How to pay a US company legally from Spain

Spain has a 1990 tax treaty with the United States, but it is one of the less generous treaties in Western Europe: the standard withholding rate on service fees is 10%, and the treaty does not eliminate it as cleanly as the UK or German equivalents. The Banco de España and CNMV govern the payment framework; SEPA handles the EUR leg, and BBVA, Santander, or CaixaBank are the dominant banks for international transfers.

The regulatory framework

Outbound payments from Spain are primarily governed by the Banco de España, which acts as the national central bank and oversees the stability and functioning of payment systems. While the Comisión Nacional del Mercado de Valores (CNMV) supervises Spanish securities markets and investor protection, its direct involvement in routine service payments to foreign entities is less pronounced. The Single Euro Payments Area (SEPA) facilitates euro-denominated transfers within Europe, but payments to the United States typically fall outside SEPA and are executed via international wire transfers, commonly known as SWIFT transfers.

Spanish residents, both individuals and legal entities, are obligated to declare certain economic transactions and financial asset/liability balances with non-residents to the Banco de España. This is primarily done through the Formulario ETE (Encuesta de Transacciones Exteriores). The reporting thresholds for the Formulario ETE vary, but generally, transactions exceeding €1 million require regular reporting (monthly, quarterly, or annually depending on the total volume of transactions). Even if individual transactions are below this threshold, the cumulative balance of assets and liabilities with non-residents can trigger reporting obligations.

Withholding tax

The Convention between the United States of America and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, signed in 1990, dictates the tax treatment of cross-border income. For services like company formation, advisory, or business setup, the critical articles are Article 7i (Business Profits) and Article 15i (Independent Personal Services).

Under Article 7i (Business Profits), the profits of an enterprise of one Contracting State (e.g., a US company) are taxable only in that State unless the enterprise carries on business in the other Contracting State (Spain) through a permanent establishment situated therein. If a US company does not have a permanent establishment in Spain, its business profits derived from services rendered to a Spanish entity are generally not subject to withholding tax in Spain.

Similarly, Article 15i (Independent Personal Services) states that income derived by an individual resident of one Contracting State (e.g., a US individual providing services) in respect of professional services or other activities of an independent character shall be taxable only in that State, unless the individual has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. In such a case, the income may be taxed in the other State, but only so much of it as is attributable to that fixed base.

It is crucial to distinguish general business services from royalties, which are covered under Article 12i. Royalties, defined as payments for the use of intellectual property, scientific work, or industrial/commercial/scientific equipment, may be subject to withholding tax in Spain at rates of 5%, 8%, or 10%, depending on the specific type of royalty. Technical assistance related to such rights or property can also fall under this article. However, typical company formation or general business advisory services do not usually constitute royalties and therefore should not be subject to these withholding rates.

For a Spanish entity making payments to a US company, it is generally the responsibility of the Spanish payer to determine if withholding tax applies and to remit it to the Spanish tax authorities (Agencia Tributaria). The US company would typically provide a Form W-8BEN-E (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting) to claim treaty benefits and confirm it does not have a permanent establishment in Spain, thus exempting its business profits from Spanish withholding tax.

What founders get wrong

Many founders incorrectly assume a blanket 10% withholding tax applies to all service payments made from Spain to US companies. This misconception stems from a misunderstanding of the US-Spain tax treaty, which differentiates between business profits and royalties. As outlined, general business services are typically exempt from Spanish withholding tax unless the US provider has a permanent establishment in Spain. Payments for royalties, however, do attract withholding tax at varying rates.

Another common oversight involves the reporting obligations to the Banco de España. Entrepreneurs often focus solely on tax implications and neglect the administrative requirement to declare international transactions and balances via the Formulario ETE. Failing to report these transactions, especially for cumulative amounts exceeding the thresholds, can lead to penalties, even if no tax was due.

The practical path

1. Verify US Company Status: Request a completed Form W-8BEN-E from the US company. This document certifies their tax residency and confirms whether they have a permanent establishment in Spain, which is crucial for determining Spanish withholding tax obligations. For US individuals, a Form W-8BEN would be required.
2. Choose a Payment Method: For international transfers, Spanish banks like BBVA, Santander, and CaixaBank offer SWIFT transfers. These are reliable but can incur higher fees and less favorable exchange rates compared to specialized fintech platforms. Alternatively, services like Wise (formerly TransferWise) or Revolut provide competitive exchange rates and lower transaction costs for cross-border payments.
3. Ensure Proper Invoicing: The US company should issue an invoice that clearly describes the services rendered. This documentation is essential for the Spanish payer to justify the payment and demonstrate compliance with tax regulations, particularly if an audit occurs.
4. Consider Formulario ETE Reporting: If the cumulative value of transactions or financial balances with non-residents exceeds €1 million, ensure that the necessary declarations are made to the Banco de España via the Formulario ETE. This is a reporting obligation, not a tax payment.
5. Maintain Records: Keep meticulous records of all invoices, payment confirmations, and tax documentation (like the W-8BEN-E) for at least five years, as required by Spanish tax law.

Edge cases

For Spanish residents operating as autónomos (self-employed individuals), the process of paying a US company follows the same principles as for a Spanish company, but with personal liability considerations. The autónomo must still ensure the US company's tax status is verified and adhere to any applicable withholding tax rules and Banco de España reporting requirements.

Payments involving large amounts (e.g., exceeding €1 million annually) will almost certainly trigger the Formulario ETE reporting obligations to the Banco de España. This requires careful monitoring of cumulative transaction volumes and balances to ensure timely and accurate submission of the required declarations.

If the Spanish entrepreneur or company maintains existing foreign accounts (e.g., a USD account in another jurisdiction), they might choose to make payments from these accounts. While this might simplify the currency conversion aspect, the underlying Spanish tax and reporting obligations (such as Formulario ETE) for the Spanish resident remain unchanged.

When you don't need us

If your Spanish entity is making a straightforward payment for general business services to a US company that does not have a permanent establishment in Spain, and the cumulative annual value of your international transactions and balances remains below the Banco de España's Formulario ETE reporting thresholds, the process is relatively simple. You verify the US company's W-8BEN-E, make the payment via your chosen bank or fintech, and retain proper records. In such cases, the primary complexities of international tax and reporting are largely mitigated by the treaty and low transaction volume.

What we do

Keystone Bridge Global ensures that all invoices for our services to Spanish entrepreneurs are structured to comply with both US and Spanish tax regulations, facilitating a smooth payment process. We provide the necessary documentation, such as our W-9, to confirm our US tax residency and absence of a permanent establishment in Spain, thereby simplifying your withholding tax assessment. Our expertise in cross-border financial operations helps Spanish clients navigate these complexities efficiently.

For the broader picture on this topic, see our guide on how to pay a US company from your country.

See also

• Best Payment Processors for Non-Residents — Full Comparison For more context, see LLC vs C-Corp for Spain founders.