Spain Tax Treaties with other countries

Spain has signed Double Taxation Agreements (DTA) with over 93 countries.
Spain follows the OECD Model Tax Convention.
The application of the provisions of a tax treaty is voluntary.
Hence, if the tax treaty provides for higher rates, then the nonresident can opt for applying the rate provided in the Spanish legislation.
The exemption and credit method are both provided for in the Spanish CIT Law.
The credit method is the default method for avoiding double taxation.
If the conditions to apply the exemption are not met, then the credit method applies to the foreign income obtained.

Spain Tax Treaties with Taiwan
Spain Tax Treaties with China

Email: bcn4ww@evershinecpa.com
The Engaging Manager from Headquarter
Ms. Anna Wang, Speak German English, and Chinese.
skype: burlinna

We set up below judgment criteria on Treaty application:

Scenario:

If you are not a Spain legal resident, and if your resident country has DTA with Spain, and if you are without PE (Permanent Establishment), please go to section Ａ.
If you are not a Spain legal resident, and if your resident country has DTA with Spain, and if you are with PE (Permanent Establishment) please go to section Ｂ.
If you are not a Spain legal resident, and if your resident country has not DTA with Spain, please go to Section Ｃ.

Section A:

If you are not a Spain legal resident, and if your resident country has DTA with Spain, and if you are without PE (Permanent Establishment), it will be deemed as “non-Spain Domestic Sourced Income”.
That means Spain will levy zero-tax.
However, your still need to send zero-tax application to Spain Tax Bureau for being approved.

Below, we will let you understand through Q&A.

DTA-Q-10:       

In Spain, which foreign legal resident company can apply for zero tax rate without PE under DTA?

DTA-A-10:
Spain has signed DTAs with the following 93 countries:

DTA-Q-20:       

Why does the Country’s foreign capital without a permanent establishment (PE) in Spain, under the DTA enjoy zero tax rate?

DTA-A-20:

It follows Article 5 and Articles 7 in the DTA Treaty. Articles define if foreign entity having PE in Spain. Article 7 regulate if no PE, non-Spain domestic sourced income will not be levied tax in Spain.

DTA-Q-30:       

Under what circumstances are deemed to have no PE, and will the establishment of a foreign-funded subsidiary in Spain be regarded as a foreign-funded subsidiary in Spain?

DTA-A-30:

According to DTA Article 5 item 7, A Wholly Foreign Owned subsidiary in Spain will not be treated as PE because it is a separate legal entity.

That means if a Spain Subsidiary pay service fee to non- Spain Parent Company through service contract signed between subsidiary and non – the Spain Parent company
as an investor, non- Spain 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.
Please see Spain Transfer Pricing webpage.

DTA-Q-40:

If foreign company establishes a branch or office in Spain, can the zero-tax rate without PE be applied?

DTA-A-40:

According DTA Article 5 item 2, If foreign company set up a branch or Office in Spain, then will be considered as Spain domestic Income.

But According DTA Article 5 item 4，if an Office is only doing preparatory or auxiliary activity, will apply zero-tax rate.

DTA-Q-50:       

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

DTA-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.

Section Ｂ:

Scenario:

If you are not a Spain legal resident, and if your resident country has DTA with Spain, and if you are with PE (Permanent Establishment), 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.

Below, we will let you understand through Q&A

DTA-Q-60:       

What are the factors that deemed to be the country’s domestic source income?

DTA-A-60:

Spanish-sourced income includes:

• Income from all types of business activities carried out in Spain, regardless of whether they are performed through a PE.
• Employment income, pensions, and similar remunerations derived from employment performed in Spain or paid by a Spanish resident entity or a PE and remuneration of board members of Spanish entities.
• Capital source income such as dividends, interest, royalties, and other income derived from granting the right to use moveable property, when the income is paid by a resident of Spain or when the assets or the capital are used in Spain.
• Income derived directly or indirectly from real estate property situated in Spain or from rights granted with respect to such real estate; and
• Capital gains from the disposal of securities issued by Spanish residents and moveable property situated in Spain or from rights that are to be executed or exercised in Spain; capital gains arising directly or indirectly from real estate property located in Spain or rights with respect to such property and transfer of participations in an entity, regardless of whether they are resident in Spain, whose assets consists mainly in real estate located in Spain.

DTA-Q-70:

Does Article 5 and Article 7 in the DTA take precedence over the Spain determination factors on Spain domestic sourced income?

DTA-A-70:

When DTA is applied, in the event of a different PE definition between Spain domestic tax laws and Article 5 in the DTA, the definition under the DTA shall prevail the domestic regulations.

When DTA is applied, if foreign company being defined as without PE (Permanent Establishment) in Spain, then will be considered non-Spain domestic sourced income, in the event business profit is relevant to this issue, the clause in Article 7 in the DTA zero-rate tax can be applied accordingly.

In this scenario, please see section A.

DTA-Q-80:
When non-tax residents of Spain having Spain domestic sourced income, what is the withholding tax rate according to Spain tax regulations excluding DTA?

DTA-A-80:

The withholding tax rates under domestic law are:

Business Profits – 24%

Dividend – 19% (Note 1)

Interest (General loan) – 19% (Note 2)

Royalties fee – 24% (Note 3)

Technical services – 24%

Professional services – 24%

Note:

1. 0% applies under the domestic law provisions implementing the EU Parent-Subsidiary Directive and extending it to parent companies’ resident in EEA countries, dividends paid by a Spanish company to a parent company resident in another EU Member State.
2. 0% applies for interest paid to a resident of another EU Member State or an EU permanent establishment (PE) of an EU company.
3. 19% applies for royalties paid to residents of EU Member States or EEA countries.

DTA-Q-90:       

If DTA Tax Rate is higher than Spain tax rate, apply which tax rate?

DTA-A-90

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.

DTA-Q-A0:      

When non-tax residents of Spain having Spain domestic sourced income, what is Spain’s application procedure based on the DTA preferential tax rate?

DTA-A-A0:

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.

Section Ｃ:

DTA-Q-B0:

As an investor, if your country has not signed DTA with Spain, what kinds of tax rates when you have Spain relevant income?

DTA-A-Q0:

The withholding tax rates under domestic law are:
Business Profits – 24%
Dividend – 19% (Note 1)
Interest (General loan) – 19% (Note 2)
Royalties fee – 24% (Note 3)
Technical services – 24%
Professional services – 24%

Note:

1. 0% applies under the domestic law provisions implementing the EU Parent-Subsidiary Directive and extending it to parent companies’ resident in EEA countries, dividends paid by a Spanish company to a parent company resident in another EU Member State.
2. 0% applies for interest paid to a resident of another EU Member State or an EU permanent establishment (PE) of an EU company.
3. 19% applies for royalties paid to residents of EU Member States or EEA countries.

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
For how to exchange data files between your Finance Accounting System and Evershine Cloud Accounting Information System, please send an email to HQ4fra@evershinecpa.com
Dale Chen, Principal Partner/CPA in Taiwan+China+UK will be accountable for your case.
LinkedIn address:Dale Chen

Additional Information

Evershine CPAs Firm Headquarters
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Tel No.: +886-2-27170515 ext. 105
Mobile: +886-939357000
Email: kerrychen@evershinecpa.com
Skype: oklahomekerry

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