.
Double exposure: balance + withdrawals
The difficult part for many Americans is the “double layer”:
Wealth tax on balances → The market value of your account each year is subject to Spain’s wealth tax (unless you live in a rebate region like Madrid or Andalucía).
Income tax on withdrawals → When you start taking distributions, Spain taxes those as regular income — on top of whatever the IRS may tax in the US.
So yes, you’re potentially hit twice: once on the value of the account, and once again when you use it.
Why timing matters
Connor highlighted that this is where timing and structuring are critical. For example:
If you move to Spain before age 59½, you won’t have penalty-free access to your IRAs or 401(k)s, yet Spain will still include them in wealth tax.
If you wait until after 59½, you have more flexibility to plan distributions in a tax-efficient way while already living in Spain.
Social Security kicks in later (typically 67), adding another layer of taxable income.
📞 Book Your Free Call with a Vetted Cross-Border Financial Advisor
Ready to get personalized advice on managing your 401(k), avoiding wealth tax, or planning your income as a US expat in Spain? Schedule a no-obligation call with one of our trusted financial experts today.
Claim Your Free Financial ConsultationHow can you legally reduce wealth tax in Spain?
The good news: while you can’t avoid Spain’s wealth tax rules entirely, there are perfectly legal strategies to reduce your exposure and protect your assets. In our webinar, Rob and Connor outlined several approaches they use with American clients before and after their move.
1. Choose the right region from the start
Where you register as a tax resident makes the single biggest difference.
Madrid and Andalucía → 100% wealth tax rebate. Even if your net worth is €5M, you’ll pay nothing.
Catalonia, Valencia, Balearics → Enforce wealth tax aggressively, with lower exemptions. A €3M portfolio here could trigger €20,000+ annually.
💡 Rob’s advice: “Two retirees with identical portfolios can face completely different bills purely based on region. Decide before you register your residency.”
2. Keep US retirement accounts in the US
Many Americans think transferring IRAs or 401(k)s to Spain might simplify things. In reality, it usually makes things worse:
Spain does not have an equivalent pension wrapper to accept US accounts.
A full transfer would be treated as a taxable distribution in the US and as income in Spain → double taxation.
Best strategy: leave them in the US, keep them properly invested, and take distributions gradually.
👉 This limits unnecessary taxation and ensures the accounts stay compliant with both IRS and Spanish rules.
3. Consolidate custodians before moving
Some US firms, like Vanguard, often close accounts once you update your address to Spain. Others, like Schwab and Fidelity, allow expats to remain clients.
Before moving, consolidate into expat-friendly custodians.
This avoids panic later when a provider freezes or closes your account.
It also makes tax reporting easier, since you’ll receive fewer annual statements.
💡 Connor explained: “We screen custodians ahead of time for every client. That way, you won’t wake up in Spain to a letter saying your account is being shut down.”
4. Focus on individual securities, not pooled funds
ETFs and mutual funds are easy options in the US — but they create problems once you live abroad:
EU restrictions → Once you change your address, many US custodians won’t let you buy additional ETFs or mutual funds. You can only hold or sell.
PFIC rules → If you invest in European funds, the IRS may classify them as Passive Foreign Investment Companies, with punitive tax treatment (sometimes up to 45% on gains).
✅ Solution: Work with managers like ACM who build portfolios of individual securities (stocks and bonds). These stay compliant under both US and EU rules and avoid PFIC traps.
5. Use tax loss harvesting when restructuring
If you move assets from one custodian to another or shift into new portfolios, you risk triggering capital gains. That can inflate your wealth tax exposure and create an unexpected income tax bill.
Tax loss harvesting offsets gains with existing losses, smoothing the transition.
ACM actively manages this when onboarding expats, spreading sales across tax years if needed.
💡 Connor highlighted: “No investor should be punished for moving to a new advisor or region. We map out unrealized gains and work them down tax-efficiently.”
6. Plan distributions in phases
Wealth tax isn’t the only layer — income tax on withdrawals adds another. Planning when and how you draw income is crucial:
Before 59½ → Access is limited; withdrawals may trigger US penalties. Spain still counts balances for wealth tax.
After 59½ → Penalty-free withdrawals allow more flexibility to create income streams.
At 67 → Social Security begins, which may change your tax bracket and affect how much you need from investments.
By mapping these phases in advance, you can spread liabilities and avoid spikes that push you into higher brackets.
📞 Book Your Free Call with a Vetted Cross-Border Financial Advisor
Ready to get personalized advice on managing your 401(k), avoiding wealth tax, or planning your income as a US expat in Spain? Schedule a no-obligation call with one of our trusted financial experts today.
Claim Your Free Financial ConsultationKey Takeaway
Wealth tax often feels like an unfair penalty for simply having saved and invested wisely. But as Rob emphasized in our webinar, the real issue isn’t the tax itself — it’s how unprepared many Americans are when they arrive in Spain. Without planning, you risk unnecessary bills, restricted accounts, and a portfolio that doesn’t serve your retirement goals.
The takeaway is simple: treat wealth tax as part of a bigger retirement strategy, not just a line item. When you align where you live, how your accounts are structured, and when you draw income, the annual burden becomes manageable — and in some cases, disappears entirely.
As Rob put it best:
“The goal isn’t just to save tax this year — it’s to create a structure where your money outlasts you, not the other way around.”
