The U.S.-Spain tax agreement was originally signed in 1990, with an additional protocol signed in 2013, but only ratified in 2019, reducing withholding taxes on dividends, interest and royalties and increasing the exchange of tax information between the two countries. The first main objective of the convention is to avoid double taxation of income from residents of the United States or Spain from sources within the other country. The convention describes the people it applies to, the income taxes it covers, and provides that each country provides a credit against the tax debt of its residents for income taxes paid to the other country. Rules apply to the taxation of different types of income, such as corporate profits, capital gains, shipping and air revenues, dividends, interest, royalties and labour income, with specific provisions for certain categories. B people, such as government employees, diplomats, students, artists and athletes. Although Spain imposes a limited tax on personal capital, capital taxes are not covered by the agreement, since the United States does not levy such taxes and therefore there is no double taxation to be reduced or eliminated. The convention also provides for procedures for representatives of both countries to reach agreement on issues of double taxation or the application of the convention. A separate agreement, called a totalization agreement, will help American emigrants to Spain not to pay social security taxes to both the U.S. and Spanish governments. The contributions of expatriates made during their stay in Spain can be credited to these two systems. The country they pay depends on the length of their life in Spain. It is important that interest and royalties are no longer subject to withholding tax (so far 10% withholding tax) as long as the beneficiary is the beneficiary. This creates a level playing field between the US and EU member states, as interest and royalty payments within the EU are generally exempt under the EU Interest and Royalty Directive.
The new protocols will reduce confusion, security and often less tax for investors between Spain and the United States, which will facilitate bilateral foreign direct investment. In particular, the new agreement reduces withholding tax on dividends, interest and profits and allows tax-free transfer of pension plans. The main changes contained in the official text are summarized below: The new treaty encourages the resolution of disputes between investors and the contracting state through arbitration. As a result, many American expatriates living in Spain have to file two tax returns and threaten them with double taxation. The new tax treaty maintains the additional taxation of branches (branch tax) only in certain cases, including real estate income (in some cases), which would increase this additional tax to 5% (compared to the previous rate of 10%). the ANTS policy commission The new tax treaty will be supplemented by a Memorandum of Understanding including, among other things, , its application to tax-transparent payments to companies, a Memorandum of Understanding for the conclusion of an agreement to avoid the double taxation of investments between Puerto Rico and Spain, as well as the scope of the concept of “pension fund” and the rules for determining their place of residence. 1. Additional dividends and taxes on branches On July 16, 2019, the U.S. Senate ratified a new protocol that amends the 2013 double taxation convention signed between the United States and Spain. The approval and ratification of the protocol had already been completed in Spain. However, the United States still has pending procedural requirements before the protocol comes into force. The U.S.-Spain tax contract provides double taxation for income and capital gains taxes, but benefits are limited for the u.