Jacob Salama · International Tax Lawyer · Colegiado nº 11.294 ICAMálaga
24%
Beckham Law flat rate on employment income
6 yrs
Duration of Beckham Law regime
No state income tax on wages
Tennessee state income tax
Tennessee eliminated its Hall Tax on investment income in 2021 and has no state income tax on wages. Nashville's healthcare, music, and tech sectors are booming. Tennessee-to-Spain expats face no state exit tax but need careful planning around health system (HCA, Community Health Systems) RSUs. Jacob Salama advises professionals and business owners from Tennessee who are relocating to Spain on the full spectrum of US-Spain tax compliance: pre-departure asset planning, Beckham Law applications, FATCA, FBAR and Modelo 720 obligations, and ongoing dual-filing coordination. Whether you are based in Nashville, Memphis, Knoxville, Chattanooga, the planning principles are consistent — but the details depend on your specific circumstances and asset mix.
The 1990 US-Spain DTA (as amended by the 2013 Protocol) governs the allocation of taxing rights between the two countries. For US citizens — unlike nationals of any other country — the treaty's Saving Clause (Article 1(4)) preserves the United States' right to tax its citizens on worldwide income regardless of Spanish residence. A US national from Tennessee who becomes a Spanish tax resident remains fully subject to US federal income tax. The foreign tax credit mechanism under Article 24 of the DTA is the primary tool for avoiding economic double taxation, but its application requires careful sequencing with Spanish IRPF or Beckham Law calculations.
The Beckham Law (Article 93 LIRPF), as expanded by Spain's 2022 Startup Law, allows qualifying individuals becoming Spanish tax residents for the first time to be taxed at a flat 24% on Spanish-source employment income up to €600,000, rather than the progressive general IRPF rate (up to 47%). Most foreign-source income is excluded from Spanish IRPF during the Beckham period. For professionals from Tennessee earning in dollars from a US employer, this means: the Spanish salary is taxed at 24%, while dividends, rental income, and capital gains from US assets may be entirely outside Spanish IRPF. The application is made via Modelo 149 within six months of Spanish social security registration.
US nationals who move from Tennessee 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 exceeding $10,000 in aggregate at any point during the calendar year. Second, FATCA (Form 8938) requires separate disclosure of foreign financial assets above the applicable threshold. Third, Modelo 720 requires Spanish tax residents to declare foreign bank accounts, securities and real estate above €50,000 per category. Jacob coordinates all three streams to ensure full compliance and to identify voluntary disclosure opportunities where historical non-compliance exists.
Tennessee state income tax (No state income tax on wages) ceases to apply once you properly establish non-residency in Tennessee. The key steps involve: (1) establishing a new domicile in Spain (or another state before Spain); (2) filing a part-year resident return for the year of departure; (3) ensuring you do not maintain a permanent place of abode in Tennessee after departure; and (4) spending fewer than the statutory number of days in Tennessee in future years. The exact rules vary by state and some states (notably California, New York, and New Jersey) are particularly aggressive in asserting continued residency. Jacob advises on the state-level exit process as part of the integrated US-Spain move planning.
Tennessee has no state income tax on wages or salaries. The Hall Income Tax on interest and dividends was fully repealed effective January 1, 2021 — making Tennessee completely income-tax-free. Tennessee's residency exit is very straightforward: the state does not aggressively contest domicile changes.
Tennessee's economy includes healthcare and healthcare administration (Nashville is the HQ of HCA Healthcare, Community Health Systems, Envision Healthcare — the largest concentration of healthcare companies outside of a coastal hub), automotive manufacturing (Volkswagen in Chattanooga, Nissan in Smyrna), music and entertainment (Nashville), logistics (FedEx corporate headquarters in Memphis), and a growing technology sector. Expats from Tennessee moving to Spain include healthcare executives, automotive engineers and managers, entertainment professionals, logistics industry workers, and tech entrepreneurs.
For professionals relocating from Tennessee to Spain, the Beckham Law (Article 93 LIRPF) — a flat 24% rate on Spanish-source employment income up to €600,000 for the first six years — can represent a substantial reduction in effective tax. Combined federal and Tennessee rates can approach ~37%, making the Beckham Law's 24% flat rate particularly attractive.
| Scenario | Top Effective Rate | Approx. Tax on $180k Income |
|---|---|---|
| US — Federal (37%) + TN (0%) | ~37% | ~$66,600 |
| Spain — Beckham Law (employment income) | 24% flat | ~€43,200 |
| Spain — Standard IRPF (no Beckham) | Up to 47% | ~€68,400+ |
Tennessee's zero income tax creates no state-level barrier to retirement income. All 401(k), IRA, pension, and Social Security income has been completely free of state tax for Tennessee residents. Moving to Spain creates the transition from zero state taxation to Spanish IRPF on retirement distributions — a significant change that requires pre-departure planning.
Under the US-Spain Double Taxation Agreement, private pension and 401(k) distributions are taxable in Spain once you are a Spanish tax resident. The US may withhold at source, but this is creditable against Spanish IRPF. The Roth IRA creates a double-taxation risk — Spain does not recognise its US tax-exempt status. Pre-departure drawdown planning while still a Tennessee resident (paying only federal tax, with no Tennessee state tax on retirement income in many cases) can significantly reduce lifetime tax costs.
Key planning point for Tennessee expats: Nashville-area healthcare executives frequently hold significant deferred compensation, carried interest in private equity-backed healthcare rollup structures, and management equity in hospital operator entities. When moving to Spain, these deferred compensation interests — upon vesting or payment — may be Spanish-sourced employment income subject to IRPF, while private equity interests may generate capital gains treated under the DTA's Article 13. Comprehensive planning before the move is essential.
Spanish wealth tax (Impuesto sobre el Patrimonio) applies to tax residents on their worldwide assets exceeding the personal allowance (€700,000 for residents, plus an additional €300,000 for the primary residence). For expats from Tennessee with significant investment portfolios, property, or business interests, wealth tax is an important planning consideration. The rates range from 0.2% on the first tier to 3.5% on the highest. The choice of Spanish region of residence significantly affects wealth tax exposure: residents of Madrid enjoy a 100% bonificación (effectively zero wealth tax), while Andalucía has a 99% bonificación. In contrast, Cataluña and Comunitat Valenciana apply wealth tax in full. For high-net-worth individuals from Tennessee with substantial assets, the choice of Spanish region of residence can result in wealth tax differences of tens of thousands of euros per year.
Under the Beckham Law special regime (Article 93 LIRPF), Spanish wealth tax applies only to Spanish-located assets — not worldwide assets — for the duration of the regime. This is an additional major advantage of the Beckham Law for wealthy expats from Tennessee: for the first six years of Spanish residence, your US brokerage portfolio, IRA, 401(k), US real estate, and other US-located assets are entirely outside the Spanish wealth tax base. Once the Beckham period ends and you transition to the standard IRPF regime, worldwide wealth becomes assessable.
Many professionals from Nashville and Memphis in the healthcare and logistics sector are exploring remote work arrangements that allow them to live in Spain while continuing to work for their TN-based employer. This arrangement raises specific tax and compliance questions that must be addressed before the move.
A well-structured pre-departure process can significantly reduce your total tax burden and avoid costly compliance failures. Key steps for Tennessee residents preparing to move to Spain include:
Why specialist advice matters: Moving from Tennessee to Spain involves simultaneous US federal, TN state, and Spanish tax obligations. General advisors typically lack the cross-border expertise to optimise all three at once. Jacob Salama advises Tennessee nationals moving to Spain on the complete picture — from pre-departure planning through the first Spanish IRPF return and beyond.
Moving from Tennessee 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.