Jacob Salama · International Tax Lawyer · Colegiado nº 11.294 ICAMálaga
24%
Beckham Law flat rate on employment income
€600k
Cap on the 24% Beckham rate (above: 47%)
6 yrs
Duration: year of arrival + 5 fiscal years
MD has specific state-level tax characteristics that directly affect how you exit the US tax system when relocating to Spain. While federal US tax obligations for US citizens follow you globally under the Saving Clause of the US-Spain Double Taxation Agreement (1990, Protocol 2013), state tax exposure can often be cut entirely upon proper establishment of Spanish residence — provided you take the right steps before and immediately after your move. Jacob Salama advises professionals and business owners from Baltimore who are relocating to Spain on the full spectrum of US-Spain tax compliance, from pre-departure asset planning and Beckham Law applications to ongoing FATCA, FBAR and Modelo 720 obligations.
The 1990 US-Spain DTA (as amended by the 2013 Protocol) governs the allocation of taxing rights between the two countries across all major income categories. For US citizens — unlike nationals of any other country — the treaty contains a Saving Clause (Article 1(4)) under which the United States retains the right to tax its citizens as if the treaty did not exist. This means that a US national from Baltimore who moves to Spain and becomes a Spanish tax resident remains fully subject to US federal income tax on their worldwide income, regardless of whether they also pay Spanish IRPF. The foreign tax credit mechanism under Article 24 of the treaty and Section 901 of the Internal Revenue Code is the primary tool for avoiding economic double taxation, but its application requires careful sequencing to ensure that credits are not wasted.
The Beckham Law (Article 93 LIRPF), as significantly expanded by Spain's 2022 Startup Law (Ley 28/2022), allows qualifying individuals who become Spanish tax residents for the first time — having not been resident in Spain for the ten preceding years — to be taxed at a flat rate of 24% on Spanish-source employment income up to €600,000, rather than at the progressive general rate. The regime also applies semi-territorial taxation to non-employment income: most foreign-source income is excluded from Spanish IRPF during the Beckham period, which can be particularly advantageous for professionals from Baltimore who continue to receive dividends, rental income or capital gains from assets they retain in the United States. The application is made via Modelo 149 and must be submitted within six months of registration in the Spanish social security system.
US nationals who move from Baltimore to Spain and become Spanish tax residents face three overlapping foreign asset reporting obligations. First, the FinCEN 114 (FBAR) requires disclosure of all foreign financial accounts whose aggregate value exceeds $10,000 at any point during the calendar year. Second, FATCA (Form 8938) requires separate disclosure of foreign financial assets above the applicable threshold, and imposes an obligation on Spanish financial institutions to report US account holders to the IRS under the Spain-US FATCA IGA. Third, Modelo 720 requires Spanish tax residents to declare foreign bank accounts, securities and real estate above €50,000 per category. The penalty regime for Modelo 720, while reduced following the 2022 ECJ ruling, remains significant for non-compliant filers. Jacob coordinates all three reporting streams to ensure full compliance and to identify opportunities to mitigate historical non-compliance through voluntary disclosure.
Many professionals relocating from Baltimore carry unvested equity compensation — ISOs, NQSOs, RSUs or phantom shares — at the time of their move. The Spanish IRPF treatment of these instruments, and their interaction with the US tax rules that may have already applied, requires careful analysis. Under Spanish tax law, RSUs vesting after the date of Spanish residence are fully taxable as labour income (rendimiento del trabajo) in the year of vesting, based on the market value of the shares at that date. The 30% reduction for irregular income (rendimientos irregulares) under Article 18.2 LIRPF may apply to reduce the IRPF charge where the vesting period exceeds two years and the income is not regularly received, but the conditions must be met strictly. Under the Beckham Law, RSUs from a foreign employer whose economic activity is performed outside Spain may be excluded from Spanish IRPF entirely under the semi-territorial treatment — a planning opportunity that requires advance analysis before the move from Baltimore is completed.
When a Baltimore resident establishes tax residency in Spain, they are simultaneously exiting one of the United States' moderate state tax regimes and entering Spain's IRPF system — which taxes worldwide income at rates up to 47% for general residents, or at a flat 24% for those who qualify under the Beckham Law (Article 93 LIRPF).
Maryland's combined state and county income tax is among the higher burdens in the mid-Atlantic region. Proper establishment of Spanish domicile, including surrendering the Maryland driver's licence and voter registration, is needed to cleanly break residency. Unlike most countries, the United States imposes worldwide income tax on its citizens regardless of where they live. The US-Spain Double Taxation Agreement (1990, as amended by the 2013 Protocol) contains a Saving Clause under Article 1(4) that preserves this right, meaning US nationals from Baltimore who move to Spain remain fully subject to US federal income tax alongside their Spanish IRPF obligations.
The foreign tax credit mechanism — governed by Article 24 of the DTA and IRC §901 — is the primary tool for avoiding economic double taxation. However, its correct application requires careful sequencing between the two systems, and errors in credit ordering frequently result in avoidable double taxation or wasted credit carryforwards.
The tax issues that arise for professionals moving from Baltimore to Spain depend heavily on their income type and asset structure. The following profiles reflect the situations Jacob Salama most frequently advises on from this metropolitan area:
The following table summarises the main tax rate changes a Baltimore resident experiences upon establishing Spanish tax residency:
| Tax | In Baltimore, Maryland | In Spain |
|---|---|---|
| Maryland state income tax | 4.75%–5.75% + county surcharge | Eliminated on departure |
| US federal income tax | 10%–37% | Still applies (Saving Clause) |
| Spanish IRPF on employment income | N/A | 24% (Beckham) / up to 47% (general) |
| Spanish wealth tax (IP) | N/A | 0%–3.5% depending on region and assets |
| Foreign asset reporting (Modelo 720/FBAR) | FBAR / FATCA only | Modelo 720 + FBAR + FATCA |
One of the most complex planning areas for Baltimore professionals relocating to Spain is the treatment of US retirement accounts — 401(k)s, Traditional IRAs, and Roth IRAs — under both the US-Spain DTA and Spanish domestic law.
Traditional 401(k) and IRA distributions are treated as private pension income under Article 17 of the DTA. Spain has the primary right to tax these distributions once the recipient is a Spanish tax resident. Contributions made on a pre-tax basis in the US — and the accumulated growth — will be subject to Spanish IRPF on withdrawal, at rates up to 47% under the general scale or 24% under the Beckham regime.
Roth IRA distributions present a well-documented double-taxation trap. The IRS treats qualified Roth distributions as tax-free because contributions were made on an after-tax basis. Spain, however, does not recognise the Roth exemption under domestic law or the DTA. The AEAT typically treats Roth IRA distributions as taxable investment income. This means a Baltimore expat who moves to Spain and later takes Roth distributions may pay Spanish income tax on amounts that have already been subject to US income tax — with no DTA mechanism to prevent it.
Pre-departure planning considerations for retirement accounts include: timing of Roth conversions before establishing Spanish residency; assessment of whether to take accelerated distributions while still a US resident; evaluation of rollover options that may simplify Spanish reporting; and the Modelo 720 disclosure obligation, which requires Spanish residents to declare foreign pension accounts above €50,000 per category on an annual basis.
Many US nationals who have been living in Spain for months or years without filing Spanish returns, or without disclosing US accounts to the AEAT via Modelo 720, find themselves in a position of historical non-compliance. Jacob Salama regularly assists clients in regularising their position across both jurisdictions before the relevant authorities identify the gaps.
On the US side, the IRS Streamlined Procedures (Streamlined Foreign Offshore Procedure for bona fide foreign residents, or Streamlined Domestic Offshore for US-based filers) provide a reduced-penalty path for non-wilful failures to file FBARs, Form 8938, and delinquent income tax returns. Eligibility requires that the failure was non-wilful — meaning it resulted from a lack of understanding of the obligations rather than a deliberate decision to conceal assets.
On the Spanish side, voluntary disclosure of previously unreported foreign assets and income prior to an AEAT investigation significantly reduces penalties and eliminates the risk of criminal referral. The 2022 reforms to Modelo 720 — following the ECJ C-127/12 ruling — removed the most disproportionate penalties, but late filing remains subject to standard tax surcharges under the Ley General Tributaria.
Moving from MD to Spain involves complex US-Spain tax interactions that general advisors miss. Jacob handles every private client case personally.
The content on this page is for general informational and educational purposes only. It does not constitute legal or tax advice and does not create a lawyer-client relationship. Tax laws change frequently and their application depends on individual circumstances. Always obtain specific professional advice before taking any action. Jacob Salama — Salama Legal SLP — is a registered Spanish lawyer (Colegiado nº 11.294, ICAMálaga) and is not authorised to provide US or UK legal advice.