Spain-UK tax treaty will enter into force on 12 June 2014


29 May 2014

The new tax treaty between Spain and the United Kingdom signed on 14 March 2013 will enter into force on 12 June 2014, replacing the existing tax treaty which was signed on 21 October 1975.

The new Treaty implements a number of changes of which we highlight the following:

Capital gains tax on transfer of shares of real estate companies:

Spain generally taxes gains derived by non-Spanish residents from the sale of Spanish land-rich entities. The Spain-UK treaty currently in force does not allow Spain to impose tax on capital gains derived by a UK resident from the transfer of the shares of entities.

Article 13 of the new Treaty enables Spain to impose tax on capital gains deriving from the transfer of shares of an entity when more than 50% of its value derives, directly or indirectly, from real estate properties located in Spain, unless the shares are substantial and regularly traded on a stock exchange.

Absence of withholding tax on dividends, interest and royalty payments:

The Treaty establishes that no withholding tax applies to interest and royalties payments and to dividend distribution from qualifying participation (more than 10% in the equity), provided that the recipient of the income is the beneficial owner.

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