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Non-Resident Taxation Manual (February 2024)

Income from movable capital (dividends, interests, royalties)

Internal regulations

Regulations: article 13.1.f) Law IRNR

In accordance with internal regulations, the following returns are understood to have been obtained in Spanish territory:

  • Dividends and other income derived from participation in the own funds of entities resident in Spain.

  • Interest and other earnings obtained from the transfer to third parties of equity capital settled by persons or organisations resident in Spain or by permanent establishments located therein or which repay capital loans used in Spain.

  • Fees (1) satisfied by persons or entities resident in Spanish territory, or by permanent establishments located therein, or that are used in Spanish territory.

(1) Royalties are understood as the amounts paid for the use or, or the granting of use, of rights over literary, artistic, scientific works, cinematographic films, patents, trademarks, drawings, plans, secret formulas or procedures, computer programs, information relating to industrial, commercial or scientific experiences, personal rights that can be transferred such as image rights, industrial, commercial or scientific equipment, and any other similar right.(Back)

In relation to this type of income, the internal regulations contemplate multiple exemption cases .

As an example, in the case of interests , they are exempt :

(Normative: article 14.1. letters c); d) and f) IRNR Law)

  • Those obtained by residents in another Member State of the European Union or, with effect from January 1, 2021, in another State that is a member of the European Economic Area that is not a Member State of the European Union, provided that there is an effective exchange of information on the matter. tax information (with effect from July 11, 2021, regulatory references made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance regarding the exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax, that is applicable. See Annex V ) or by permanent establishments of said residents located in another Member State of the European Union or, with effect from January 1, 2021, in another State member of the European Economic Area, provided that they are not obtained through a tax haven (with effect from July 11, 2021, references made to tax havens are understood to be made to the definition of a non-cooperative jurisdiction. See Annex IV )

  • Yields derived from Public Debt.

  • The income from non-resident accounts.

As for dividends , they are exempt :

(Normative: article 14.1. letters h); k) and l) IRNR Law)

  • Those distributed by subsidiary companies resident in Spain to their parent companies (2) residents in another Member State of the EU ( Annex V ) or to the EP of the latter located in other Member States, or to parent companies resident in the member States of the European Economic Area or to the EPs of the latter located in other member States as long as they have an effective exchange of information on tax matters (with effect from July 11, 2021, the references Regulations made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance regarding the exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax, which is applicable. See Annex V ), and provided that certain conditions are met. For the application of this exemption, it is required that the parent company does not have its residence, or the PE is not located, in a country or territory classified as a tax haven (with effect from July 11, 2021, references made to tax havens They are understood to be carried out under the definition of non-cooperative jurisdiction. See Annex IV ).

  • Dividends and shares in profits obtained by pension funds equivalent to those regulated in the Pension Plans and Funds Law, resident in another Member State of the European Union or by permanent establishments of said institutions located in another Member State of the EU or residents in the member States of the European Economic Area with which there is an effective exchange of tax information (with effect from July 11, 2021, regulatory references made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance regarding the exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax, which is applicable. See Annex V ).

  • Dividends and profit shares obtained by collective investment institutions regulated by Directive 2009/65/ EC, of the European Parliament and of the Council; or residents in the member States of the European Economic Area with which there is an effective exchange of tax information (with effect from July 11, 2021, regulatory references made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance regarding the exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax, which is applicable. See Annex V ); It is a partial exemption, since the taxation cannot be lower than that resulting from the application of the tax rate for which collective investment institutions domiciled in Spanish territory are taxed.

(2) Until December 31, 2020, a parent company is one that owns in the capital of another company a participation (as of January 1, 2011) of 5% or (as of January 1, 2015) that the value of acquisition of the participation is greater than 20 million euros. The investee company will be the subsidiary company.

As of January 1, 2021, a parent company is one that owns a 5% stake in the capital of another company.

Transitory rules: The exemption referred to in article 14.1.h) will apply during the years 2021, 2022, 2023, 2024 and 2025 to the shares acquired before January 1, 2021 whose acquisition value is greater than 20 million euros without it being necessary for the participation to reach 5% in the capital and provided that the remaining requirements established in said article are met.(Back)

As for royalties , they will be exempt and in the particular case of royalties between associated companies, paid to a company resident in a Member State of the EU or to a permanent establishment of such a company located in another EU Member State, provided that certain requirements are met ( Regulations: article 14.1. m) IRNR Law ).

Agreement

When an Agreement is applicable, in relation to dividends, interest and royalties, it will have to be specifically consulted. In general, the shared taxation regime between Spain and the State where the taxpayer resides is followed; In that case, Spain would have the right to tax these incomes, but with a taxation limit indicated in the respective Agreement ( Annex III ).

Taxation

Regulations: articles 24, 25 and 26 IRNR Law

Income obtained without EP mediation must be taxed separately for each total or partial accrual of the income subject to tax.

In general, the tax base will consist of the full amount, that is, without deduction of any expenses.

However, in the case of taxpayers residing in another Member State of the European Union or in a State of the European Economic Area in which there is an effective exchange of information (with effect from July 11, 2021, the regulatory references made to States with which there is an effective exchange of tax information are understood to be carried out to States with which there are regulations on mutual assistance regarding the exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax, that is applicable. See Annex V ), to determine the tax base, the following expenses may be deducted:

  1. In the case of natural persons, the expenses provided for in the Personal Income Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out. in Spain.

  2. In the case of entities, the deductible expenses in accordance with the provisions of the Corporate Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain. Spain.

The tax rate applicable to dividends and interest is 19%.

The tax rate applicable to royalties is the general one in force:

  • Residents EU , Iceland, Norway and, since 07-11-2021, Liechtenstein: 19%
  • Rest of taxpayers 24%

Deductions: Only the following may be deducted from the tax rate:

  • Deductions for donations, in the terms provided in the Personal Income Tax Law and in the Law on the tax regime of non-profit entities and tax incentives for patronage.

  • The withholdings that would have been made on the income.

Reduction by agreement: If an Agreement that establishes a tax limit for dividends, interest or royalties is applicable, the taxpayer may take that limit into account by making a reduction in the fee.