Spain Tax Treaties with China

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The Engaging Manager from Headquarter
Ms. Anna Wang, Speak German English, and Chinese.
skype: burlinna

CN-Q-10:

China Parent Company, can apply for zero tax rate without PE under DTA in Spain?

CN-A-10:

Yes.
China has DTA with Spain, and if China Legal Resident company is without PE (Permanent Establishment), it will be deemed as “non-Spain Domestic Sourced Income”.
That means Spain will levy zero-tax.
However, China Legal Resident company still need to send zero-tax application to Spain Tax Bureau for being approved.

CN-Q-20:

When China Parent Company as an Investor, setup a Spain subsidiary, and provide services from China to Spain Subsidiary, can apply for zero tax rate without PE under DTA in Spain?

CN-A-20:

According to DTA Article 5 item 7, a Spain subsidiary will not be treated as PE of China Parent company as an investor because it is a separate legal entity.

That means if a Spain Subsidiary pay service fee to China Parent Company through service contract signed between subsidiary and China Parent company
as an investor, China Parent Company can apply zero tax.
As for if paid amount being reasonable, it will get involved TP (Transfer Pricing) judgement by Spain Tax Bureau.

CN-Q-30:         

What is the procedure for Spain to apply for zero tax rate under DTA without PE?

CN-A-30:

The following documents may be attached:

1. Certificate issued by the foreign collective management entity that contains the list of recipients, indicating that they are residents, within the meaning of the Agreement, of the same country in which the foreign entity is a resident, the full amount of the rights corresponding to each of them and the sum of those amounts.
2. Justified with a Certificate of residence issued by the tax authorities of the country of residence, must contain the certified translation into Spanish and authentication of the Ecuadorian consul. or apostille. This certificate will be valid for one year from the date of issue.

When the withholding is not carried out due to the application of the exemptions of a Convention or is carried out within the limits of taxation fixed therein, it shall be justified with a certificate of residence.

Model 211: Withholdings on the acquisition of real estate from non-residents without a permanent establishment,

Model 216: General model of withholdings regarding income subject to Non-Resident Income Tax obtained without a permanent establishment.

Model 296: Comprehensive informative statement of the list of recipients of the income subject to the Tax paid by the withholding agent, including exempt income by virtue of the application of the Spanish internal regulations, of an agreement or because the tax has been paid.

CN-Q-40:         

When China Resident company having Spain domestic sourced income, what are the withholding tax rates for various incomes in Spain?

CN-A-40:

China has DTA with Spain, and if you are with PE (Permanent Establishment) in Spain, your income will be considered as Spain domestic sourced income.
As for levying Tax Rate, please be aware:
if Spain Tax rate > DTA Rate, adopt DTA Rate; if Spain Tax rate < DTA Rate, adopt Spain Rate.

If DTA applied, the DTA rates between China and Spain are as below:

*The withholding tax rate under domestic law may apply rather than the treaty rate where the domestic law rate is lower than the treaty rate.

CN-Q-50

When China Tax Resident having Spain domestic sourced income, what is Spain’s application procedure based on the DTA preferential tax rate?

CN-A-50:

The following documents may be attached:

1. Certificate issued by the foreign collective management entity that contains the list of recipients, indicating that they are residents, within the meaning of the Agreement, of the same country in which the foreign entity is a resident, the full amount of the rights corresponding to each of them and the sum of those amounts.
2. Justified with a Certificate of residence issued by the tax authorities of the country of residence, must contain the certified translation into Spanish and authentication of the Ecuadorian consul. or apostille. This certificate will be valid for one year from the date of issue.

When the withholding is not carried out due to the application of the exemptions of a Convention or is carried out within the limits of taxation fixed therein, it shall be justified with a certificate of residence.

Model 211: Withholdings on the acquisition of real estate from non-residents without a permanent establishment,

Model 216: General model of withholdings regarding income subject to Non-Resident Income Tax obtained without a permanent establishment.

Model 296: Comprehensive informative statement of the list of recipients of the income subject to the Tax paid by the withholding agent, including exempt income by virtue of the application of the Spanish internal regulations, of an agreement or because the tax has been paid.

Summary of TAX TREATY between Spain and CHINA

The Government of The People’s Republic of China and The Government of the Kingdom of The Spain concluded and signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (Double Taxation Agreements, DTA), on 31 May 2013 and takes effects from 1 January 2015.

Permanent Establishment

Article 5 states the term permanent establishment (PE) means a fixed place of business which generally includes the followings:

*A place of management

*A branch

*An office

*A factory

*A workshop

*A building site, a construction, assembly or installation project, or supervisory activities last more than 6 months.

*The furnishing of consultancy services through employees or other personnel for periods aggregating more than 183 days within any twelve-month period.

Withholding Tax

*Article 7 of DTA between Spain and China explained, Spain may not tax payments on general business services rendered by China corporation unless it is attributable to the permanent establishment situated in the relevant territory.

*In Article 10, 5% charged on the dividends if the beneficial owner is a company which holds directly at least 25% of the capital of the company paying the dividends.

*Article 11 states that interest arising in Spain may be taxed in Spain according to the laws applicable in Spain, the tax so charged shall not exceed 10% of the gross amount of the interest.

*Article 12 explained royalties means payment for (a) the use of, or the right to use, any copyright of literary, artistic, or scientific work including cinematograph films and films and recordings for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula, or process; or (b) information concerning industrial, commercial, or scientific experience.

*Technical services are covered by the business profits in Article 7. Spain corporations may not tax payments for technical services rendered by a China enterprise unless it is attributable to PE. Technical services rendered in an independent capacity should be covered in Article 14 (see professional services) instead.

*A professional service or other activities provided by individuals of an independent character was explained in Article 14. Spain corporations may not tax payments for professional service rendered by a China resident unless the China resident has a fixed place or stay in Spain for 183 days or more.
An independent activity includes physicians, lawyers, engineers, architects, dentists, and accountants.

Elimination of Double Taxation

Article 23 of the DTA states that double taxation shall be eliminated by allowing tax credit to be made available to the home resident territory. It shall be credited against the tax levied in the first-mentioned territory on that resident. However, the amount of credit shall not exceed the amount of the tax in the first-mentioned territory.

Exchange of Information

Article 28 states that the competent authorities of the territories shall exchange such information (including documents or certified copies of the documents) relevant to the provision of this Agreement.

Please be aware of below Warning:

The above contents are digested by Evershine R&D and Education Center in December 2022.
Regulations might be changed as time goes forward and different scenarios will adopt different options.
Before choosing options, please contact us or consult with your trusted professionals in this area.

Contact Us

Barcelona Evershine BPO Service Limited Corp.
Email: bcn4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak German, English and Chinese.
skype: burlinna

or
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LinkedIn address: Dale Chen

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