What do I file in Spain as a US citizen living there?
Expect a Spanish resident income return and, if you hold property there, the local filings that property creates. Alongside them the return in the other country continues, because that obligation does not end when you move. The two returns report the same income and one relieves the other tax; they are not alternatives. Spanish residence also brings reporting about assets held outside the country, which is information rather than tax and is missed more often than the return itself. The work starts with a list of every filing your circumstances create, before any figures are prepared.
Do I have to report my Spanish bank accounts to the US?
Reporting about accounts and assets held outside the country sits separately from the income return, and it is triggered by holding them rather than by earning anything on them. So an account that produced almost nothing can still be reportable, and moving money between two of your own accounts does not reduce what has to be disclosed. Treat the disclosure inventory as its own exercise, built from a list of every account, plan and holding you can sign on. It is the part of this corridor that most often has to be brought up to date later.
Does Spain want to know about my assets in America?
Spanish residence brings its own reporting about assets held abroad, distinct from the income return and owed whether or not tax is due on them. People arriving from the United States commonly have accounts, an employer plan and perhaps a property, and each has to be tested against the reporting rules rather than assumed to be covered by the income return. The practical approach is one schedule of everything held on each side of the corridor, then a decision on each item about which return or declaration reaches it.
Which return should I prepare first if I file in both?
Prepare the one the treaty gives the first claim to, because the second return relief claim depends on its figures. That is usually the country of source for the income in question, and it can differ item by item within the same year, so the sequence is decided by income type rather than by which return happens to be due earlier. Where a deadline forces the second return out first, file it on a stated basis and correct it when the other assessment arrives. What you cannot do is estimate the relief and leave it there.
Is my US social security pension declared in Spain?
Payments of that kind are dealt with by a specific treaty article, and the article decides which country taxes them rather than removing them from view. Declaring the income where it is required and claiming relief in the other return is normally how it resolves. What matters for the filing is that the same payment is described consistently in both returns, because the characterisation drives which country holds the first claim, and an inconsistent description leaves each authority looking at a different item. Settle the characterisation once and use it in both.
Do I file in both countries in the year I move to Spain?
Yes, and the move year is the heaviest one. Spain assesses you for the part of the year its residence rules reach, so its return covers a period. The return in the other country covers the whole year regardless. Items that straddle the move have to be allocated once and then reported the same way in both filings. Any reporting about assets held abroad also begins in that year, on each side, and it is far easier to build the inventory while the paperwork from the move is still to hand.
Branch or subsidiary — which should we use to expand?
A branch keeps one taxpayer: results consolidate at home, losses are usable sooner, and the exposure is that the branch is a permanent establishment whose profit the host country taxes, sometimes with a branch tax on repatriation. A subsidiary is a separate taxpayer with limited liability and local rates, at the cost of withholding on dividends home and transfer pricing on everything between them. The deciding facts are usually expected losses, liability and exit plans. See branch against subsidiary.
Is double taxation illegal?
It is legal. Two countries can each have a valid claim on the same income — one because the income arose there, the other because you live there — and nothing prohibits both from exercising it. What exists instead is relief: tax treaties allocate the claim, and domestic law gives a credit for foreign tax paid. The relief is not automatic, though. It is claimed on a return, and unclaimed relief is simply lost. See how double taxation is relieved.
