Global Tax Alert | 11 October 2013

Spain's draft Budget Law extends application of increased tax rates for non-Spanish residents

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Executive summary

On 30 September 2013, the Spanish 2014 draft Budget Law was published. Both the Spanish Congress and Senate have to pass it.

Among many other measures, the draft bill extends the application of increased tax rates on Spanish source income derived by non-Spanish residents with no permanent establishment in Spain.

Extension of the application of the increased rates for non-Spanish residents

On 30 December 2011, a number of measures to reduce the public deficit, including a temporary increase of the tax rates applicable to non-Spanish tax residents acting in Spain without a permanent establishment1 were approved.

The increase on tax rates was imposed for years 2012 and 2013; the 2014 draft Budget Law extends the application to 2014. If the Budget Law is passed with no changes, tax rates applicable to these taxpayers in 2014 will be as follows:

  • The general tax will continue to be set at 24.75% (the rate was formerly 24%).
  • The tax rate on dividends and interest will be fixed at 21% (originally 19%).
  • Capital gains will continue to be taxed at a 21% tax rate, where they were previously taxed at a 19% rate.
  • The 21% branch remittance tax applicable to profits repatriated to the foreign head office by Spanish permanent establishments will remain in force.

Other domestic tax measures for Spanish corporations, permanent establishments and individuals

The application of the creditable 21% increased withholding tax rate on account of the recipient's final tax liability to payments made by Spanish corporations, entrepreneurs and permanent establishments of foreign entities on payments to other Spanish entities, as opposed to the 19% rate applicable before 2012, is also included in the draft Budget Law.


1. See EY Tax Alert, Spain increases tax rates for 2012 and 2013, dated 5 January 2012 for further details.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Abogados, Madrid
  • Laura Ezquerra
    +34 91 572 7570
  • José Luis Gonzalo
    +34 91 572 7334
Ernst & Young LLP, Spanish Tax Desk, New York
  • Cristina de la Haba
    +1 212 773 8692

EYG no. CM3867