Spain: New DTT with Germany and related reclaim documentation requirements

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A new Double Taxation Treaty (DTT) with an information exchange clause has been signed between Spain and Germany and will enter into force on 1 January 2013.

This new DTT introduces an important change to the tax reclaim documentation requirements for German resident beneficial owners of Spanish equities, as follows:

For dividends paid as of 1 January 2013, the Petición de Reducción and Petición de Devolución forms will no longer be required to reclaim the excess tax withheld.
Instead, a Certificate of Residence, mentioning the new DTT and valid at payment date, must be submitted.

Details of the respective processing in Clearstream Banking will be published in due course.

N.B.: To reclaim excess tax withheld on dividends paid before 1 January 2013, through the standard refund procedure, Petición de Reducción and Petición de Devolución forms will still be required.

Tax refund possibilities for German resident beneficial owners

The standard rate of withholding tax on interest or dividends is 21% before any refund.

The possibilities to reclaim, for a German resident, tax withheld on interest or dividends distributed by Spanish companies have not been substantially modified with the new DTT:

According to Article 10 of the DTT, a German resident will, from 1 January 2013 onwards, generally be eligible to benefit from a 15%¹ rate of withholding tax on dividends.
According to Article 11 of the DTT, a German resident will, from 1 January 2013 onwards, continue to be eligible to be tax-exempt² on interest.

1. For German companies (other than partnerships or real-estate investment companies) with at least a 10% stake in the Spanish company that distributes the dividends, this will be 5%.
2. Based on Spanish legislation, German residents are already tax-exempt on interest in Spain.