New double taxation agreement Spain-UK
Entering into force June 2014, it will replace the existing tax treaty which was signed on 21 October 1975.
Be aware that, in some cases, Spanish national rules might be more benefitial.
Some aspects of it:
Dividends, interest and royalty payments
No withholding tax will be accrued on interest and royalty payments and to dividend distributions from qualifying participations (representing a minimum 10% participation in the company) made by Spanish or UK companies to residents in the other State, provided that the recipient of the income is the beneficial owner.
Dividends from non-qualifying participations may benefit from a reduced 10% withholding tax.
New rules on avoidance of double taxation on dividends received by Spanish residents from UK entities
Dividends received by a Spanish entity from a UK subsidiary that does not meet the requirements for the Spanish participation exemption will no longer be exempt and will only entitle the recipient to a foreign tax credit equal to the lower of the tax effectively paid abroad or the Spanish tax on such income.
Capital gains tax on shares of real estate companies
Article 13 of the new Treaty enables Spain to impose tax on capital gains deriving from the transfer of shares (or comparable interest) of an entity when more than 50% of its value derives, directly or indirectly, from real estate properties located in Spain.
This capital gains tax does not apply if the shares are substantial and regularly traded on a stock exchange, even if other than a Spanish or UK stock exchange.
Gains from the alienation of shares, or other rights, which directly or indirectly entitle the owner of such shares or rights to the enjoyment of immovable property situated in a Contracting State, may be also taxed in that State.
Trusts and partnerships
Article 4 aims at providing treaty eligibility to income and gains obtained by these entities unless it results in the income not being taxed in either of the Contracting States.
Anti abuse clause
Article 23 :treaty benefits will not be applicable to transactions where the main intention of the parties is to benefit from the same.
Exchange of info
Article 26: exchange of information provision as per the OECD Model.
The Treaty also seems to include certain specific rules for recognizing the new SOCIMI (Spanish REIT) tax regime, potentially providing attractive planning opportunities in connection with current and future real estate investments in Spain
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