Foreign Tax Credit and Spain's Beckham Law/Non-Resident Tax

[Randolyn]

I am in the process of moving to Spain and trying to understand tax law with this so that when I'm using TurboTax, I don't make a mistake. 

Under the new Digital Nomad Visa, you get a resident Visa, but are taxed as a non-resident. Because of this, Spain doesn't issue a Certificate of Residency, which they say is required for double taxation treaty. I haven't seen this requirement in any of the US law for the Foreign Tax Credit or the Foreign Income Exclusion. Does anyone know if you are taxed as a non-resident in Spain if you can still claim the Foreign Tax Credit for the taxes you pay to Spain?

[DaveF1006]

To clarify, do you plan to become a permanent residence of Spain?

[Randolyn]

Yes, I plan to be a permanent resident of Spain. But, for the first five years, I am considering their Digital Nomad Visa which makes me a resident, but taxes me as a non-resident, until I gain permanent residency in 5 years.

[Randolyn]

Also, to clarify, I will be working remotely in Spain for a US based company, if that wasn't clear.

[DaveF1006 · Accepted solution]

Yes, while a US citizen, you may apply for the  Foreign Income Exclusion if you meet the terms of the Physical Presence Test or Bonafide Presense Test.  Also read this link that discusses the Foreign income Exclusion more in detail.

You may also claim a foreign tax credit if you are unable to exclude your foreign income from your return.  You can't take a Foreign Tax Credit or exclude your income at the same time.  There are two exceptions however. 

1. The maximum amount of Foreign Earned Income that can be excluded in 2023 is $120,000. If you make more money than that, you can claim a foreign tax credit for income in excess of $120,000.
2. If you are unable for some reason to exclude your foreign income, you may claim the foreign tax credit instead.  

[Randolyn]

Thank you so much for the information 🙂