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
NM 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 Santa Fe 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 Santa Fe 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 Santa Fe 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 Santa Fe 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 Santa Fe 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 Santa Fe is completed.
When a Santa Fe resident establishes tax residency in Spain, they simultaneously exit a US state tax regime and enter Spain's IRPF system — which taxes worldwide income at rates up to 47% for general residents, or at a flat 24% for those qualifying under the Beckham Law (Article 93 LIRPF, expanded by the 2022 Startup Law). New Mexico applies a 4.9% flat income tax and does not conduct aggressive exit audits. Santa Fe residents can establish a clean break with a part-year New Mexico return and documented Spanish domicile.
Unlike most countries, the United States imposes worldwide income tax on its citizens regardless of where they reside. The US-Spain Double Taxation Agreement (1990, amended by the 2013 Protocol) contains a Saving Clause under Article 1(4) that preserves this right. A US national from Santa Fe who moves to Spain and becomes a Spanish tax resident therefore remains fully subject to US federal income tax on worldwide income alongside their Spanish IRPF obligations.
The foreign tax credit mechanism under Article 24 of the DTA and IRC §901 is the primary tool for avoiding economic double taxation. Its correct application requires careful sequencing between the two systems — errors in credit ordering frequently result in avoidable double taxation or wasted credit carryforwards that cannot be reclaimed.
The tax issues that arise for professionals moving from Santa Fe to Spain depend heavily on income type and asset structure. The following profiles reflect the situations Jacob Salama most frequently advises on from this metropolitan area:
| Tax | In Santa Fe, New Mexico | In Spain (Spanish resident) |
|---|---|---|
| New Mexico state income tax | 4.9% flat rate | Eliminated on departure |
| US federal income tax | 10%–37% | Still applies (Saving Clause, Art. 1(4)) |
| Spanish IRPF — employment income | N/A | 24% (Beckham) / up to 47% (general scale) |
| Spanish IRPF — savings / investment | N/A | 19%–28% (savings base rate) |
| Spanish wealth tax (IP) | N/A | 0%–3.5% depending on region and net worth |
| Foreign asset reporting | FBAR + FATCA (Form 8938) | Modelo 720 + FBAR + FATCA |
One of the most complex planning areas for Santa Fe professionals relocating to Spain is the treatment of US retirement accounts under both the DTA and Spanish domestic law.
Traditional 401(k) and IRA distributions fall under DTA Article 17 (private pensions). Spain has the primary taxing right once the recipient is a Spanish tax resident. Contributions made on a pre-tax basis in the US — and the accumulated growth — are 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 does not recognise this exemption under domestic law or the DTA. The AEAT treats Roth IRA distributions as taxable investment income under IRPF — meaning a Santa Fe expat who moves to Spain and later takes Roth distributions may pay Spanish income tax on amounts already subject to US tax, with no DTA mechanism to prevent this outcome.
Pre-departure planning for retirement accounts should include: timing of Roth conversions before establishing Spanish residency; consideration of accelerated distributions while still a US resident; evaluation of rollover strategies that simplify Spanish reporting; and Modelo 720 planning, which requires Spanish residents to declare foreign pension accounts above €50,000 per category annually.
Specialist advice from a lawyer admitted in both Spain and familiar with US tax obligations is strongly recommended before the departure date — early planning significantly reduces both the tax cost and the compliance burden of the transition.
Moving from NM 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.