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Dividend Tax in Spain

Dividend Tax in Spain

Updated on Friday 22nd September 2017

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dividend tax in spain.jpgThe taxation regime in Spain has been changed starting  with 2015 and the rates of major taxes decreased by a few percentages for the benefit of the local and the foreign investors who are encouraged to do business in this country, that was strongly affected by the financial crisis, but finally has recovered in the last few years. 

However, the measures imposed by the Spanish government in the last years have already proven to be effective on various matters, including employment, which registered record level in the first half of 2017. Our team of lawyers in Spain can provide in-depth information on the Spanish taxation regime applicable to foreign entities operating in this country.  
 
One of the most important taxes applicable to foreign investors is the dividend tax, which was imposed at rates between 21% and 27% in 2014 and between 20% and 24% at the level of 2015. 
 
Starting with 2016, the Spanish authorities apply a dividend tax imposed at rates between 19% and 23%, depending on the taxable amount. Sums of money below EUR 6,000 are imposed with a tax of 19%, while values above EUR 50,000 will be taxed at a rate of 23%
 
The taxation of dividends is available for both natural persons and legal entities operating in Spain
 

Exemption removed starting 2015

 
Another important change is the removal of the exemption on the first EUR 1,500 of dividends.
 
The foreign entrepreneurs who obtain dividends in Spain, but not through a permanent establishment in this country, are required to pay the dividend tax applicable at the rate of 19% starting with 2016. They were entitled to a refund of the dividend tax for the first EUR 1,500 of their dividends, measure that was applied in the last years, according to Spanish Non-Resident Income Tax Law.
 
This refund was available for the dividends received from companies incorporated in Spain, but only for the dividends obtained by 2014. Our team of Spanish lawyers can provide more details on the legislation referring to the taxation of dividends
 
The tax reform that came into force in January 2015 was proposed by the Spanish government in 2014, approved and then published in the Official Gazette in November 2014. The reform included the decrease of important taxes, such as dividend and corporate tax, and other major changes for the personal income tax of residents and non-residents, as well as for the value added tax (VAT)
 

Dividend exemption in Spain  

 
Foreign companies operating in Spain can benefit from a tax exemption on dividends and capital gains if certain conditions are met. Foreign subsidiaries are entitled to this benefit if the parent company holds at least 5% of the subsidiary’s ownership for a period of minimum one year. However, the regulation is applicable as long as the parent company owns at least EUR 20 million in the respective holding. 
 
It is also necessary for the foreign subsidiary to be imposed with a similar corporate income tax as the one applicable under the Spanish legislation
 
Companies can benefit from the dividend tax exemption if they are tax residents in one of the countries with which Spain has signed a treaty for the avoidance of double taxation.  
 
Foreigners who want to find out more details on the taxation system applicable to legal entities and natural persons are invited to contact our law firm in Spain.
 

 

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