For American citizens living in Spain, especially those who are shareholders in Spanish companies, a recent binding ruling (consulta vinculante) from the Spanish Tax Authority (DGT) raises serious concerns about cross-border double taxation — particularly in relation to the U.S. “Transition Tax” introduced by the 2017 U.S. Tax Reform.

This ruling highlights a growing and often misunderstood issue for expatriates who maintain U.S. nationality while being tax residents in Spain. It’s especially relevant for those applying for or already under the Beckham Law, where U.S. reporting obligations still apply.

What Is the Issue?

Under the U.S. Tax Cuts and Jobs Act (TCJA), American citizens who are shareholders in foreign corporations (including Spanish companies) were required to pay a one-time “Transition Tax” on previously untaxed foreign earnings, even if these profits were never distributed.



Many Americans living in Spain — including those owning Spanish S.L. companies — found themselves facing U.S. tax bills on profits that had not triggered any corresponding Spanish tax.

So, the question naturally arises: Can Spain allow a deduction for the tax paid in the U.S. to avoid double taxation?

Or at least: Can this U.S. tax be claimed as a capital loss or deductible expense in Spain?

What Does the Spanish Tax Authority Say?

In its recent binding ruling, the DGT (Dirección General de Tributos) responds:

• Spain has exclusive taxing rights over the income of Spanish companies when the taxpayer is a Spanish tax resident — regardless of their nationality.
• The U.S. can still tax the same income based on the citizen-based taxation rule and reserves its rights under Article 1.3 of the U.S.-Spain Double Taxation Treaty (CDI).
• Spain does not allow a deduction for the U.S. Transition Tax, because:
• The income is considered to be of Spanish source.
• The tax paid in the U.S. does not qualify as a deductible foreign tax under Spanish IRPF rules.
• Nor can the payment be treated as a capital loss or a deductible expense under Spanish tax law.

The Key Takeaway:

This creates a clear double taxation scenario, and unfortunately, there is no unilateral relief offered by the Spanish tax system in this case.

A U.S. citizen residing in Spain and owning shares in a Spanish company could be taxed twice on the same income — first by the U.S. (via Transition Tax) and later by Spain when the income is actually received.

Why This Matters for American Expats in Spain

This ruling should serve as a serious warning to U.S. citizens residing in Spain — particularly those with ownership stakes in Spanish companies, such as consultants, business owners, and investors. The issue also underscores the unique risks of holding U.S. nationality, even if you haven't lived in the U.S. in years.

American citizens under the Beckham Law or other special tax regimes are not exempt from U.S. reporting or taxation, and strategic planning is essential.

In Summary:

• The U.S. can impose taxes on foreign income, even if there's no economic connection to U.S. territory.
• Spain does not recognize the Transition Tax as deductible under Spanish law.
• This leads to real and unrecoverable double taxation.
• Taxpayers are advised to seek cross-border planning before acquiring shares in Spanish companies or repatriating earnings.

If you’re a U.S. citizen living in Spain — especially if you’re involved in a Spanish company — you need strategic, cross-border tax advice to avoid these pitfalls.

We assist clients with:

• International tax planning
• Beckham Law eligibility and structuring
• Shareholding in Spanish companies
• IRS and Spanish tax coordination
• Voluntary disclosures and audit defense

Contact or write to us at info@samirlaw.com