401(k) and IRA in Spain: How Withdrawals and Rollovers Are Taxed

A 401(k) and IRA in Spain keep their U.S. custodians and rules; what changes is the tax address. From the year you spend more than 183 days in Spain, the treaty gives Spain the right to tax every withdrawal, the United States keeps taxing you as a citizen, and only one of the two gives a credit. Take the money out the wrong way, or in the wrong year, and the same dollars are taxed twice, with a Roth account raising a question the Spanish rules do not answer on their face. This article is for informational purposes only and is not immigration, tax or medical advice; verify current requirements with the relevant Spanish authority or a licensed professional.

Which country taxes your 401(k) withdrawal once you live in Spain?

Spain, and only Spain, under the treaty. Article 20(1)(a) of the U.S.-Spain income tax convention states that pensions and other similar remuneration derived and beneficially owned by a resident of one country in consideration of past employment are taxable only in that country of residence. The United States taxes you anyway, because Article 1(3), the saving clause, lets it tax its citizens as if the treaty had not come into effect. The two claims are reconciled in Article 24, and the direction of the relief is the point most people get backwards: under Article 24(3), income the United States taxes by reason of citizenship is deemed to arise in Spain to the extent necessary to avoid double taxation, which is what lets you credit the Spanish tax against the U.S. tax on Form 1116. Under Article 24(1)(a), Spain deducts U.S. tax only where the treaty lets the United States tax the income for a reason other than citizenship. For a 401(k) or IRA there is no such reason, so Spain deducts nothing.

The Spanish tax authority reads it the same way. In binding ruling V0251-25 of March 5, 2025, the Dirección General de Tributos answered a retiree with a U.S. employer plan, on the assumption that he was a Spanish tax resident: the benefits are taxable only in Spain under Article 20(1)(a), the United States may tax them by citizenship under Article 1(3), the United States is the country that must then eliminate the double taxation under Article 24(2), and from Spain’s side there is no double taxation to correct. The ruling is published in the DGT’s Petete database of binding rulings, which is where a professional will pull it.

Why the order of the two returns matters

The practical sequence follows from the treaty. Spain taxes the withdrawal first and in full, on the following year’s Spanish return, with no Spanish withholding during the year because a foreign payer is not required to withhold. The United States taxes the same withdrawal on your Form 1040 for the same year and credits the Spanish tax. An American who files the U.S. return first, pays the IRS, and expects Spain to credit that payment is on the wrong side of the treaty, and Spain will assess its full tax with nothing to deduct.

Each move, seen from both tax offices

The same account produces different answers depending on what you do with it. Read across for the move you are considering.

How Spain computes the tax on a withdrawal

Spain treats the whole withdrawal as employment income, rendimientos del trabajo, under Article 17.1 of the personal income tax law, which the DGT’s ruling applies to amounts received from a private pension system linked to a job. The Agencia Tributaria’s 2025 manual uses the same classification for benefits from pension plans under Spanish law, whatever the form of payment: annuity, lump sum or a mix. The label is the ordinary one, not a special regime for foreign accounts. Employment income sits in the general taxable base, taxed on the progressive state and regional scales that apply to salaries, not in the savings base where dividends and capital gains go.

Two things a Spanish saver would get are unavailable to you. The ruling states that because a U.S. plan is neither a plan regulated by Spain’s pension plan law nor an EU employment pension fund under Directive 2016/2341, the tax treatment Spanish law reserves for those plans, including its transitional rules, does not apply, and the gross amount of the economic rights counts in full. Whether any part of a withdrawal that represents after-tax contributions can be excluded is not addressed in the ruling and belongs in a professional’s hands.

The filing threshold, and when the money is due

For the 2025 return, the Agencia Tributaria’s rules on who must file exempt employment income up to 22,000 euros a year in the general case, but only up to 15,876 euros when the payer is not required to withhold Spanish tax, and its page on pensions from another country confirms that a foreign payer which does not operate in Spain is not. A $25,000 IRA withdrawal on its own crosses the threshold once converted into euros, and the Spanish tax on it is paid entirely with the return, because nothing was withheld in Spain along the way.

The year of arrival counts in full

The Agencia Tributaria treats you as a Spanish tax resident for any calendar year in which you spend more than 183 days in Spain, and there is no split year. A withdrawal taken in February, before a move in May that turns into more than 183 days by December, is Spanish income for that year. The same clock is explained in the mistakes Americans make when moving to Spain, and it is the single most expensive date in this guide.

Rollovers: the one move the treaty protects

Paragraph 5 of Article 20, added by the 2013 Protocol, provides that where a resident of one country participates in a pension fund resident in the other, the income of the fund may be taxed as that person’s income only when, and to the extent that, it is paid to or for the benefit of that person, and not when it is transferred to another pension fund in that other country. The Protocol’s memorandum of understanding lists what counts as a U.S. pension fund: trusts under section 401(a) plans, including 401(k) plans, 403(a) and 403(b) plans, individual retirement accounts under section 408, Roth IRAs under 408A, SIMPLE accounts under 408(p), SEP trusts under 408(k), 457(b) plan trusts and the Thrift Savings Fund.

The DGT’s ruling turns that text into a rule with an edge. A transfer of the economic rights made directly, without the participant receiving any amount, to another U.S. pension fund such as an IRA is not taxed in Spain, as long as both funds fit the treaty definition. A transfer that is not direct, meaning you receive the money and put it back yourself, is a disposition of the rights and is taxed as a withdrawal, and so is a transfer to a fund outside the United States, including a Spanish plan. The ruling adds that Spain’s own rule allowing tax-free mobilization between Spanish pension systems does not extend to a U.S. plan.

The U.S. side rewards the same discipline. The IRS page on pension and annuity withholding states that a payer must withhold 20 percent of an eligible rollover distribution unless the payee elected a direct rollover to an eligible retirement plan, including an IRA, and that a payee who takes the distribution cannot elect no withholding. Topic 557 adds that a rollover or transfer to another IRA or qualified plan escapes the 10 percent additional tax as long as the one IRA-to-IRA rollover per year rule is respected. From Spain, direct means direct: the custodian sends the money to the new custodian, and nothing lands in your account in between.

The Roth question

The U.S. side of a Roth IRA is settled. The IRS’s required minimum distribution FAQs state that qualified distributions from a Roth are received tax-free and that withdrawals from Roth IRAs are not required during the owner’s lifetime, and its withholding page treats distributions from a Roth IRA as outside the withholding rules that apply to every other IRA. In the treaty, a Roth IRA under section 408A is a pension fund, so Article 20(5) keeps the growth inside it out of Spanish income while it stays there.

What the treaty does not contain is any exemption for what comes out. Article 20(1)(a) gives Spain the taxing right over the withdrawal, and the treaty says nothing about the fact that the contributions were already taxed in the United States. How Spain then characterizes a Roth withdrawal, as employment income in full, as employment income on part of it, or as savings income on the growth, is a matter of DGT doctrine, and ruling V0251-25 did not address Roth accounts. The gap between the general scale and the savings scale is wide enough to justify a written question. The route that produces an answer you can rely on is a consulta vinculante, a binding ruling you request from the DGT on your own facts before the first withdrawal, or a search of the DGT’s Petete database for a published ruling on the same facts. A conversion from a traditional IRA to a Roth is a related question the ruling did not cover either; its U.S. treatment is in Publication 590-A, and its Spanish treatment should be asked, not assumed.

The U.S. rules that keep running from Spain

Moving does not switch off the Internal Revenue Code, and four of its rules interact with the Spanish side.

Required minimum distributions

The IRS’s FAQs set the required minimum distribution age at 73 for traditional IRAs, SEP and SIMPLE IRAs and workplace plans, with the first distribution due for the year you reach 73 and an option to delay it to April 1 of the following year, after which the second is due by December 31 of that same year. Workplace plan participants who keep working can wait until the year they retire, unless they own more than 5 percent of the business. An IRA owner calculates the amount separately for each IRA but can withdraw the total from any of them, while a 401(k) must be drawn separately. The shortfall on a missed distribution carries a 25 percent excise tax, reduced to 10 percent if corrected within two years, reported on Form 5329, and the IRS can waive it for reasonable error. Spain taxes each distribution as employment income in the year it is paid, so a delayed first distribution stacks two years of withdrawals into one Spanish return.

Early withdrawals

Under Topic 557, a distribution from a traditional or Roth IRA before age 59 and a half carries a 10 percent additional tax on the taxable part, on top of income tax, unless an exception applies. The exceptions the IRS lists include total and permanent disability, terminal illness, substantially equal periodic payments over your life expectancy, qualified higher education expenses, up to $10,000 for a first home, and a corrective distribution of an excess contribution withdrawn by the filing due date. Spain has no equivalent additional tax in the rules the ruling applied, but it taxes the whole withdrawal as employment income regardless of your age.

Withholding you cannot switch off

The IRS’s withholding page states that a payee who is a U.S. citizen or resident alien cannot elect no withholding for any periodic or nonperiodic payment delivered outside the United States, that the default rate on a nonperiodic distribution is 10 percent, and that IRA distributions payable on demand are nonperiodic. From a Spanish address, the custodian withholds, Spain expects its own tax with the return, and the U.S. credit for the Spanish tax only arrives when the Form 1040 is filed. For a large withdrawal that is a year of both taxes paid before either refund, and it is the reason the timing of a withdrawal is planned around a cash reserve, not just around a rate.

Contributions while you work in Spain

The IRS caps IRA contributions for 2026 at $7,500, or $8,600 from age 50, or your taxable compensation for the year if that is lower, with no upper age limit since 2020. Publication 590-A then narrows what compensation means for someone abroad: it does not include any amounts you exclude from income, such as foreign earned income and housing costs. An American who excludes the whole Spanish salary under the foreign earned income exclusion has no compensation for IRA purposes; one who claims the foreign tax credit instead keeps it. Excess contributions are taxed at 6 percent a year for every year they stay in the account.

Four moves that look harmless from Spain

Each of these is a normal U.S. decision that turns into a Spanish tax event once the treaty applies.

• Cashing out in the arrival year. A retiree who liquidates a 401(k) in March and lands in Málaga in June, staying past the 183-day mark, has taken the whole distribution as a Spanish tax resident. The clean version of the same plan is the withdrawal in the previous calendar year, or a move that starts late enough to keep the arrival year under 183 days.
• Taking the check. A 401(k) administrator that mails you the balance to roll over yourself has created an indirect rollover: 20 percent U.S. withholding at source and, per the ruling, a Spanish withdrawal in full. The direct transfer is the only version the treaty protects.
• Consolidating into a Spanish plan. Moving a U.S. account into a plan de pensiones to keep everything in one country is taxed in Spain as a withdrawal, and the ruling closes the door on Spain’s tax-free mobilization rule for it. Keep the U.S. account where it is and manage it from Spain.
• Letting the IRS withholding stand in for the Spanish tax. The withholding is a U.S. prepayment, not a payment to Spain. The Spanish tax is due in full with the Spanish return, and the U.S. credit comes after, on the U.S. one.

Two reporting layers sit beside these. The FBAR and Form 8938 rules that cover accounts outside the United States are explained in the streamlined procedure guide, and whether a U.S. retirement account has to be declared on Spain’s Modelo 720 is a question this guide does not settle; the Agencia Tributaria’s Modelo 720 questions and answers are the place to check. The state layer is separate again: breaking state tax residency before you leave covers whether a former state still taxes your withdrawals.

Before the first withdrawal

Get two dates on one page: the day your 183-day count will pass in the arrival year, and the day of the withdrawal you are planning. If the withdrawal has to happen, ask the custodian for its direct transfer procedure in writing, and ask for the withholding it will apply to a Spanish address.

A single traditional IRA, taken in annual withdrawals after 59 and a half, with a Spanish return that reports the gross amount as employment income and a U.S. return that credits the Spanish tax on Form 1116, is a job many people do alone with good software on the U.S. side and a gestor on the Spanish one. Anything with a Roth, an indirect rollover already taken, after-tax contributions, a state that still claims you, or a withdrawal in the arrival year is a case for a cross-border professional, and for a Roth a binding ruling request is the professional’s first move. If Social Security is part of the same picture, how Spain treats U.S. Social Security follows a different treaty rule, and the two should be planned together.

The dates that drive this, the residency threshold, the Spanish filing window and the U.S. deadlines, are in the Spain Navigator, the app that puts every step of your move to Spain in order, alongside the visa and registration steps they collide with.