US-Spain tax treaty applied to LLC: practical guide for Spain residents

22. Practical guide to the US-Spain treaty (1990 + 2013 Protocol, BOE 23-Oct-2019) applied to disregarded LLC owned by Spanish tax residents: key articles, withholdings, forms, numerical examples and how it integrates with Spanish IRPF.

The US-Spain tax treaty signed on February 22, 1990, plus the amending protocol in force since November 27, 2019, sets the rules that stop you from paying twice on the same LLC income.

When someone first sees the combo "US LLC" and "Spanish tax resident", the immediate question is always the same: "so where do I pay taxes?". The answer is clear: in Spain, on the net profit, thanks to the US-Spain double-taxation treaty. The LLC is not used to "not pay", it is used to not pay twice and to optimize within what's legal.

This guide walks through the treaty step by step, in plain language, applied to the specific case of a non-resident-owned LLC with a Spanish-resident owner. With articles, rates, numerical examples, forms and AEAT references.

What it is and why it exists

A double-taxation treaty (DTA) is a bilateral agreement between two countries to share the right to tax cross-border income and avoid taxing the same income twice, in source and in destination. Without a treaty, the natural result would be that you pay taxes in the US (because your LLC is there) and again in Spain (because you live there). That would suffocate any international business.

To avoid this, the US and Spain signed in 1990 a Convention to avoid double taxation and prevent fiscal evasion in matters of income taxes, modernized by a Protocol signed in 2013 that entered into force on November 27, 2019 (<a href="https://www.boe.es" target="_blank" rel="noopener">BOE</a> of October 23, 2019). This protocol updated withholding rates, information exchange and anti-abuse clauses.

Key articles to understand an LLC with a Spanish owner:

Art. 4, Tax residency: defines where each person or entity is considered resident.
Art. 5, Permanent establishment: crucial to know whether the US can tax you as a business operating in its territory.
Art. 7, Business profits: the basic rule for services.
Art. 10, Dividends: reduced withholding.
Art. 11, Interest: generally exempt.
Art. 12, Royalties: reduced rates.
Art. 17, Limitation on benefits: prevents any vehicle without real substance from getting treaty access.
Art. 24, Methods to eliminate double taxation: how Spain credits what was paid in the US (and vice versa).

How it works for disregarded-entity LLC

A Single-Member LLC owned by a non-resident is by default a Disregarded Entity: for the <a href="https://www.irs.gov" target="_blank" rel="noopener">IRS</a> it does not exist as a separate taxpayer. Its income and expenses flow directly to its single member. This is pass-through taxation.

For treaty purposes the reading is:

The LLC is not a US tax resident because it is not taxed there as an entity.
Who must be analyzed is the member: if they reside in Spain, the treaty applies to the Spanish-resident member.
Therefore, the LLC's net profits are taxed in Spain under the member's IRPF.
In the US the LLC only meets information requirements (Form 5472 + 1120 pro forma, BOI Report) provided it has no ECI (Effectively Connected Income).

The Spanish <a href="https://petete.tributos.hacienda.gob.es" target="_blank" rel="noopener">DGT</a> has confirmed this approach in binding rulings such as V0290-20 and later ones, classifying the US LLC as a transparent or pass-through entity for Spanish purposes, depending on the case-specific analysis.

Where you actually pay taxes

The short and honest answer for the typical case of an LLC providing services without a US permanent establishment and a Spanish-resident owner:

In the US: conditional US federal treatment, 0% state (in NM/WY/DE for LLC without local activity). Only maintenance costs.
In Spain: IRPF on the net profit of the LLC, integrated in your annual tax return as economic activity income under the attribution-of-income regime, at your personal marginal rate (19% to 47%).

In other words, you pay in Spain, but you pay better: on the net profit after broad deductions, with no monthly autónomo quota, no autónomo quarterly advance payments and a much more efficient professional stack.

Income types covered by the treaty

Income type	Without treaty (US)	With US-Spain treaty
Services rendered from outside the US	30% withholding	0% (Art. 7, no PE)
Royalties (standard software, cultural copyright)	30%	0-10% by type (Art. 12)
Dividends from US companies	30%	15% general / 10% qualifying (Art. 10)
Bank or bond interest	30%	0% generally (Art. 11)
Capital gains on US shares	30% / variable	Mainly taxed in Spain (Art. 13)
Pensions	30%	Specific rules (Art. 20)

For an operating digital-services LLC, the most relevant combo is: 0% US withholding on services and taxation in Spain as business income.

Spanish tax-residency certificate

To activate the treaty before the US payer, you need to prove that you are a Spanish tax resident. The AEAT issues a tax-residency certificate for treaty purposes through its electronic office. This certificate is valid for one year from issuance and it's wise to keep it always updated, especially if you work with brokers or payers applying complex withholdings.

In most collections via Stripe, PayPal, AdSense or similar they won't actively ask for it because the W-8BEN-E already does the work. But faced with an audit or with a broker like Interactive Brokers or a large corporate client, the certificate is the hard proof of your residency. At Exentax, sensitive steps sit in one controlled workflow, not in scattered notes.

Forms you will need

W-8BEN-E: filed by your LLC before each US payer to certify residency of the beneficial owner and the applicable treaty rate. See our <a href="/en/blog/w-8ben-and-w-8ben-e-fatca-and-withholding">complete W-8BEN and W-8BEN-E guide</a>.
W-8BEN: for non-resident individuals receiving income in their own name, not the LLC's.
Form 1042-S: issued by the US payer if any withholding was applied. Needed to claim a refund or to credit it in Spain as foreign tax paid.
Form 5472 + Form 1120 pro forma: the LLC's annual information return with the IRS.
BOI Report: with <a href="https://www.fincen.gov" target="_blank" rel="noopener">FinCEN</a>, identifying the ultimate beneficial owner.
Modelo 100 (IRPF): your annual Spanish return where you integrate the LLC's net profit.
Modelo 720/721: if the aggregate balance of foreign accounts, securities or crypto exceeds €50,000.
Tax-residency certificate: issued by the AEAT when needed for an external payer.

Practical cases with numbers

Case A, Software advisor with US and EU clients

LLC bills USD 120,000/year for services provided from Spain.
LLC expenses: USD 30,000 (software, hardware, travel, registered agent, accounting).
Net profit: USD 90,000 ≈ €82,000.
US: 0% withholding (active W-8BEN-E, no PE). Maintenance ≈ €2,000.
Spain: effective IRPF of around 35-40% on €82,000. IRPF liability ≈ €25,000-€28,000.
Total tax burden: €27,000-€30,000. Versus €38,000-€45,000 a comparable autónomo would pay including the quota.

Case B, Trader / investor with US dividends via LLC

LLC holds an Interactive Brokers account.
US dividends received: USD 10,000/year.
Without treaty: 30% withholding → USD 3,000 to the IRS.
With W-8BEN-E + treaty: 15% withholding (Art. 10) → USD 1,500 to the IRS.
In Spain: include the dividends in the savings base and apply the deduction for international double taxation of Art. 80 LIRPF for the USD 1,500 already paid in the US, up to the limit of the Spanish tax that would correspond to that income.

Case C, Royalty for software sold in the US

LLC sells software licenses to US companies: USD 50,000/year.
If qualified as royalty (Art. 12), the withholding can be 5% depending on the subtype.
If qualified as service or sale of a copy (not royalty), Art. 7 → 0%.
The correct qualification is critical and depends on the contract. This is where an experienced tax advisor pays for itself.

Source withholdings and how to recover them

If you suffer US withholdings (because no W-8 was on file, because it was a dividend or royalty payment, or because the payer made a mistake), you have two paths:

Direct claim to the payer: if it was their mistake and you're still within the fiscal year, they can usually adjust and refund you the difference.
Refund request to the IRS: via Form 1040-NR (individual) or procedures associated with the 1042-S. It's slow (typically 12-18 months) and requires ITIN or EIN. The sensible move is not to get there: keep your W-8s clean from day one.

In Spain, withholdings effectively paid in the US within the treaty limit can be credited via the deduction for international double taxation (DDII) on the IRPF. That's the mechanism that prevents you from paying twice on the same income.

Filing in Spain: Modelo 100

In your annual personal tax return (Modelo 100) you integrate the LLC's net profits as economic activity income under the attribution-of-income regime, unless your advisor justifies a different qualification. Typical steps:

Convert USD figures to EUR using the average yearly rate or the rate at the time of receipt, on a consistent criterion.
Compute total revenue and deductible expenses for the year.
Allocate net profit in the corresponding box of Modelo 100.
Apply the deduction for international double taxation for withholdings actually paid in the US within the treaty limit.
File Modelo 720/721 if you exceed foreign-asset thresholds (bank accounts, securities, crypto).
Keep all documentation: Mercury/Relay/Wise statements, invoices issued by the LLC, contracts, signed W-8BEN-E forms, Form 1042-S if any, IRS filings and expense receipts.

The AEAT can request supporting documentation at any time. Having an organized system from day one is the difference between an audit that closes quickly and one that drags. At Exentax, concern becomes controlled work: context, document, action and review.

Why you need a Spanish tax advisor

A US-side LLC well constituted is only half the work. The other half is integrating it correctly into your Spanish IRPF. This includes:

Properly qualifying the income (attribution, royalties, dividends, gains).
Applying the treaty and the international double-taxation deduction.
Choosing the imputation method (accrual vs cash).
Complying with Modelos 720/721 if applicable.
Documenting deductible expenses so they survive an audit.

A Spanish tax advisor who understands international structures with LLC is not optional: it's part of the complete setup. At Exentax we cover the US side (formation, EIN, banking, IRS and FinCEN compliance, W-8s before each payer) and we coordinate with your Spanish advisor, or we recommend one if you don't have one.

> Every case is individual. DGT positions can evolve and treaty protocols are updated periodically. This guide is informational; it does not substitute for personalized analysis of your case by a qualified professional.

In short

The US and Spain have a treaty signed in 1990 and modernized in 2019 that allocates taxing rights and prevents double taxation.
For a disregarded-entity LLC with a Spanish-resident owner, business profits are taxed in Spain, with no US withholding when there's no permanent establishment.
Dividends, interest and royalties have specific reduced rates.
The W-8BEN-E is the operational tool to activate the treaty with each US payer.
US withholdings suffered are credited in Spain via the international double-taxation deduction.
You must keep your tax-residency certificate available and file correctly via Modelo 100, plus Modelos 720/721 if applicable.
The complete setup: Exentax + Spanish tax advisor.

If you want to review your case with concrete numbers, book a strategic 30-minute review with Exentax and we'll explain exactly how your LLC fits within the US-Spain treaty and how to coordinate it with your advisor in Spain.

To go deeper, also read <a href="/en/blog/us-llc-vs-spanish-autonomo-structure-banking-tax">US LLC as an alternative to being self-employed in Spain</a> and <a href="/en/blog/w-8ben-and-w-8ben-e-fatca-and-withholding">Complete guide to W-8BEN and W-8BEN-E</a>.

For treaty analysis, the LLC label is only the starting point. The useful review checks income type, owner residence, treaty eligibility, source rules, permanent-establishment risk and how Spain will read the US classification.

Treaty access starts with classification

The US-Spain double taxation treaty reads more usefully when it's treated as a stable mapping between the country of tax residence of the beneficial owner and the country of the source of each income type, than as a generic shortcut to "avoid paying twice". The treaty doesn't replace the residence rules of either country: it sets a structured way for both administrations to coordinate, type of income by type of income.

A short note in the personal folder that records the country of residence declared for the year, the types of income received and the side where each one was first taxed makes the position reviewable in a few minutes whenever a tax adviser asks for clarification, instead of forcing a reconstruction from memory of the entire year.

> <a href="/en/book">Review my case</a>

How Exentax applies the US-Spain treaty to a real LLC file

For Spain-US treaty questions, Exentax separates treaty text from the facts that make it usable: residence, income type, beneficial owner, limitation rules, LLC classification and supporting records. The treaty is not a shortcut; it is a framework that needs a coherent file.

How the US–Spain treaty actually plays out for a single-member LLC

The treaty between Spain and the United States works on the level of persons, not on the level of pass-through vehicles. A single-member LLC that is disregarded for US tax purposes is generally looked through, and the relevant questions are answered at the level of the natural person who is the member. Where that person is tax resident in Spain, Spain will tax the worldwide income attributed through the LLC under its own rules, and the treaty will allocate taxing rights between the two countries on a category-by-category basis.

In practice this means that three articles do most of the work in a calm year: the residence article, which sets which country has primary taxing rights when both could otherwise claim it; the business profits article, which generally requires a permanent establishment in the other country before that country can tax operating profits; and the elimination-of-double-taxation article, which sets the order in which credits are applied. None of these articles produces an automatic outcome on its own. They are tools that need consistent documentation: residence certificates, accounting that ties to the calendar year used in each country, and a clear record of where economic activity actually happened. A working file with these three pieces, refreshed once a year, removes most of the friction that the treaty is meant to remove.