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Romania-Spain

7 December 2020

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New Tax Treaty between Romania and Spain to Enter into Force

The new income tax treaty between Romania and Spain enters into force on 14 January 2021. The treaty, signed 18 October 2017, replaces the 1979 tax treaty between the two countries.

Taxes Covered

The treaty covers Romanian tax on income and tax on profit and covers Spanish income tax on individuals, corporation tax, and income tax on non-residents.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company that has directly or indirectly held at least 10% of the paying company's capital for at least one year, or the beneficial owner is a pension fund; otherwise, 5%
  • Interest - 3%
  • Royalties - 3%

Note - the final protocol to the treaty includes the provision that as long as, according to its internal legislation, interest arising in a Contracting State is exempt from tax in that State, the rate provided for in paragraph 2 of Article 11 (Interest) shall be reduced to zero (instead of 3%).

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of shares or similar rights deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, with an exemption for shares listed on a stock exchange (immovable property in which the company conducts its economic activity is not considered); and
  • Gains from the alienation shares or other rights that directly or indirectly entitle the owner of such shares or rights to the enjoyment of immovable property situated in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Entitlement to Benefits

The final protocol signed with the treaty includes the provision that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

Effective Date

The new treaty generally applies from 1 January 2022, although Articles 23 (Mutual Agreement Procedure), 24 (Exchange of Information), and 25 (Assistance in the Collection of Taxes) apply from the date of the treaty's entry into force (14 Jan 2021), without regard to the taxable period to which the matter relates. The 1979 tax treaty between the two countries ceases to have effect on the date the new treaty is effective.

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