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Double taxation in Spain: What is it and how does it work?

Being a foreigner and owning a company in Spain with headquarters in your country of origin implies complying with the tax regulations in both countries. Therefore, today we want to talk to you about an agreement present in many countries: double taxation. Have you heard about it? Here are some more details on the subject.

What is double taxation in Spain?

First, we will explain what double taxation means. When we mention this term, we refer to the act of having to pay taxes twice for the same taxable event, within the same tax period.

In this way, it is understood that this situation occurs when a taxpayer is a resident of two countries for tax purposes during the same period of time.

Double taxation treaties in Spain

Now, to speak of a double taxation agreement (DTA) is to speak of an agreement between two States in which a series of tax regulations are established, where taxpayers with a fiscal presence in two countries are prevented from having to pay twice for the same taxable event.

Therefore, an agreement of this type will operate in a bidirectional way between two countries, so it applies in the same way on a Spanish company with business in another country, or on a company in another country with business in Spain.

The Spanish Government recognizes that the presence of these agreements is fundamental to promote foreign investments; both foreign investments in Spain and those of Spanish capital abroad.

In addition, these double taxation agreements are of utmost importance in the Spanish economy as they provide legal certainty to investors and reduce the tax burdens of their investors.

On the other hand, in order to avoid some kind of fraud, more and more Tax Administrations are establishing relevant agreements with exchange of information that reduce tax evasion.

And if you are wondering how many double taxation agreements exist in Spain? According to the Tax Agency, there are currently 103 double taxation treaties in force, 98 are in force and the rest are in the process of being processed (Bahrain, Montenegro, Namibia, Peru and Syria).


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States with double taxation agreement with Spain

The following are the countries with which there is a double taxation agreement with Spain:

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How do double taxation treaties work?

As mentioned above, a double taxation agreement prevents taxpayers from being taxed twice in the signatory countries. However, they can work in the following way:

1. Exemption method

In this case, the State of residence of the taxpayer waives the right to tax the income obtained by the taxpayer in the foreign country. Therefore, it is necessary to define which income is taxable and which is not.

2. Imputation method

In this case, the income received in the country where it was generated is included in the taxable income of the recipient for the purpose of taxation by the State of residence. Therefore, the total or partial tax is deducted from the taxable income.

Then, the total income generated by the subject is taxed, allowing a deduction equivalent to the tax liability established in the foreign country.


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Advantages of the double taxation treaty

And, if you still have doubts about the benefits of this agreement in the business world, here are the most relevant ones:

  • They offer legal certainty, since the investor will be able to know the return he is going to get and the taxes he has to pay.

  • They represent a saving in taxes, since they avoid duplicity in tax invoices.

  • They favor the promotion of foreign investments

  • Avoid double taxation conflicts


In summary, we can say that double taxation treaties in Spain work as a useful tool to fight against fraud, tax evasion and promote greater investments in the territory. Are you a foreigner and your business applies for this type of agreement? Contact us today and we will advise you on the tax management of your company!

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