The new Taxation Agreement will favour Spain as a destination for US investors.
Last July, the Senate of the United States voted in favour of the implementation of the new Double Tax Agreement.
This new Agreement will modernize and modify the previous agreement between both countries that came into force in 1990, improving the field of investment between Spain and the United States.
Further, this modification will favour Spain compared to other European countries that had been enjoying from better agreements than Spain until the ratification of this new Agreement.
The main improvements in this new Agreement are related to capital gains, dividends and canons.
Concerning the improvements, stands out the extension from six to twelve months in order to be considered as a permanent establishment.
Also, there has been a change in relation to the withholding tax related to the payment of dividends between Associated Companies from a rate 10% to 5%. On the other hand, this withholding tax has been removed when the company is a Parent Company.
Regarding royalties, the new Agreement will delete the taxation in relation to them. With this modification, the major beneficiary will be the American Companies that, until now, have been taxed by a range from 5% to 10%.
Capital gains will not be taxed by any of the two countries with the exemption of the capital gains related to real estate holdings.
Also, in this new agreement, both countries agree on the inclusion of a mandatory mutual arbitration procedure to resolve double taxation disputes between the two countries.
This new Agreement, apart from the previously mentioned, will include techniques that will enhance the exchange of information between both Tax Authorities and will cooperate to ensure that this new Agreement only applies to residents of both countries.
In conclusion, this new agreement is focused on improving the background to maximize investment between both countries.
It is important to highlight that the American investment has been the most important investment source for Spain.
B Law & Tax
International Tax & Legal Advisors