Double Tax Conventions are bilateral agreements between two States that establish the rules to distribute the capacity to tax income obtained in one of the Contracting States by a resident of the other Contracting State, based on its nature.

Through their provisions, which prevail over domestic rules, it is possible to reduce taxation on income obtained by a taxpayer, whether it is a company or an individual, in the other Contracting State.


These Conventions try to avoid double taxation suffered by companies and individuals with international business, that derive foreign sourced income and that are subject to tax in Spain on their world – wide income.

 

This aspect has now become of major importance in the case of the United Kingdom, once the results of the referendum on its permanence in the EU have been known and taking into account that different matters are currently being covered by EU Directives to exempt foreign source income such as dividends, royalties or interest, paid between associated or tax-related companies that are resident in the EU.

In the event that such rules were no longer applicable as a result of the Brexit, income derived by Spanish tax residents in the United Kingdom or vice versa would be ruled by the Spain / UK Double Tax Convention.

For example, do your know that royalties and interest income obtained by a Spanish resident company in the UK can only be taxed in Spain? Do you know when the reduced 10% rate on dividend income derived by a non – resident in the UK applies?

Spain has signed 102 Double Tax Conventions in total, out of which 93 are in force. The remaining 9 treaties are in different steps of their application process, (Azerbaijan, Bahrain, Belarus, Cape Verde, Qatar, Montenegro, Namibia, Peru and Syria).

The appropriate knowledge of their provisions can help you reduce taxation and increase the profitability of your international investments and projects. Prior assessment will certainly help you avoid missing these opportunities.

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Publicado el 07-2016 por PBS