Spain wealth tax and a US annuity: why a SPIA won’t shrink your Patrimonio bill, but cuts income tax to 8% at 70+
Written by Hans Goldstein, licensed insurance agent · CA 4273294Short answer: in Spain a life annuity does not reduce the wealth tax (Impuesto sobre el Patrimonio). Under Ley 19/1991 art. 17, a policy you cannot surrender is counted at the insurer’s mathematical reserve, in the policyholder’s base, so the money stays taxable and shrinks only as payments are made. Where the annuity shines is income tax: Spain taxes only a fixed slice of each life annuity payment, set by your age when payments start, from 40% under 40 down to 8% at 70 and over (Ley 35/2006 art. 25.3.a.2º). The wealth tax allowance is €700,000 per person plus €300,000 for your main home, unless your region sets its own.
Free guide: Moving abroad on a fixed income
Income rules and taxes by country: Norway, Switzerland, Sweden, Italy, Spain, Malta and more, plus how a lifetime annuity fits.
I write a lot about countries where a US lifetime annuity takes money out of the wealth tax. Norway is the clean case. Spain is not one of them, and I would rather tell you that up front than have you buy an annuity for the wrong reason. What Spain does offer is one of the friendliest income tax treatments of a purchased life annuity in Europe. If you are moving to Spain and want dependable income that meets the visa test and is lightly taxed, the annuity still earns its place. It just is not a wealth tax play.
Spain’s wealth tax in 2026: who pays and how much
Spanish tax residents pay the Impuesto sobre el Patrimonio on their net wealth worldwide (Ley 19/1991 art. 5). The state rules:
| Item | State rule | Where in Ley 19/1991 |
|---|---|---|
| Allowance | €700,000 per person, unless your region sets another amount | Art. 28 |
| Main home | Exempt up to €300,000 | Art. 4.9 |
| Rates (state scale) | 0.2% rising to 3.5% on the top slice; regions can use their own scale | Art. 30 |
| Cap | Wealth tax plus income tax limited to 60% of the income tax base, but the wealth tax can be cut by at most 80% | Art. 31 |
| Filing | Required if tax is due, or if gross assets exceed €2,000,000 | Art. 37 |
Each spouse is assessed separately on what he or she owns, so a married couple with jointly owned assets gets two allowances. On top of the regional tax, a national solidarity tax on large fortunes (Ley 38/2022) has applied to net wealth above €3 million, with credit for regional wealth tax actually paid. Some regions, such as Madrid and Andalusia, have offered full relief from the regional wealth tax. These pieces change often, so check the current year with a Spanish adviser before you plan around them.
Why a SPIA stays in the Spanish wealth tax base
This is the key rule, and it is the opposite of Norway. Article 17.1 of the wealth tax law says life insurance counts at its surrender value. When the policyholder has no right to surrender, the policy counts at the value of the mathematical reserve (provisión matemática), and it goes in the policyholder’s tax base. Article 17.2 values other purchased annuities by capitalization, but sends annuities that come from life insurance back to article 17.1.
In plain English: a life-only single premium immediate annuity from a US insurer has no cash value, but Spain still counts it at roughly the present value of the payments still to come. In year one that is close to what you paid. Each year the reserve falls as payments are made, so the annuity’s weight in your wealth tax base declines gradually. That is a slow fade, not an exemption.
Why I write about this. My mom is Norwegian, my dad is American, and they’re planning the move from the US to Norway. My mom is the sponsor (the host, or “reference person” in UDI’s words), so Norway’s income test falls on her income, not my dad’s. UDI told us in writing that money in an account does not count as income, and only lifelong income does. Their savings were not the problem; the paperwork wanted a monthly number in the host’s name. The rules in Spain are different, but the problem is the same one many retirees hit: the income test, not the net worth. I’m writing this to help others in the same boat as my parents. Read how we worked through the Norway income requirement.
In the same boat? Let’s run your numbers
See roughly what a lifetime annuity would cost to close your income gap, then get my personal read by email. I can help while you still live in the US.
Estimates use the September 9, 2026 ImmediateAnnuities.com payout survey (life only) and a 15% cushion. Illustrative, not a quote.
The upside: Spain taxes only a small slice of each payment
For a life annuity bought with your own money, Spain does not tax the whole payment. It taxes a fixed percentage, set once by your age when the annuity starts paying, and that percentage never changes afterward (Ley 35/2006 del IRPF art. 25.3.a.2º). The taxable slice goes into the savings base, taxed from 19%.
| Age when payments start | Share of each payment taxed in Spain |
|---|---|
| Under 40 | 40% |
| 40 to 49 | 35% |
| 50 to 59 | 28% |
| 60 to 65 | 24% |
| 66 to 69 | 20% |
| 70 and over | 8% |
Worked example: an annuity paying €24,000 a year that starts at 62 puts 24%, €5,760, in the Spanish base. At 19% that is about €1,094 a year. Start the same annuity at 70 and only 8%, €1,920, is taxable, about €365 a year. Illustrative only, and your personal allowance (€5,550, plus €1,150 over 65, LIRPF arts. 56 and 57) can reduce it further if the annuity is most of your income.
Compare that with living off a portfolio in Spain: dividends, interest and gains are all taxed in the savings base at 19% to 30%, every year, and the portfolio is also in the wealth tax base. The annuity is in the wealth base too, but its income is taxed far more lightly.
The US side for a US citizen
As a US citizen you keep paying US tax on the annuity wherever you live. The US uses the exclusion ratio: the part of each payment that returns your premium is tax-free, and only the rest is taxable (26 U.S.C. 72). The US-Spain treaty and the foreign tax credit stop the same income from being fully taxed twice. Because Spain taxes such a small slice, the US tax on the taxable part is usually the one that binds. More in the exclusion ratio abroad.
One US rule to plan for: since January 1, 2026, a US citizen whose residence address is outside the US cannot opt out of federal withholding on annuity payments (Treas. Reg. 31.3405(e)-1). Withholding is a prepayment you settle on your Form 1040, not an extra tax.
Reporting: Modelo 720
To Spain a US annuity is a foreign asset. Spanish residents generally report foreign assets above €50,000 on Modelo 720, and the rules name life insurance and life annuities with foreign insurers, reported at surrender value or reserve (Real Decreto 1065/2007 art. 42 ter). Ask the insurer each year for a reserve figure so your adviser has a number to report, and keep the contract and payment records together.
So when does a SPIA make sense in Spain?
- You need the visa income. The non-lucrative visa asks for 400% of IPREM, €2,400 a month for one person in 2026, and the consulates accept life annuities. A lifetime payment shows the same number at every renewal. See how to prove annuity income for the NLV.
- You are 66 or older. The taxable slice drops to 20%, and to 8% at 70, which is hard to beat with any other income source.
- You want income that cannot run out. In a country you plan to stay in for decades, longevity protection matters more than the wealth tax line.
The trade-off, once: the annuity is irreversible, pays a level amount unless you buy an increasing payout, is paid in dollars while you spend euros, and does nothing for your Spanish wealth tax. If wealth tax is your main worry, look at where you settle in Spain, or at countries where an annuity does leave the base.
Buy it before you leave
A US annuity has to be bought while you are still a US resident, with a US address, in a state where your agent is licensed. Choose a life-only payout worded “for the lifetime of the annuitant” with no cash-out rider, so the consulate sees lifetime income. Start payments a few months before you apply so you have statements to show.
Frequently asked questions
Free annuity gap analysis for Spain. Tell me your ages, your Social Security or pension, and whether you are single or a couple. I will show how far your income is from the Spain requirement and what a lifetime annuity would cost to fill the gap, in the sponsor’s or main applicant’s name where that matters.
Related reading
- Moving abroad on a fixed income: hub
- Norway: the country where a US annuity leaves the wealth tax
- Spain non-lucrative visa 2026: income requirement
- Spain NLV: proving life annuity income
- Wealth tax by country and annuities
- Spain vs Portugal vs Italy for American retirees
- How Europe taxes a US annuity
Sources
- Ley 19/1991 del Impuesto sobre el Patrimonio (arts. 4, 5, 17, 28, 30, 31, 37)
- Ley 35/2006 del IRPF (art. 25.3.a, life annuities; arts. 56 and 57)
- Ley 38/2022 (solidarity tax on large fortunes, art. 3)
- Real Decreto 1065/2007 (art. 42 ter, Modelo 720)
- US-Spain income tax treaty (IRS text)
- 26 U.S.C. 72 (annuities, exclusion ratio)
- 26 CFR 31.3405(e)-1 (withholding for US citizens with a foreign address, from 2026)
Goldstein & Co. LLC dba Goldstein Insurance Services · Hans Goldstein, licensed insurance agent, CA lic. #4273294 · NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com
Education, not tax, legal or immigration advice. Rules, thresholds and exchange rates change; confirm with the consulate or immigration authority and a local tax adviser before you act, and get answers in writing. Hans Goldstein is a licensed insurance agent (CA 4273294) and can only offer annuities to residents of states where he is licensed. Annuity payments are guaranteed by the issuing insurer’s claims-paying ability, not by any government. Payout figures are illustrations from a published survey, not quotes. Immediate annuities are generally irrevocable.