US LLC Owned From Spain: Form 5472, Taxes and Filing

The US tax treaty with Spain and your LLC

Spain is on the IRS list of countries that have an income tax treaty with the United States (IRS treaty list). For an LLC owner, the treaty matters in two places.

Business profits and a permanent establishment

US treaties generally tax a treaty resident's business profits in the US only if they are attributable to a permanent establishment in the US, such as an office or a dependent agent. Taking that position on a US return is a treaty-based return position, disclosed on Form 8833; failing to disclose it carries a US$1,000 penalty (IRS Form 8833). Whether you qualify depends on the treaty's text, including any limitation on benefits article, so we read the actual treaty for your facts.

Treaty rates on Form W-8BEN

If a US payer pays you US-source income such as dividends, interest or royalties, the treaty claim on Form W-8BEN, naming Spain as your country of residence, is how you claim a lower withholding rate (IRS). Without a valid treaty claim, the general rate on that kind of income is 30% (IRS).

What we need from an owner in Spain

To prepare the filing for an owner in Spain, we ask for:

• Your passport and your home address in Spain
• Your tax ID: For a resident of Spain, this is usually your Spanish tax identification number; for Spanish nationals this is generally the number on the national identity card (DNI) (OECD tax ID sheet).
• The LLC's formation documents and EIN letter
• Bank and payment account statements for the year, so every transfer between you and the LLC can be listed, converted from euros where needed

The IRS wants all amounts in US dollars and the same tax ID used every year (IRS).

Treaty and law references for owners in Spain

Plain-language summaries; follow the links for the official text. Article numbers are from the treaty text on irs.gov.

Treaty

• The IRS lists the 1990 income tax treaty, signed February 22, 1990, amended by a protocol signed January 14, 2013. General effective date (IRS Table 3): treaty Jan. 1, 1991; protocol Nov. 27, 2019 (IRS treaty documents for Spain; treaty text; IRS Table 3).
• Article 4 (Residence), which decides who counts as a resident for treaty benefits.
• Article 5 (Permanent Establishment), which defines a US permanent establishment.
• Article 7 (Business Profits), under which business profits are taxed in the US only if attributable to a permanent establishment.
• Article 10 (Dividends), on dividends.
• Article 11 (Interest), on interest.
• Article 12 (Royalties), on royalties.
• Article 17 (Limitation on Benefits), which sets the tests a resident must meet to claim benefits.
• Article 24 (Relief from Double Taxation), on relief from double taxation.
• Treaty benefits for income earned through a fiscally transparent entity, such as a single-member LLC, are decided under section 894 and Treas. Reg. section 1.894-1(d) (IRS Pub 515, Form 8833).

US law

• Form 5472: Internal Revenue Code section 6038A and Treas. Reg. section 1.6038A-1; final regulations T.D. 9796 treat a foreign-owned US disregarded entity as a corporation for this purpose (IRS Form 5472 instructions).
• US trade or business and effectively connected income: Code sections 864 and 871 (IRS Pub 519).
• Treaty disclosure: Code section 6114, Treas. Reg. section 301.6114-1, and the section 6712 penalty (IRS Form 8833).
• BE-13: 15 CFR 801.7 (eCFR).

The tax law of Spain itself also applies to you; check it with a local adviser.