New Tax Residents in Spain with a Foreign LLC: A Complete Tax Guide

Tax Implications of Maintaining an LLC as a Tax Resident in Spain

When you establish your tax residence in Spain (generally by spending more than 183 days a year in the country), you acquire the obligation to pay taxes in Spain on your worldwide income. This means that all your global income, including the profits from your foreign LLC, must be declared to the Spanish Tax Agency (Hacienda). In other words, it doesn't matter if your LLC is anonymous or does not pay taxes in its country of origin; as a new Spanish resident, you will have to report its income in your IRPF (Personal Income Tax) declaration.

How are the profits of your LLC taxed in Spain? In most cases, a U.S. or other country's LLC is considered a pass-through entity, whose profits "pass" to its owners. Therefore, Hacienda usually treats the profits of your LLC as your personal income. You must include the LLC's profits in your annual IRPF declaration (Form 100), even if you have not effectively withdrawn them to your personal account. This income is usually classified as income from economic activities (if it comes from your work or business) and is taxed on the progressive scale of the Spanish IRPF. This can imply increasing tax rates (by brackets) that for high incomes reach up to around 45-47%.

Practical example: Marta is a Spanish entrepreneur who moved from the U.S. to Málaga, keeping her Delaware LLC. In 2025, her LLC earned a profit of €80,000, of which Marta only transferred €30,000 to her personal account. Even so, being a Spanish tax resident, Marta must declare the full €80,000 in her IRPF. That amount will be added to her other income and taxed according to the tax brackets. Although she has not "touched" part of the profits, Hacienda considers that she has the economic right to them and taxes them anyway. If Marta were to omit declaring these profits, she risks penalties for concealment of income and a regularization of previous years, with fines that could reach 150% of the unpaid tax, in addition to surcharges and interest.

A possible tax relief comes from double taxation treaties. If your LLC pays taxes in its country (for example, if you chose to have it taxed as a corporation), Spain allows you to avoid double taxation. In practice, you can deduct the corporate tax paid abroad from your Spanish IRPF by presenting official certificates from the country of origin. However, in many foreign LLCs (such as U.S. LLCs treated as a disregarded entity), no foreign corporate tax is paid, so there is no tax credit to apply, and you must pay full taxes in Spain. In short, as an International Tax Lawyer in Spain, I advise evaluating whether it is convenient for your LLC to pay some taxes in its country of origin (via a choice of tax regime) to take advantage of double taxation credits in Spain, although this will depend on each case.

Another important point is the informative declaration of assets abroad. If your LLC's assets or accounts abroad exceed €50,000, you will have to report them using Form 720 before March 31 of the following year. For example, if your LLC has a bank account outside of Spain with a balance of €60,000, or shares valued above that threshold, you must include that data in Form 720. Not filing it can lead to very high fines, although after recent legal changes the penalties have been moderated. In any case, transparency is key: the Spanish Tax Agency requires knowledge of the existence of your LLC and its significant assets abroad. Later, we will delve deeper into the formal obligations (forms 720, 100, etc.) in the Tax Compliance section.

Social Security Contribution Obligations When Working with a Foreign LLC

Taxation is not the only front: when you reside in Spain and carry out your professional activity here (even if it is through a foreign LLC), obligations with Spanish Social Security arise. In general, any person who works for themselves or for another person in Spain must contribute to Social Security, which guarantees access to public healthcare, pensions, benefits, etc. Let's see what this implies for different scenarios:

Self-employed worker (freelancer) with an LLC: If you are the owner of the LLC and do not have an employment contract with another company, in practice you are acting as a self-employed worker in Spain. Legally, you should register as self-employed with Spanish Social Security, even if you invoice through your LLC. This involves paying the monthly self-employment fee to contribute. The self-employment fee is a fixed amount (or by brackets based on income since 2023) that is paid each month regardless of the income obtained. In 2025, the minimum base is around €300 per month (with possible reductions for the first few years for new self-employed individuals), although it can be higher depending on your income. Paying this fee includes you in the self-employed workers' regime, contributing to your retirement and giving you the right to public healthcare. Many entrepreneurs who use a foreign LLC try to avoid this fee, but doing so means operating outside the labor law: if Hacienda or the Labor Inspectorate detect that you had habitual economic activity in Spain without being registered as self-employed, they could claim unpaid contributions and impose surcharges.

Employee of a foreign company: If instead of being an owner, you work in Spain for a foreign company or LLC as an employee (for example, you are hired by your own LLC or another company in the U.S., UK, etc.), the situation is particular. Spain has bilateral Social Security agreements with several countries (U.S., EU countries, UK after Brexit, etc.) to avoid double contribution. For example, the Spain-U.S. agreement allows an American employee temporarily relocated to Spain to continue contributing to the American system for up to 5 years, avoiding paying twice. However, to take advantage of these exceptions, a formal business relocation and a certificate of coverage issued by the country of origin are normally required. If you have moved yourself and your LLC has no presence in Spain, they may not apply. In the absence of an international certificate, Spanish law expects you to contribute here. This can be done in two ways:

1. Your foreign company registers with Spanish Social Security as a company without a domicile in Spain and registers you, withholding and contributing for you as a local company would (this requires complex administrative procedures).

2. Or, if the company does not perform this procedure, you must register as a self-employed worker to contribute, even if you consider yourself to "work for someone else." In practice, many choose the self-employed route to regularize their contribution situation when teleworking for a foreign entity.

Practical example: Juan, an Argentine citizen, moves to Spain and continues to work remotely for his LLC registered in the United Arab Emirates, of which he is the sole partner. Upon arrival, he obtains an international remote work visa. Although his formal employer is the foreign LLC, Juan decides to register as a self-employed person in Spain to contribute. Each month he pays ~€280 to Spanish Social Security. Alternatively, he could try to have his LLC register as an employer in Spain, but since he is the owner himself, he sees it as unnecessary. Thanks to contributing in Spain, Juan has public health coverage and is accumulating the right to a pension. If he had not contributed to any system, he would be exposed to the law: without public (or mandatory private) insurance and with the risk of a labor penalty if the lack of registration is detected. An International Tax Lawyer in Spain confirmed to him that contributing as self-employed was the safest option to comply with the regulations.

What if I don't contribute? Operating with your LLC without contributing to Social Security carries risks, in addition to the health issue. The Administration could consider that you are in an irregular work situation. However, in practice, many "digital nomads" spend seasons in Spain earning from foreign companies without registering locally. This is a legal vacuum partially resolved with the telework visa (Startups Law 28/2022), which requires proof of private health insurance, but does not explicitly require contributing in Spain if there is no Spanish employer. Even so, keep in mind: if you plan to stay for several years, benefit from public services, or eventually access permanent residency, it is advisable to contribute. The years without contributions can leave you without unemployment or sick leave benefits, and for pension purposes, they will be lost years. In short, integrating into the Spanish Social Security system (either as self-employed or through a bilateral agreement) is part of optimizing your stay legally.

Alternatives for Structuring Your Business: Foreign LLC or Create a Spanish SL?

Maintaining your original LLC is not the only option. As a new tax resident in Spain, it's a good idea to analyze corporate alternatives that can facilitate compliance and tax optimization. The main options are: operating as a pure sole proprietor, creating a Spanish limited company (SL), or even combining structures (for example, a Spanish SL that controls your LLC). Each option has its pros and cons:

1. Continue with the foreign LLC (with proper advice): This option can be viable, especially if your business is digital and does not require infrastructure in Spain. Advantages: You avoid certain local bureaucracy (incorporating a company in Spain, accounting according to Spanish standards, etc.), and if the LLC has no "nexus" in Spain other than yourself, you could theoretically save on some costs such as Spanish Corporate Tax (25%) and self-employment fees. In fact, many Spanish entrepreneurs create LLCs in the U.S. to benefit from their simplicity and, as long as the LLC is not physically located or operating in Spain, they do not pay Corporate Tax or local VAT here. But be careful: this route requires meticulous tax compliance for IRPF (declaring all the LLC's income) and risk control. Hacienda examines each case through the lens of residence and effective control. If it sees that you really manage the LLC from Spain (even if it has no offices here), it will understand that you control its profits and will want to tax them. Having an LLC is not a magical way to "not pay taxes," but a tool that must be used correctly and with transparency. This option is primarily suitable for digital entrepreneurs without employees, with global operations, who, advised by an expert, comply with all declarations (IRPF, 720, etc.) to avoid penalties. An International Tax Lawyer in Spain can guide you in keeping your LLC's accounting aligned with Spanish requirements to justify income and expenses in the event of a possible inspection.

2. Operate directly as a sole proprietor in Spain: This would involve invoicing your clients personally (or through your business name) without an intermediary company. Advantages: Simplicity in terms of structure, no costs for company incorporation or maintenance. You only need your NIF (Tax Identification Number) and to register with Hacienda (Form 036) and as a sole proprietor. Disadvantages: You may end up paying the same or more in taxes than with an LLC. Your professional income will go to the progressive IRPF (possibly with quarterly withholdings via Form 130), which in high brackets exceeds 45%. In addition, you assume unlimited liability (your personal assets are responsible for business debts) unlike the limited liability of an LLC or SL. And as we mentioned, you will have to pay the self-employment fee. Sometimes, people who work alone opt to be sole proprietors initially due to modest or uncertain income, and later evolve to a company when the business grows. In fact, if you are starting out and your income is low, the sole proprietor regime with its deductions (and reduced flat-rate contribution) can be economical during the first few years. But as your profits increase, it is usually less tax-efficient than a company.

3. Create a Spanish Limited Company (SL): This involves incorporating a company in Spain, with its own legal personality, and possibly transferring part or all of your LLC's activity to this new SL. You could be the administrator and sole partner (SL unipersonal) or have more partners if that is the case. Advantages: The SL pays Corporate Tax at 25% of its profits (general rate), and if it is a new creation, it can enjoy a reduced rate of 15% for the first two years with profits. This fixed rate can be advantageous if your personal income would otherwise fall into high IRPF brackets. In addition, by charging through an SL, you can better plan your taxation: for example, paying part of the profits as your salary (a deductible expense for the SL) and leaving another part in the company for reinvestment or paying it out via dividends. Dividends, in turn, are taxed on your IRPF but as investment income at rates of 19-26%, generally lower than those for employment income. By combining salaries and dividends, you can optimize taxes. Another advantage of the SL is its local image and operations: if you plan to hire employees in Spain, rent an office, or sell mainly in the Spanish market, having a local entity is almost essential. In fact, if your LLC hires employees in Spain, it will be considered a de facto Spanish company for labor purposes because it will have to contribute here for those workers, so a local SL formalizes that situation better. Disadvantages of the SL: Greater administrative burden (accounting according to the General Accounting Plan, official books, filing accounts with the Commercial Registry), incorporation costs (minimum capital contribution of ~€3,000 and notary), as well as the obligation to contribute as a self-employed administrator-partner (the so-called "corporate sole proprietor," who has a slightly higher fee than the normal sole proprietor). Also, keep in mind that the SL separates your assets, but administrators have certain legal responsibilities; it is not a license for fiscal recklessness, and Hacienda can also inspect links between your SL and yourself.

4. Mixed structures (holding): In more advanced scenarios, some choose to maintain the foreign LLC as part of a holding, for example, creating a Spanish holding that owns the LLC, or vice versa. This allows for distributing activities by jurisdiction. For example, a Spanish SL that handles activity in Spain (hiring local staff, serving European clients, etc.) and your foreign LLC remains for operations in the U.S. or other markets. The two could be connected via commercial agreements. These structures can take advantage of the best of both worlds but require professional planning to avoid problems with transfer pricing, income classification, etc. They are usually only justified if your business reaches a considerable size or you are looking for specific advantages (for example, an International Tax Lawyer in Spain might recommend it to facilitate the application of a specific tax treaty or access to international financing).

In summary, there is no universal solution: the choice between a foreign LLC, a Spanish SL, or a sole proprietorship depends on the nature of your business, income volume, need for a local presence, and your horizon of permanence in Spain. For a "digital entrepreneur without a team," an LLC with good advice may suffice. If you have a business already structured in Spain or that sells in the EU, a Spanish SL (and registering in the OSS for European VAT, if applicable) will surely be the right path. A sole proprietor in the initial phase may prefer to continue as a sole proprietor, optimizing deductible expenses. And a professional with high income might combine an SL to invoice large contracts and an LLC for other markets. The important thing is not to improvise the structure: get advice from experts and put together a coherent tax plan from the beginning, instead of reacting later to possible fines or setbacks.

Possibility of Applying the Beckham Regime (Impatriates) and Its Tax Advantages

One of the greatest attractions for new residents is the special regime for impatriates, popularly known as the Beckham Law. This regime, originally intended to attract highly qualified foreign professionals (like the famous soccer player David Beckham in 2003), allows those who move to Spain for professional reasons to pay taxes as a non-resident, even though they actually live here. In essence, you will only pay taxes on income generated in Spain at a fixed rate of 24% up to the first €600,000 (and at 47% for the excess), instead of being subject to the progressive rate of the normal IRPF. Furthermore, income obtained outside of Spain is exempt from Spanish taxation under this regime. For someone with investments, businesses, or dividends abroad, this is extremely beneficial, as they would not have to pay taxes on that international income during the Beckham period.

Main requirements: After the reform introduced by the Startups Law (Law 28/2022), the requirements for taking advantage of the Beckham regime have been made more flexible. As of 2023, you need to:

• Not have been a tax resident in Spain in the last 5 years (it used to be 10 years).

• Move to Spain for a specific work or professional reason, which can be:

  • An employment contract in Spain with a Spanish employer (this applies to both a normal contract and a management contract, only professional athletes are excluded).

  • An international teleworker: the rule now recognizes relocation as valid "without being ordered by the employer, when the work activity is provided remotely using computer means." In particular, the case of employees with an international telework visa is cited. That is, if you come with the new digital nomad visa, the work requirement is understood to be met.

  • An administrator of a company in Spain: if you acquire the status of administrator of a Spanish entity. Be careful: if you also have shareholding in it, it must not be a shareholding that makes the company "linked" to you according to the Companies Act. In practice, it is usually interpreted that your shareholding < 25% does not create a problem for Beckham.

  • An entrepreneur or investor: carrying out an economic activity in Spain that is qualified as entrepreneurial, following the procedure of Law 14/2013.

  • A highly qualified professional in startups: providing services to emerging companies (startups) or carrying out R&D activities, with compensation where more than 40% comes from those innovative activities.

• Not obtain income through a permanent establishment in Spain (your own business with a fixed base) during the regime, except for the cases of entrepreneurs and startups mentioned that allow it.

• Formalize the application in a timely manner: You must submit Form 149 to the Tax Agency within 6 months of registering with Social Security or starting the activity in Spain. This is crucial; if you miss the deadline, you lose the option.

If you meet all the requirements, Hacienda authorizes you to pay taxes under the Beckham regime. What exactly does it mean to pay taxes as a "non-resident"? In practice:

• Your employment income in Spain is taxed at a fixed rate of 24% (up to €600k, then 47%). The deductions and personal minimums of the normal IRPF do not apply, but the rate is usually advantageous if you have a high salary.

• You do not pay taxes on your worldwide income. Only on what you obtain in Spain. For example, dividends from your foreign LLC, interest from accounts abroad, or capital gains from the sale of foreign shares would not pay taxes in Spain during this regime. (Note: If that income comes from tax havens, there could be exceptions, but in general, they are excluded.)

• Wealth Tax: under Beckham, Spain would only tax the assets located in Spain, not your assets abroad. And Form 720 for assets abroad would not be required, since it is only filed by residents fully subject to worldwide income. By paying taxes as a non-resident in that regard, you would not have the obligation to declare your assets abroad.

• Limited duration: The benefit applies for the year of relocation and the following 5 fiscal years, for a total of 6 years. After that, you will return to the general regime.

Practical example: Continuing with Marta, our entrepreneur with a Delaware LLC, let's assume she plans her move to Spain by taking advantage of the Beckham Law through an impatriate visa. Marta establishes a formal employment relationship with her own Spanish company (which qualifies as an innovative startup) and applies for the regime. For the next 6 years, Marta will only pay 24% on the salary she assigns herself in Spain. Let's imagine she pays herself €50,000 a year as the administrator of her new Spanish SL: she will pay €12,000 in taxes (24%). Any additional distribution she receives from her U.S. LLC (dividends, etc.) will not be taxed in Spain, and her investments in the U.S. will not be either. In addition, she will not have to file Form 720 for the LLC's accounts or pay taxes on the LLC's undistributed profits while she is under Beckham. The difference is huge: without Beckham, the €50,000 + LLC profits would have been added to her IRPF, perhaps reaching a marginal rate of 45%. With Beckham, her effective rate is 24%, and foreign income is excluded. Of course, Marta must carefully manage her situation: for example, ensuring that her LLC does not generate a permanent establishment in Spain, since the Beckham regime does not allow having local business income except for the cases that are enabled.

Limitations and advice: The Beckham regime is very advantageous, but it has its nuances. For example, you cannot deduct personal expenses or apply reductions (such as a deduction for habitual residence, children, etc.) in the Beckham IRPF part. Likewise, since you are technically considered a "non-resident" for treaty purposes, you will not be able to invoke the double taxation treaty as a Spanish resident during those years. However, this is rarely a problem given the low taxation you get. Another point: your spouse and children can opt for a similar regime if they move with you, under certain conditions, which can facilitate family planning. In any case, get advice from an expert before applying for Beckham; you must verify eligibility in detail and complete the procedures in a timely manner. Many newcomers hire an International Tax Lawyer in Spain precisely to manage the application to Beckham, given the complexity of the process and the importance of doing it right.

Tax Compliance in Spain for LLCs: Forms 100, 720, 200, and Other Key Procedures

When you become a Spanish tax resident and maintain operations or assets abroad, it's essential to comply with all formal obligations before the Tax Agency. Here, we list the most relevant forms that may affect you and what they entail:

Form 100 - Income Tax Return (IRPF): This is the annual Personal Income Tax declaration. As a resident, you must file it every year (usually between April and June), declaring all your worldwide income, including the profits of your LLC. If you take advantage of the Beckham regime, you will instead file Form 151 (special non-resident tax) declaring only your Spanish income. In the normal Form 100, the LLC's income could be listed as income from economic activities or movable capital income, depending on its nature (for example, if you simply receive dividends from the LLC, it would be movable capital; if it is your active business, economic activity). Keep in mind that if your LLC was treated as a transparent entity, you might also have to file the quarterly Form 130, paying fractional payments on account of the IRPF, to avoid surprises at the end of the year. Many LLC owners are unaware of this and only declare annually, but the IRPF regulations require quarterly advance payments for income from economic activities if there are no withholdings.

Form 720 - Informative Declaration of Assets and Rights Abroad: This is an informative declaration (you don't pay taxes on it, you just provide information) that is mandatory for tax residents who have assets outside of Spain worth more than €50,000 in one of three categories: bank accounts, securities (stocks, shares, insurance), or real estate. If your LLC has assets that, proportionally to your share, exceed that threshold, you must declare them. Examples: balances in the LLC's accounts, the LLC's financial investments, or if you own >25% of the LLC and it in turn owns real estate or financial assets abroad. In practice, the share in the LLC itself could be interpreted as a security that must be declared if its value exceeds 50k. Hacienda has made it clear that even if the LLC is "anonymous" in the U.S., you must declare it if you are a Spanish resident. Non-compliance with Form 720 had disproportionate penalties in the past (fines of 150% of the undeclared value, etc.), which were declared illegal by the EU. Currently, the penalties are limited but are still significant for each piece of data not reported. Important: if you have already filed a 720 and in subsequent years those assets do not change by more than €20,000, you do not have to repeat it; it is only filed again when there are relevant changes or new assets that exceed the threshold.

Form 200 - Corporate Tax: This is the annual Corporate Tax declaration form for companies resident in Spain. If you decide to incorporate a Spanish SL, you must file Form 200 every year, declaring the company's profits and liquidating the corresponding 25% (or 15% for the first few years if applicable). Can it affect your foreign LLC? Directly, no, since the LLC will not file Form 200 unless it is considered a resident in Spain or has a permanent establishment here. However, be careful!: If Hacienda determines that your LLC has its effective tax residence in Spain, it could require you to pay Corporate Tax as if it were a regular Spanish company (which we will explain in the effective residence section). Likewise, if your LLC opens a permanent establishment in Spain (e.g., a branch, office, fixed warehouse here), that branch would have to declare its profits using a form similar to 200. In short, Form 200 will be relevant for any entity that Hacienda considers resident or operating a business in Spain, whether it is your SL or potentially your LLC if it "lands" here.

Forms 130/131 - IRPF Fractional Payments: If you obtain income from an economic activity (as would be managing your business via a transparent LLC), you must file Form 130 quarterly (direct estimation regime), paying approximately 20% of your accumulated profits in the quarter, on account of the IRPF. This is then deducted from the annual declaration. If you were in modules (objective estimation), you would use Form 131, but this is rare for this profile of international activity. It is important not to forget these partial payments to avoid surcharges.

Forms 111 and 190 - Payroll or Professional Withholdings: If you have a Spanish SL and pay yourself a salary or pay employees, you will file Form 111 quarterly to pay the IRPF withholdings made and Form 190 as an annual summary. In your personal case, it may not apply if there are no employees in Spain or if you work alone.

Form 184 - Declaration of Attribution of Income Entities: This informative form may be necessary if Hacienda considers your LLC an attribution of income regime entity. In Spain, communities of goods, civil societies, or some entities without legal personality file Form 184 to communicate what income they attribute to their partners. Although a foreign LLC is not a Spanish entity, several tax experts recommend filing a Form 184 if the LLC does not pay corporate taxes abroad and its income is attributed to you here. It would be a way to inform Hacienda, "my LLC X had so much profit in the year, of which 100% corresponds to me as a member." In fact, in practical examples of tax advisory services, it is mentioned that when the LLC has no activity or profits, it is even advisable to file a "zero" Form 184 to leave a record that there was no income to attribute. This is not explicitly required by law, but it is a measure of tax prudence that an International Tax Lawyer in Spain may recommend for greater transparency.

Form D-6 / A-1 (foreign investments): If you own significant shares in foreign companies, there is an obligation to declare them to the Foreign Investment Registry of the Ministry of Commerce using Forms D-6 (annual for investments in marketable securities) or A-1 (for other investments). For example, if your LLC owns foreign stock market shares or if you, as a Spaniard, invested capital in that LLC, you might have to report it. These obligations are sometimes overlooked, but I will briefly mention that they exist, as they seek statistical control of foreign investments.

In summary, formal compliance is extensive. It is not enough to "pay taxes," you must also file all the required informative forms. A correct management includes:

• Timely declaring your income in IRPF (Form 100) or the impatriate regime.

• Reporting your foreign assets (Form 720, and where appropriate, a complementary Form 720 if in future years you exceed new thresholds).

• Filing the Corporate forms (200) if you have a local company or the LLC becomes subject to it.

• Keeping clear accounting for your LLC to be able to justify the numbers you declare to Hacienda.

• Keeping supporting documentation: bank statements, LLC expense invoices, certificates of taxes paid abroad, etc., for at least 4 or more years, in anticipation of inspections.

It may seem overwhelming, but with good advice and an organized tax calendar, it is manageable. When in doubt, it is better to over-declare than to omit: for example, if you are not sure whether you should file a certain informative form, filing it voluntarily (even if Hacienda then tells you it was not necessary) is usually harmless; however, omitting something mandatory does lead to a fine. The goal is to sleep soundly knowing that you are up to date with Hacienda - and that, as the saying goes, "is priceless."

CFC Rules, Effective Residence, and Permanent Establishment: Surveillance of Your Foreign LLC

When a Spanish resident controls a company abroad, Hacienda applies several doctrines to prevent evasion. It is vital to know the CFC rules (Controlled Foreign Corporation or "international tax transparency"), the concept of a company's effective tax residence, and the notion of a permanent establishment, as they could affect your LLC and your tax burden.

CFC Rules (Controlled Foreign Corporations or International Tax Transparency)

The International Tax Transparency (TFI) rules seek to prevent residents from deferring taxes by using entities in tax havens or low-tax jurisdictions. Spain includes them in Article 100 of the Corporate Tax Law, adapted to the ATAD Directive. In short, as a resident in Spain, Hacienda can impute the passive income of your foreign entity to you as if it were your own, even if you do not distribute it, provided certain conditions are met:

• Control: That you alone, or together with related family members/partners, own at least 50% of the non-resident entity. In a single-member LLC, this threshold is automatically exceeded (100% ownership).

• Low taxation: That the foreign company pays a tax on its income that is < 75% of what it would pay in Spain for that same income. For example, if your LLC is in the United Arab Emirates with a 0% rate, or in Delaware where it does not pay federal tax for not operating in the U.S., it is clearly below 75% of the Spanish tax (i.e., below an effective ~18.75%).

• Nature of income: The rules distinguish between passive and active income. If the entity does not have an adequate material and personal organization for its activity (i.e., it is a shell), then all its income is imputed. If it does have assets (staff, office, real business), only certain specific passive income (interest, dividends, real estate income, royalties, etc.) listed in the rule would be imputed. In both cases, we are talking about undistributed profits, which, although they remain in the company, Hacienda makes you pay taxes on them in your IRPF as additional income, proportional to your participation.

In practice, how does this affect you with your LLC? Given that most of the single-member LLCs in our cases do not pay corporate tax abroad, and many times they depend on the work of the partner himself (you from Spain), Hacienda may consider that they fall squarely into the TFI. This means that even if you decide to leave the profits "parked" in the LLC's account to avoid transferring them to Spain, Hacienda will still require you to pay for them every year. This reinforces what was explained in previous sections: it is not enough not to withdraw the money; the passive or business income of your "controlled" LLC is fiscally attributed to you in Spain. The philosophy of the TFI is clear: to discourage the creation of opaque structures in havens, attributing the income generated through those entities to Spanish partners. So unless your LLC has real substance abroad (e.g., an office with employees in its country) and pays normal taxes, the safest thing is to assume that its profits will be your profits in the eyes of Hacienda. Note: If your LLC ever does pay taxes in its country (for example, you decide to have it taxed as a C-Corp in the U.S. at 21%), you can argue that it does not meet the low taxation condition (<75%). This, added to the fact that future dividends could be exempt due to a significant share (if you have >5% and one year of ownership), could free you from TFI imputation in certain cases. In fact, the DGT (General Directorate of Taxes) has recently clarified that when a foreign holding company pays taxes equivalent to Spain (or is 100% exempt for a legitimate reason), tax transparency is not activated. But these are very specific situations normally applicable to larger corporate structures. For the typical individual entrepreneur LLC with zero taxation, assume total international tax transparency.

Effective Tax Residence of the LLC: Can Spain Consider Your LLC a Resident?

In addition to imputing income to you, Hacienda could go a step further: determine that your foreign LLC is actually a tax resident in Spain. This would happen if it is found that the management and control of the company are exercised from Spain, which in tax law is called the "effective management headquarters" in Spanish territory. The law is blunt: "Entities that meet any of the following requirements shall be considered residents in Spanish territory: a) that they have been incorporated in accordance with Spanish laws, b) that they have their registered office in Spain, c) that they have their effective management headquarters in Spain." And it clarifies that the effective management headquarters is the place where decisions are made and the company's activity is controlled.

If you, from your home or office in Spain, make all the LLC's business decisions, negotiate contracts, manage accounts, etc., the management headquarters is objectively in Spain. In the absence of international treaties, Spain could invoke this to consider it a Spanish company for tax purposes, with all that this entails: the LLC would start paying Corporate Tax in Spain on its worldwide profits (minus, perhaps, what has already been taxed abroad) and would have the formal obligations of a Spanish company.

Does the country of origin or any treaty protect you? It depends. For example, the Spain-U.S. Double Taxation Treaty does not explicitly contemplate how to resolve the double residence of legal entities (many modern treaties leave that matter to mutual agreement of authorities). The U.S. determines the residence of its entities by the place of incorporation; so your LLC will always be "American" for the U.S. Spain sees it as "Spanish" due to effective management. This could lead to a double residence and potential double corporate taxation, which is not desirable. It would be necessary to negotiate case by case if a conflict arose. For other jurisdictions: with the UK, there is a treaty that addresses the effective headquarters for companies; with the Emirates, there is no treaty with a clear clause, etc. The important thing is not to get to that situation. If Hacienda already has serious suspicions and is willing to declare your LLC as a resident, it is because it considered that you set it up for evasive purposes and that it is actually just your alter ego in Spain.

How to avoid it? Ensure that your LLC has management links outside of Spain: for example, a non-resident professional administrator, partner meetings held abroad, a commercial address abroad, etc. These measures help to argue that the management does not only occur from Spain. Even so, in the digital age, it is difficult to hide where the "brain" of the business is. A simpler approach is: if you are going to reside permanently in Spain and your main business is yourself, consider using local structures (SL) and not forcing the fiction that "everything happens in Delaware." Many entrepreneurs start with LLCs out of ignorance or speed, but in the medium term, they migrate to Spanish structures when their life is established here.

Consequence of the LLC being considered a Spanish resident: You would probably have to regularize several years of Corporate Tax, file Form 200 for each non-prescribed tax year, pay 25% of profits (minus credits for taxes paid abroad if any), maybe municipal capital gains tax if it had real estate, etc. In addition, since the LLC is now "Spanish," it would no longer be covered by the tax treaty as a foreign entity. It can become a legal chaos, with the risk of penalties for not having declared as a resident company when it should have.

Permanent Establishment: The Unnoticed "Branch" of Your LLC in Spain

Without fully declaring it a resident, Hacienda can argue that your foreign LLC operates in Spain through a permanent establishment (PE). A permanent establishment is any fixed place of business through which a non-resident entity carries out all or part of its activity in Spain. This includes a place of management, a branch, an office, a factory, a workshop, or the habitual actions of an agent with the authority to conclude contracts on behalf of the company. If you, from Spain, continuously manage the LLC's contracts and business, your own presence could be classified as a PE of the LLC in Spain (you would be a "dependent permanent agent"). This also applies if you have an office here dedicated to that business, a warehouse for goods distributed from Spain, etc.

The distinction from effective residence is subtle: a PE implies that the company is still foreign, but it recognizes that a part of its activity is carried out in Spain permanently. In such a case, Spain can tax the profits attributable to that PE. In practice, it should be calculated how much of the LLC's profit comes from the function performed in Spain (which is debatable if it is all the management). The PE would pay Non-Resident Tax in Spain, usually at the same rate as corporations (25%), and it would be necessary to appoint a tax representative, keep separate accounting for the PE, etc. In addition, when repatriating profits from the PE to the head office, a 19% tax could apply (the "branch profit tax") unless a treaty limits it.

Example: Let's say your U.S. LLC sells software globally, and although it does not have an office open to the public in Spain, you work from your home in Valencia. If you physically perform most of the business functions (development, marketing, support) here, Hacienda could argue that your home is a PE of the LLC. This is especially true if a Spanish contact phone number appears on the website or if you have informally hired staff. Spain would then want the LLC to pay for that PE. The Spain-U.S. treaty defines PE in a classic way (fixed place of business, dependent permanent agent, etc.), so that standard would apply. The delicate part is that since you are the owner, you could unintentionally be constituting a PE.

How to mitigate the risk of a PE: If you operate with an LLC and do not want to create a PE here, you must act as an independent agent: for example, issuing consulting invoices from your person/Spanish SL to the LLC for the services you provide to it, instead of concluding the LLC's contracts directly with Spanish clients. If the LLC does not hire locally or advertise a Spanish address, it also reduces visibility. In general, avoid elements of physical permanence (a location, stock, employees) linked to the LLC in Spain. But let's be honest: if you live here and your main business is your LLC, it is difficult to physically detach it completely without falling into contradictions.

In conclusion, Hacienda has several tools to "trap" the taxable matter of your LLC:

• Attributing its income to you via CFC (tax transparency).

• Reclassifying it as a resident entity in Spain due to effective headquarters.

• Or at least subjecting it to Non-Resident Tax due to a Permanent Establishment in Spain.

It is best to prevent these scenarios with good tax planning. Sometimes the solution is to anticipate and voluntarily regularize: for example, if you have already been in Spain for a while with the LLC moving a lot of money, you may want to submit a binding inquiry to Hacienda or explore how to declare spontaneously before an inspection. Again, an International Tax Lawyer in Spain can evaluate your situation and recommend the path of least risk: from changing the company's tax residence (moving the management abroad or directly incorporating it again here) to taking advantage of amnesties or agreements if they existed (for now there are no amnesties, but there are cooperative compliance programs for large fortunes).

Legal Strategies to Optimize Your Tax Situation Without Incurring Risks

At this point, it is worth summarizing key strategies that will allow you to minimize the tax burden by scrupulously complying with the law. Tax optimization does not consist of hiding but of planning and making informed decisions. Here are some final recommendations:

1. Consider taking advantage of the Beckham regime if you are eligible: As we saw, this special regime can drastically reduce your personal taxes for 6 years by taxing only Spanish income at 24% and exempting foreign income. For new residents with high incomes or significant assets abroad, it is usually the number one strategy. Example: If you anticipate large dividends from your LLC or capital gains from selling your foreign startup, doing so under Beckham would mean paying €0 in Spain for those gains (compared to 23% or more that normal IRPF would entail on foreign gains). The key is to meet all the requirements and prepare the documentation for the application in advance. Make sure you start the employment relationship (or the telework visa) from day one of your move to align dates with the Beckham option. Once you are in, take advantage of those years to restructure your assets: for example, you could distribute dividends from your LLC each year without Spanish tax, building a financial cushion for when you leave the regime. Of course, do not cheat by trying to pretend to be a non-resident during Beckham; you must live in Spain (>183 days) to maintain it, and Hacienda can check it. With correct use, Beckham is legal and powerful.

2. Evaluate comparative taxation and international treaties: Each case is different depending on the countries involved. Review the double taxation treaty between Spain and your LLC's country (if it exists). For example, the Spain-UK, Spain-U.S., Spain-UAE treaties, etc., may contain definitions of permanent establishment, methods to eliminate double taxation, applicable dividend withholdings, etc., that affect your planning. A useful exercise is to do the math on how much you would pay in taxes by maintaining the LLC versus creating a local structure. Include in the analysis:

• Spanish Corporate Tax (25%) + IRPF on dividends vs. direct IRPF for the LLC in attribution (possibly up to 47%).

• Social Security costs (corporate sole proprietor ~€350/month vs normal sole proprietor ~€300/month vs not contributing and assuming risk).

• Withholding at source: E.g., dividends from a U.S. LLC to you in Spain would have 0% or 5% withholding depending on the structure (many opt for a disregarded LLC that does not withhold anything, but if it were a corp, there might be a 5% withholding by treaty).

• Foreign tax credit: E.g., if your LLC pays 21% corporate tax in the U.S., that 21% could be largely deducted from your Spanish IRPF, mitigating double taxation.

By confronting these numbers, simple optimizations are sometimes discovered. For example, choosing to be taxed as a corporation in the U.S. (via Form 2553 or 8832, converting your LLC into a fiscal S-Corp or C-Corp) may be worthwhile if you can thus obtain a creditable foreign tax. Although you pay some tax abroad, you reduce the tax base in Spain. Another idea: if your spouse does not work, it may be convenient to make them a second partner of the LLC or SL to distribute income and take advantage of their personal minimums (in joint or separate IRPF). These are always movements within the law, using the rules in your favor.

3. Regularize your obligations as soon as possible: If you have already been in Spain for a while without having correctly declared your LLC's income or without having filed Form 720, consider regularizing spontaneously before Hacienda requires it. Filing voluntary out-of-time declarations has moderate surcharges but avoids larger penalties. And if Hacienda sends you a request first (for example, it detects bank movements from the LLC to your account), there will be no reduction in penalties. Therefore, catching up on your own initiative is preferable. In addition, it shows good faith, which can work in your favor in eventual negotiations or inspections.

4. Maintain exhaustive documentation and separate personal vs. business spheres well: We already mentioned it, but it is crucial: keep clear accounting for your LLC, even if they do not ask for it in its country. Record income, expenses with invoices, payrolls if you pay yourself a salary, etc. Avoid mixing personal expenses with business ones; if you need money, withdraw it via an identifiable transfer (dividend, remuneration) instead of paying personal expenses directly from the LLC's account. Keep all documents for at least 5 years. If an inspection arrives, you can easily justify deductions and the origin of funds. For example, you could show the LLC's Operating Agreement, certificates of being up to date with the IRS, forms filed in the U.S. (5472, etc.), contracts with clients, etc. This will give the inspector confidence that you have acted with transparency. Many tax problems arise not from bad faith but from a lack of evidence; do not be part of that statistic.

5. Do not neglect long-term asset planning: If you plan to stay in Spain indefinitely, look beyond year to year. Aspects such as Wealth Tax (which in some regions taxes worldwide assets if you are not in Beckham), or future inheritances, may make it advisable to restructure assets. For example, it may be convenient for you to place your LLC shares under a holding company in another EU country with tax benefits, or use unit-linked life insurance for investments, etc. These are advanced topics but a good international tax advisor in Spain can suggest them to you to optimize not only income but also assets and their transmission.

6. Consult with experts and do not skimp on advice: International taxation is complex and changes frequently. What worked for a friend of a friend last year may not be safe today. For your peace of mind, surround yourself with competent professionals: an "International Tax Lawyer in Spain" or a firm specializing in expatriates. They are up to date on the latest legal developments and Hacienda criteria, and can even have direct communication with the Tax Agency to resolve interpretive doubts. The cost of a consultation is minuscule compared to the savings in taxes or penalties you can achieve. In addition, in the event of an inspection, having advice from minute one makes a difference in the outcome.

7. Adapt the structure as your situation evolves: Review your tax scheme from time to time. If you initially kept the LLC but in two years you doubled your income and hired two people in Spain, you should probably migrate to an SL now. Or vice versa: if your venture doesn't take off and the SL generates losses, you might go back to being a sole proprietor for a while. Tax planning is not static. For example, some impatriates use Beckham for 6 years and, when they finish, if they continue with their business, they can then incorporate the Spanish SL to pay 25% corporate tax from then on instead of jumping to the common IRPF. Each stage has its ideal optimization.

In short, optimizing without risk is possible by combining legal tools at your disposal: special regimes (Beckham), international treaties, choosing the correct legal form, and proactive compliance. Far from being "aggressive" practices, they are legitimate decisions that any professional would make. The difference is made by information and advice. Design your business life in Spain so that you pay what is fair, no more and no less, avoiding unpleasant surprises.

Summary for New Residents with a Foreign LLC

Being a tax resident in Spain with a foreign LLC entails responsibilities on both sides of the ocean. On the one hand, Spain will require you to pay taxes here on your LLC's profits (unless you apply the impatriate regime) and declare its existence and assets (Form 720). You will also have to comply with Social Security, normally by registering as self-employed or finding a legal way to contribute while working remotely. On the other hand, you have tools to optimize your situation: the Beckham Law can drastically reduce your tax burden during the first few years, and the option of incorporating a Spanish Limited Company (SL) gives you a local structure and lower fixed tax rates in some cases. Of course, any path you choose requires transparency and rigor in compliance: filing forms (100, 720, 200, etc.), keeping clean accounting, and not engaging in simulations.

The rules for a controlled foreign corporation (CFC), the determination of a company's effective residence, and the notion of a permanent establishment are mechanisms with which Hacienda ensures that it does not fail to tax income that is in fact generated under its jurisdiction. As a new resident, you must be aware of these concepts so as not to cross red lines unintentionally. If you act with foresight, it is possible to enjoy the advantages of an international LLC (flexibility, less foreign bureaucracy, etc.) and comply with Spanish regulations, avoiding penalties.

In summary, plan your tax landing in Spain comprehensively. It's not just about where to pay less in taxes, but about establishing a solid legal foundation for your business and your family in your new country. With the right strategy, you will be able to optimize taxes within the law, benefit from special regimes, and sleep soundly knowing that you are at peace with the tax authorities. And remember, when things get complicated, seeking the advice of a trusted International Tax Lawyer in Spain is the best investment: they will guide you through Spanish and international regulations so that you can focus on what you do best, which is growing your business, while they make sure that Hacienda "doesn't keep you up at night." Welcome to Spain and much success in this new personal and business stage!