SPAIN Law and Practice Contributed by: Cristina Alba and José María Rodríguez Hernández, act legal
credited in Spain, subject to the statutory limits and the applicable treaty. Spanish corporate taxpayers are taxed on worldwide income under the CIT, so dividends, interest and royalties are generally included in the taxable base (accounting profit, subject to tax adjustments). How - ever, qualifying dividends (and certain capital gains on shareholdings) may benefit from the participation exemption regime, subject to the conditions set out in the CIT legislation. Alternatively, double tax relief may also be available. Interest and royalties are usu - ally taxed according to the conventional CIT rules, although domestic and foreign withholding taxes are normally creditable against the final CIT liability and therefore reduce the overall tax burden. Non-Residents Passive income derived by non-residents without a permanent establishment is typically subject to with - holding taxation under Spanish domestic law. • Dividends: generally subject to withholding (com - monly 19% under domestic rules), although exemptions may apply (eg, under the EU Parent- Subsidiary framework, subject to conditions and anti-abuse rules). • Interest: generally subject to 19% withholding under domestic rules, but Spain also provides important domestic exemptions in specific cases (EU). • Royalties: generally subject to withholding under domestic law (19% for EU/EEA residents; other - wise, 24%), although treaty relief is often available and, in EU cases, exemption may apply subject to the relevant conditions being met. Spain’s treaty network frequently reduces or eliminates withholding tax on dividends, interest and royalties, but access to treaty benefits depends on the treaty wording (including beneficial ownership and anti- abuse clauses, and in many cases MLI/PPT effects). Relief may be obtained at source if the payer has the required documentation, or otherwise by refund. In addition, Spanish domestic law provides several exemptions relevant to non-residents without a PE, including (subject to conditions) income from Spanish
public debt, certain securities issued in Spain, non- resident bank accounts, certain container and bare - boat shipping/aircraft income used in international transport, and certain gains on listed securities or fund redemptions. It also includes specific exemptions for certain dividends received by qualifying pension funds and collective investment vehicles. Although the pension fund exemption is drafted by reference to EU/EEA-equivalent institutions, Spanish case law has extended comparable treatment to cer - tain third-country pension funds (eg, Canada) on the basis of the free movement of capital, subject to com - parability and information-exchange requirements. In practice, the analysis of non-resident withholding should therefore consider domestic exemptions, EU law and treaty relief together. 3.4 Capital Gains Residents (Individuals) Capital gains realised by Spanish tax resident individ - uals are generally taxed under PIT and, in most cases, are included in the savings tax base when derived from the transfer of assets (subject to the applicable progressive savings tax rates ranging from 19% to 30%). Residents (Corporate Taxpayers) Spanish corporate taxpayers pay CIT on capital gains as part of their regular taxable base (that is, account - ing profit that is subject to statutory tax adjustments). So, capital gains are usually taxed according to the normal CIT regulations. However, there may be excep - tions or special rules in some situations, such as the participation exemption regime for qualified share - holdings, which is subject to the restrictions laid out in the CIT legislation. Non-Residents (No PE) If non-residents realise capital gains from Spanish- source assets, they may be subject to taxation in Spain under the NRIT laws. Examples include: • disposals of Spanish real estate; • transfers of shares in Spanish entities; and • transfers of shares in property-rich entities (ie, enti - ties whose value derives mainly from Spanish real
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