Tax regime: An opportunity for Spain

Unfortunately, despite its undeniable advantages, Spain is not typically amongst the candidates to host such headquarters, and it is largely because our business and tax relations with the United States are governed by regulations approved in the 1990s, when there was no Internet and or even mobile phones. 

The surprise is that even in that situation, Spain remains amongst the top ten countries for North American investment. 

The passing (last Tuesday, finally) by the United States Senate of the new Double Taxation Agreement (DTA) with Spain may mean “a before and after” for strengthening business relations between Spain and the U.S., with many potential benefits resulting for our economy. 

The new DTA puts Spain amongst the most favourable jurisdictions for American investment, even ahead of such countries as Luxembourg and Ireland and at the level of countries like the United Kingdom. 

Once the DTA goes into effect, most of the economic flows with the U.S. will be tax-free in Spain. The dividends distributed by Spanish companies to U.S. shareholders will go from 10% currently to being exempt from taxation or paying 5% when the shareholder’s stake is ten percent. 

Payments and interest rates will no longer be subject to a rate of 10% and will be free of taxation, enabling a greater exchange of technology and commercial experiences (essential for sectors as consolidated as the automotive and pharmaceutical industries or others as promising as start-ups or the film industry). 

But what may undoubtedly put Spain at the forefront of North American investment recipients is the treatment of capital gains in the sale of stocks that, with the exclusion of real estate companies, will become tax-exempt in most cases. This amendment may finally turn Spain into the top U.S. investment platform in Europe and Latin America. 

It would be an mistake to let us get swept away by short-term perspectives that regret a possible loss of tax revenue because the possibilities that the DTA opens for us in the current international context (think about the trade war with China and the foreseeable hard Brexit) to attract investments to Spain can easily surpass any reduction in the already minimal collection of Non-Resident Income Tax.

Ultimately, the new DTA puts us in a position of advantage against the countries in our environment. Thus a window of opportunity appears that we can either take advantage of or pass up (it would not be the first time). 

What we cannot deny is that if we don’t do it, someone else will, indicated by the fact that in the coming days the U.S. Senate will vote on DTA’s with Japan, Luxembourg and Switzerland which will soon be followed by DTA’s with Poland, Chile and Hungary. 

It’s up to us.