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 moves is the right to tax them. From the first year in which you are a Spanish and treaty resident, usually past 183 days there, the treaty hands every withdrawal to Spain, the United States goes on taxing you as a citizen, and only one credits. A withdrawal made the wrong way, or in the wrong year, can be taxed by both countries, with U.S. relief capped at the credit limit, and a Roth follows different Spanish rules. 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 alone, as far as the treaty is concerned; the United States, as far as the United States is concerned. Article 20(1)(a) of the U.S.-Spain income tax convention makes pensions and other similar remuneration, derived and beneficially owned by a resident of one country in consideration of past employment, taxable only in that country of residence, subject to Article 21(2), which leaves a pension paid for U.S. government service to the United States unless you are both a resident and a national of Spain. The United States keeps its claim nonetheless, because the saving clause in Article 1(3) allows it to tax its citizens as if the treaty had not come into effect. Article 24 reconciles the two claims: 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, provided that the U.S. tax is never lower than it would be for a non-citizen, which is what allows the Spanish tax to be credited against the U.S. tax on Form 1116. Spain, under Article 24(1)(a), deducts U.S. tax only where the treaty allows the United States to tax the income on some ground other than citizenship; a 401(k) or IRA offers no such ground, so Spain deducts nothing.

The Spanish tax authority reaches the same reading. In binding ruling V0251-25 of March 5, 2025, the Dirección General de Tributos, answering a retiree with a U.S. employer plan and assuming that he was a Spanish tax resident, held that the benefits are taxable only in Spain under Article 20(1)(a), that the United States may tax them by citizenship under Article 1(3), and that the duty to eliminate the double taxation then falls on the United States under Article 24(2), which leaves Spain with nothing to correct. That plan was tied to a job: the ruling’s classification covers amounts received from private pension systems linked to employment. A personal IRA is a different question. In binding ruling V1133-17 of May 10, 2017, decided before the 2013 Protocol took effect and on thin facts, the DGT said that two IRAs the taxpayer had opened himself did not seem to derive from an earlier job, that the treaty does not mention this kind of income, and that Article 23 on other income therefore applied, leaving the tax to the country of residence alone. It did not say how Spain classifies the income, and ruling V1291-22 of June 7, 2022 dealt with the traditional IRA there as tied to U.S. government service (taxable only in the United States under Article 21(2)(a)) and with a Roth IRA under Article 23.

Why the order of the two returns matters

The sequence in practice follows from the treaty. Spain taxes the withdrawal first and in full, on the Spanish return for the following year, and nothing is withheld in Spain during the year because a foreign payer has no duty to withhold. The United States taxes the same withdrawal on your Form 1040 for the same year and credits the Spanish tax in the year it is paid, or in the year of the withdrawal if you elect to credit foreign taxes as they accrue, an election made on a timely filed original return that then binds all later years and all foreign taxes, which Publication 514 allows. Spain will assess its full tax with nothing to deduct.

Each move, seen from both tax offices

The table sets each move against both systems, one row at a time.

How Spain computes the tax on a withdrawal

Under the ordinary regime, Spain classifies the whole withdrawal from an employer plan 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 tied to a job. For a personal IRA the class is open: if it follows the Roth ruling below it would be movable capital income in the savings base, and if it follows the employer plan it would be employment income; no ruling decides, so the rest of this section describes the employer plan. The Agencia Tributaria’s 2025 manual places benefits from pension plans under Spanish law in the same category, whatever the form of payment, whether annuity, lump sum or a combination of the two. A newcomer who qualifies for and opts into the special regime for workers posted to Spain, article 93 of that law, is taxed as a non-resident on Spanish-source income, which generally excludes a U.S. pension, so this section changes; see the Beckham law guide. Employment income belongs to the general taxable base and, outside the Basque Country and Navarra, which apply their own foral rules, is taxed on the same progressive state and regional scales as a salary, not in the savings base that receives dividends and capital gains.

Two advantages a Spanish saver would receive are not available here. According to the ruling, a U.S. plan is neither a plan governed by Spain’s pension plan law nor an EU employment pension fund under Directive 2016/2341, so the tax treatment Spanish law reserves for those plans, transitional rules included, does not apply, and the gross amount of the economic rights is counted in full. The ruling is silent on whether the part of a withdrawal that represents after-tax contributions may be excluded; that question belongs with a professional, and I would not answer it from the ruling alone.

The filing threshold, and when the money is due

For the 2025 return, the Agencia Tributaria’s rules on who must file do not require a return for taxpayers whose income comes only from the listed sources when employment income, pensions included, stays within 22,000 euros a year in the general case, a ceiling that drops to 15,876 euros when the payer is not required to withhold Spanish tax; its page on pensions from another country confirms that a foreign payer which does not operate in Spain is under no such requirement. A $25,000 IRA withdrawal, once converted into euros, crosses the threshold by itself, and the Spanish tax on it is paid entirely with the return, since nothing was withheld in Spain on the way.

The year of arrival counts in full

The Agencia Tributaria regards you as a Spanish tax resident for any calendar year in which you spend more than 183 days in Spain, counting sporadic absences unless you prove tax residence elsewhere, or in which the center of your economic interests is in Spain, and it presumes residence where your spouse and minor children live; Spanish law knows no split year. If a withdrawal is taken in February and a move in May turns into more than 183 days by December, the withdrawal is Spanish income for that year. The same clock is explained in the mistakes Americans make when moving to Spain.

Rollovers: the one move the treaty protects

Paragraph 5 of Article 20, which the 2013 Protocol added and which entered into force on November 27, 2019, provides that where a resident of one country participates in a pension fund resident in the other, the fund’s income 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. Which U.S. arrangements count as a pension fund is described by the Protocol’s memorandum of understanding, in a list that is illustrative rather than closed: trusts under section 401(a) plans, including 401(k) plans, profit sharing and stock bonus 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 gives that text a sharper edge. A transfer of the economic rights made directly to another U.S. pension fund such as an IRA, with no amount passing through the participant’s hands, is not taxed in Spain, provided that both funds fall within the treaty definition. If the transfer is not direct, which is to say the money reaches you and you put it back yourself, the ruling treats it as a disposition of the rights and taxes it as a withdrawal; the same result follows for a transfer to a fund outside the United States, a Spanish plan included. Spain’s own rule permitting tax-free mobilization between Spanish pension systems, the ruling adds, does not reach a U.S. plan.

The U.S. rules reward the same discipline. Under the IRS page on pension and annuity withholding, a payer must withhold 20 percent of an eligible rollover distribution unless the payee elected a direct rollover to an eligible retirement plan, an IRA included, and 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, provided that the rule of one IRA-to-IRA rollover per year is respected.

The Roth question

On the U.S. side, a Roth IRA raises no doubt. The IRS’s required minimum distribution FAQs state that qualified distributions from a Roth are received tax-free and that Roth IRAs require no withdrawals during the owner’s lifetime, and its withholding page places Roth IRA distributions outside the withholding rules that govern every other IRA. The treaty counts a Roth IRA under section 408A as a pension fund, so Article 20(5) keeps the growth out of Spanish income for as long as it remains in the account.

What comes out is another matter, because the treaty contains no exemption for it. Outside Article 20, the treaty gives Spain the right to tax the withdrawal, and it takes no notice of the fact that the contributions were already taxed in the United States. The DGT has answered for a Roth IRA, in binding ruling V1291-22 of June 7, 2022: because it was not linked to employment, Article 23 of the treaty left the tax to Spain, the withdrawal was not employment income, and it was taxed as movable capital income, in the savings base, on the amount received less the contributions made. That reply rests on one taxpayer’s facts, and ruling V0251-25 did not deal with Roth accounts. An answer that can be relied on comes from a consulta vinculante, a binding ruling requested from the DGT on your own facts before the first withdrawal, or from a published ruling on the same facts in the DGT’s Petete database. A conversion from a traditional IRA to a Roth raises a related question the ruling left untouched; its U.S. treatment is set out in Publication 590-A, and its Spanish treatment is better asked than assumed.

The U.S. rules that keep running from Spain

Four U.S. rules keep running from Spain, and each meets a Spanish one.

Required minimum distributions

Under the IRS’s FAQs, the required minimum distribution age is 73 for traditional IRAs, SEP and SIMPLE IRAs and workplace plans, and 75 for anyone who reaches 74 after 2032, generally those born in 1960 or later; the first distribution is due for the year you reach the applicable age, with the option of delaying it to April 1 of the following year, in which case the second falls due by December 31 of that same year. A participant in a workplace plan who is still working may wait until the year of retirement, unless that participant owns more than 5 percent of the business. An IRA owner computes the amount separately for each IRA but may take the total from any one of them, which is not the same as a 401(k), where each plan has to be drawn separately. A missed distribution exposes the shortfall to a 25 percent excise tax, reduced to 10 percent if corrected within two years and reported on Form 5329, and the IRS can waive it for reasonable error. Because Spain taxes each distribution as employment income in the year it is paid, a delayed first distribution puts two years of withdrawals on one Spanish return.

Early withdrawals

Under Topic 557, a distribution from a traditional or Roth IRA taken 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. Among the exceptions the IRS lists are 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 the corrective distribution of an excess contribution withdrawn by the filing due date. The rules the ruling applied contain no Spanish counterpart to that additional tax.

Withholding you cannot switch off

According to the IRS’s withholding page, 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, the default rate on a nonperiodic distribution is 10 percent, and IRA distributions payable on demand count as nonperiodic. The opt-out that exists for other U.S. payees depends on the home address the payer holds for you, so with a Spanish address on file, the custodian withholds, Spain expects its own tax with the return, and the U.S. credit for the Spanish tax arrives only once the Form 1040 is filed. On a large withdrawal, both taxes are paid and neither comes back for a year.

Contributions while you work in Spain

The IRS caps IRA contributions for 2026 at $7,500, or $8,600 from age 50, or at your taxable compensation for the year if that is lower, and there has been no upper age limit since 2020. What compensation means for someone abroad is then narrowed by Publication 590-A, which leaves out 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 therefore has no compensation for IRA purposes, whereas one who claims the foreign tax credit instead keeps it. Excess contributions are taxed at 6 percent a year, for every year they remain in the account.

Four moves that look harmless from Spain

Each of the following is an ordinary U.S. decision that becomes a Spanish tax event once the treaty applies.

• Cashing out in the arrival year. If a retiree liquidates a 401(k) in March, lands in Málaga in June and stays past the 183-day mark, the whole distribution was taken as a Spanish tax resident. A withdrawal made in a calendar year in which you are not a Spanish tax resident under any Spanish test, which turns on more than the 183-day count, falls outside Spanish tax, though the U.S. tax still applies.
• Taking the check. When a 401(k) administrator mails the balance to you so that you can roll it over yourself, the result is an indirect rollover, with 20 percent U.S. withholding at source and, according to the ruling, a Spanish withdrawal in full.
• Consolidating into a Spanish plan. Moving a U.S. account into a plan de pensiones so that everything sits in one country is taxed in Spain as a withdrawal, and the ruling shuts out Spain’s tax-free mobilization rule for it. Tidiness, in this case, can be expensive, so a transfer into a Spanish plan is worth discussing with a licensed professional first.
• Letting the IRS withholding stand in for the Spanish tax. What the custodian withholds is a U.S. prepayment, which is not the same as a payment to Spain. Spain collects its tax in full with the Spanish return, and the U.S. credit follows later, on the U.S. return.

Two reporting layers sit alongside these moves. The FBAR and Form 8938 rules for accounts outside the United States are covered in U.S. taxes when you live in Spain. For Spain’s Modelo 720, the Dirección General de Tributos held in binding ruling V1291-22 of June 7, 2022 that a traditional IRA and a Roth IRA, since both allow withdrawals at any time, are reported whether or not a contingency has occurred. No ruling extends Modelo 720 to a 401(k), and the Agencia Tributaria’s general answer keeps pension rights off the form until a contingency the plan covers, unless the plan allows a surrender in the manner of life insurance. The state layer is separate again, and breaking state tax residency before you leave explains whether a former state still taxes your withdrawals.

Before the first withdrawal

Two dates belong on the same page: the day the 183-day count will be passed in the arrival year, and the day of the planned withdrawal. If the withdrawal cannot wait, the sensible request to the custodian is its direct transfer procedure in writing, together with the withholding it will apply to a Spanish address.

A single employer plan such as a 401(k), drawn down in annual withdrawals after 59 and a half, reported at its gross amount as employment income on the Spanish return and on a U.S. return that credits the Spanish tax on Form 1116, is the simplest case (a personal IRA is the same on the U.S. side, but its Spanish class is open), and even then both returns merit review by a licensed professional, a gestor for the Spanish one and a U.S. preparer for the other. Once the picture includes a Roth, an indirect rollover already taken, after-tax contributions, a state that still claims you or a withdrawal in the arrival year, it calls for a cross-border professional, whose first step for a Roth may be a binding ruling request on your own facts. If Social Security is part of the same plan, how Spain treats U.S. Social Security rests on a different treaty rule, and the two are better planned together. If these withdrawals are what you mean to live on, the guide to retiring in Spain sets the visa income test, the health insurance and the tax residence dates in order.

The dates behind all of this, from the residency threshold to the Spanish filing window and the U.S. deadlines, sit in the Spain Navigator, the app that puts every step of your move to Spain in order, next to the visa and registration steps they run into.