Business profits are governed by the principle that they can only be taxed in the country of residence of the entity, unless the activity generating the income is performed through a permanent establishment.
Capital gains that a resident in a contracting State obtains from real estate located in the other contracting State can be subject to tax in the other State; all other capital gains are taxed in the State of residence of the person who transfers the asset, with the exception of proceeds from the sale of ships, airplanes or vessels operating in international navigation, that can only pay taxes to the State where its headquarters are located.
WITHHOLDING TAXES
COUNTRY OF RESIDENCE DIVIDENDS % INTEREST % ROYALTIES %
Argentina 10(1) or 15 0(14) 3(27), 5(25),
or 12.5 10(24), 5(25)
Australia 15 10 10
Austria 15 or 10(2) 5 5
Belgium 15 15 5
Brazil 15 15 or 10(8) 15 or 10(17)
Bulgaria 15 or 5(1) - -
Canada 15 15 10
China 10 10 10
Czech Republic/Slovak 15 or 5(1) -(12) 5(17)
Denmark 15 or 10(3) 10 6
Ecuador 15 10 or 10 or 5(17)
5(13)(14)
Philippines 10(6), 15(28) 10(8) 10(19), 20(18)
15(17) 20(18) or 15
Finland 15 or 10(1) 10 5
France 15 or 10(1) 10(9) 6
Germany 15 or 10(1) 10(9) 5
Hungary 15 or 5(1) - -
India 15(28) -(20) or 15 10(8) or 20(21)
Ireland -(1) or 15 - 5(25), 8 or 10
Italy 15 12(9) 8 or 4(17)
Japan 15 or 10(4) 10 10
Korea 10(1),15(28) -(9) or 10 10
Luxembourg 15, or 5(7) 10(9) 10
Mexico 5(1) or 15 -(14), 10(22) 10(29)
or 15
Morocco 15 or 10(1) 10 10(18) or 5(17)
Netherlands 15, 10(5) 10 6
Norway 15 or 10(3) 10 5
Poland 15 or 5(1) -(12) 10(17)
Portugal 15 or 10(2) 15(15) 5
Romania 15 or 10(1) 10 10
Russia 18 - 5(20)
Sweden 15 or 10(2) 15 10
Switzerland 15 or 10(1) 10(10) 5
Tunisia 15 or 5(3) 10 6 5(11) 10
United Kingdom 15 or 10(6) 12(16) 10
United States 15 or 10(1) 10(14) 5, 8 or 10(19)
Notes:
(1) A lower rate applies if the payee company holds 25 per cent of
the capital of the payer company.
(2) 10 per cent if the payee company holds 50 per cent or more of the
capital of the payer company during a period of at least one year
before the date of the dividend distribution.
(3) The lower rate applies if the payee company (not persons) holds
50 per cent or more of the paying company.
Spain-Tunisia treaty: it does not have to be a limited partnership.
(4) 10 per cent if the Company that receives the dividends holds 25
per cent or more of the voting capital of the payer company during
six months immediately before the end of the fiscal year in which the
distribution of dividends takes place.
(5) 1) 10 per cent if:
A) The company that receives dividends holds 25 per cent or more of
the capital of the company that pays them;
B) The company that receives the dividends holds 25 per cent or more
of the capital of the company that pays them provided that at least
the other company resident in the Netherlands also possesses 25 per
cent or more of the capital of the payer company;
2) 5 per cent if the company that receives dividends is not
subject to taxation in the Netherlands in accordance with the tax on
Dutch companies in force for the same dividends.
(6) 10 per cent if the company that receives dividends holds at least
10 per cent of the capital of the company that pays them.
(7) 10 per cent if the company that receives the dividends holds 25
per cent or more of the capital of the company that pays the
dividends during a minimum of one year prior to the date of
distribution.
(8) 10 per cent on the interest or royalties (paid to a financial
institution in one of the states which ratified the Treaty) or loans
and credits conceded for a minimum period of 10 years with the object
of financing the acquisition of the equipment and tools.
Spain-Korea Treaty: No minimum period required for interests; rate is
also applicable to interest derived from bonds.
(9) Except where the debtor is the government, a local entity or an
autonomous body.
In Germany, when the interest comes from Spain and is paid to:
- Deutsche Bundesbank or
- Kreditanstalt F?r Wiederaufbau of the Federal Republic.
(10) Except for interest coming from Spain and paid to a bank
resident in Switzerland with respect to loans not totally or
partially repaid before 5 years.
(11) 5 per cent in the case of interest derived from loans whose
duration exceeds 7 years.
(12) Interest paid is not subject to withholding, unless a permanent
establishment exists and it is the property of a beneficiary in Spain
for which the debt yielding the interest was contracted and this
permanent establishment bears them.
(13) It may not exceed 5 per cent when the interest is paid in virtue
of credits in:
- The sale of industrial, commercial or scientific equipment.
- The sale of goods delivered by a company to another company.
- The financing of construction works, installation or mounting.
(14) Tax is not owed if interest is paid for a loan of more than 5
years granted to a bank or financial entity or if the beneficiary is
the state, its political subdivisions or local entities or government
agencies that competent authorities choose by common agreement.
Spain-Mexico Treaty: loans of three years granted.
(15) The amount that may be paid to a company, based on contract
rights, for indemnification for the cessation or reduction of work
(business interruption) is deemed in Portugal to be profits derived
from loans.
(16) The limitation of 12 per cent does not apply to credit interests
transferred in the securities market when the actual beneficiary of
the interest is not subject to taxation on such interest in the
contracting state of which it is resident, and it cedes or agrees to
cede the credit from which such interest accrues within the three
months from the date said actual beneficiary acquired it.
(17) Taxation in country of residence of the beneficiary when paid on
public debt or guaranteed by the national banks.
(18) Paid on films or video and audio tapes.
(19) Paid by a company registered with the Philippine Investment
Council.
(20) Paid to the government or on an operation approved by it.
(21) Paid on technical services.
(22) When the beneficiary is a bank or savings bank. Applicable rate
is 15 per cent until October 6, 1999.
(26) The lowest rate applies to royalties, or licenses for use, of
the rights over literary, artistic or
scientific property, if these are produced by a resident of a
contracting State.
Spain-Brazil Treaty: includes films.
Spain-Czech/Slovak Treaty and Spain-Poland Treaty: Exemptions for
royalties over rights to intellectual property in the country of
origin.
(24) Royalties for the concession of licenses for the exploitation of
patents, designs, plans, formulas or secret processes.
(25) 5 per cent royalties for use, or copyright of literary works,
plays, musical and artistic works.
Spain-Argentina Treaty: Applicable rate is 5 per cent.
8 per cent royalties for the use or right to use films, tapes and
other means of transmission or reproduction of image or sound,
industrial, commercial or scientific equipment, and scientific works.
10 per cent in all other cases. 15 per cent in the Spain-Argentina
Treaty.
(26) Royalties paid on copyrights on dramatic literary creations,
musical or artistic creations (excluding those related to films or
whatever other means of reproduction of image and sound for its
utilisation on radio or television) can only be subject to tax in the
state of end use; 5 per cent in all other cases.
(27) Use or copyright of news.
(28) Excluding transparent companies.
(29) Taxation in country of residence of the beneficiary for use, or
copyright on literary works, plays, musical and artistic works.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Florentino Carreno on +341 524 7100
For more information on Taxation in Spain enter a text search 'Cuatreacsas Abogados' and 'Business Monitor'.
