Skip to main content
Non-Resident Taxation Manual (January 2023)

Income from movable capital (dividends, interest, royalties)

Internal regulations

Regulations:article 13.1.f) Law IRNR

According to Spanish law, the following work income is understood to be obtained in Spanish territory:

  • Dividends and other income derived from participation in funds belonging to organisations resident in Spain.

  • Interest and other earnings obtained by assignment to others of own capital paid by resident individuals or organisations or by a permanent establishment situated in Spanish territory or repayments of loans of capital used in Spanish territory.

  • Royalties (1) paid by resident individuals or organisations or by permanent establishments situated in Spanish territory or which are used in Spanish territory.

(1) Royalties are understood to be the sums paid for the use or licence to use rights to works of literature, art, science, or cinema, patents, trademarks, secret drawings, plans, formulas or procedures, computer programmes, information relating to industrial, commercial or scientific experiments, personal rights which can be ceded such as image rights, industrial, commercial or scientific equipment, and any similar right.(Back)

In relation to this type of income, domestic legislation provides for multiple cases of exemption.

For example, in the case of interest, is exempted:

(Regulations:Article 14.1.(c);(d) and (f) IRNR Law)

  • Those obtained by residents in another Member State of the European Union or, with effect from 1 January 2021, in another Member State 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 tax matters (with effect from 11 July 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 on the exchange of tax information under the terms provided in Law 58/2003, of 17 December, General Taxation, which is applicable.See Annex V) or by permanent establishments of such residents located in another Member State of the European Union or, with effect from 1 January 2021, in another Member State of the European Economic Area, provided that they are not obtained through a tax haven (with effect from 11 July 2021, references to tax havens are understood as references to the definition of a non-cooperative jurisdiction.See Annex IV)

  • Income derived from Public Debt.

  • Income from non-resident accounts.

Regarding the dividends, they are exempted:

(Regulations:Article 14.1.(h);(k) and (l) IRNR Law)

  • Those distributed by subsidiaries resident in Spain to their parent companies (2) resident 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 EP of the latter located in other Member States provided that they have an effective exchange of information on tax matters (with effect from 11 July 2021, the 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 on the exchange of tax information under the terms provided in Law 58/2003, of 17 December 2003 on mutual assistance on the exchange of tax information under the terms provided in Law 58/2003, of 17 December 2003 on mutual assistance on the exchange of tax information).See Annex V), and provided that certain conditions are met.For the application of this exemption it is required that the parent company is not resident, or the PE is not located, in a country or territory qualified as a tax haven (with effect from 11 July 2021, references to tax havens are construed as references to the definition of a non-cooperative jurisdiction.See Annex IV).

  • Dividends and shares in profits obtained by pension funds equivalent to those regulated in the Law on Pension Plans and Funds, resident in another Member State of the European Union or by permanent establishments of such institutions located in another EU Member State or resident in the States making up the European Economic Area with which there is an effective exchange of tax information (with effect from 11 July 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 in the exchange of tax information under the terms provided in Law 58/2003, of 17 December, General Taxation, which are applicable.See Annex V).

  • Dividends and profit shares obtained by collective investment undertakings regulated by Directive 2009/65/EC, of the European Parliament and of the Council;or residents in States that are part of the European Economic Area with which there is an effective exchange of tax information (with effect from 11 July 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 in the exchange of tax information under the terms provided in Law 58/2003, of 17 December, General Taxation, which is applicable.See Annex V);this is a partial exemption, given that the taxation cannot be less than the result of applying the tax rate paid by Unit Trust Institutions based in Spanish territory.

(2) Until 31 December 2020, a parent company is a company that holds (as of 1 January 2011) a 5% interest in the capital of another company or (as of 1 January 2015) the acquisition value of the interest exceeds EUR 20 million.The investee company is the subsidiary.

As of 1 January 2021, a parent company is a company that holds a 5% interest in the capital of another company.

Temporary arrangement:the exemption referred to in article 14.1.h) shall apply during the years 2021, 2022, 2023, 2024 and 2025 to holdings acquired before 1 January 2021 whose acquisition value exceeds 20 million euros without the holding needing to reach 5% of the capital and provided that the other requirements established in said article are met.(Back)

As for the royalties, they will be exempted andn the particular case of royalties between associated companies, paid to a company resident in an EU Member State or to a permanent establishment of such a company located in another EU Member State, provided that certain requirements are met (Normativa:Article 14.1.m) of the Non-Resident Personal Income Tax Law

Agreement

Where a Convention is applicable, in relation to dividends, interest and royalties, it should be specifically consulted.In general, the regime followed is of shared taxation between Spain and the State where the taxpayer is resident;in this case, Spain has the right to impose tax on these earnings, but with the limitation on tax indicated in each Agreement (Annex III).

Taxation

Regulations:articles 24, 25 and 26 Non-Resident Income Tax Law

The income obtained from sources other than permanent establishment must be declared separately for each partial or total accrual of income subject to tax.

As a general rule, the taxable base will consist of the full amount, i.e. without deduction of any expenses.

However, in the case of taxpayers resident 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 11 July 2021, the 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 in the exchange of tax information under the terms set out in Law 58/2003, of 17 December, General Taxation, which is applicable.See Annex V), the following expenses may be deducted for the determination of the tax base:

  1. In the case of individuals, the expenses provided for in the Personal Income Tax Act, provided that the taxpayer can prove 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, deductible expenses in accordance with the provisions of the Corporate Income Tax Act, provided that the taxpayer can prove 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.

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

The tax rate applicable to the fees is the general rate in force:

  • Residents EU, Iceland, Norway and, from 11-07-2021, Liechtenstein:19%
  • Other taxpayers 24

Deductions:of the tax liability may only be deducted:

  • Deductions for donations, under the terms set out in the Law of IRPF and in the Law on the tax regime for non-profit organisations and tax incentives for patronage.

  • Tax withholdings that have been applied on the taxpayer's income.

Reduction by agreement:if a Convention is applicable which sets a taxation limit for dividends, interest or royalties, the taxpayer may take account of this limit by applying a reduction to the tax liability.