Wealth Tax and Agreements avoiding Double Taxation

Individuals who are residents of a country with which Spain has signed a agreement to avoid double taxation that includes specific provisions in relation to assets (some agreements only deal with income), and who prove that they are entitled to its application, may apply said provisions, and it may result that a certain asset located or deposited in Spanish territory may only be subject to taxation in their country of residence and is exempt in Spain. Where it appears that both countries have the power to tax a certain asset, it would the country of residence's responsibility to apply double taxation avoidance measures.

The agreements signed by Spain are based on the OECD (Organisation for Economic Co-operation and Development) Model Agreement, Article 22 of which, devoted to assets, stipulates:

Article 22. Wealth.

1. Assets consisting of real estate within the meaning of Article 6, owned by a resident of a Contracting State and located in the other Contracting State may be taxed in that other State.

2. Assets consisting of movable property which form part of the assets of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State may be taxed in that other State.

3. Assets consisting of ships or aircraft operated in international traffic or of vessels used in navigation through internal waters, as well as movable property connected with the operation of such ships, aircraft or vessels, may be taxed only in the Contracting State in which the company's effective headquarters is located.

4. All other assets of a resident of a Contracting State can only be taxed in that State.

With such a wording, in application of Section 4 of Article 22, in the case of a non-resident taxpayer without a permanent establishment, certain non-real estate assets (bank account balances, shares, etc.) would be exempt in Spain (since the tax authority would be exclusive to the State of residence).

Although many of the Conventions signed by Spain follow this type of wording, there are others that have special or different provisions (Germany, Argentina, Belgium, France, United Kingdom, ...) so the specific applicable Convention should always be consulted . The Agreements can be consulted on the Tax Agency's website.