Spain: New DTT with United Kingdom and related reclaim documentation requirements

A new Double Taxation Treaty (DTT) with an information exchange clause has been signed between Spain and United Kingdom and will enter into force on 12 June 2014.

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

• For dividends paid as of 12 June 2014, the Petición de Reducción and Petición de Devolución forms will no longer be required to reclaim excess tax withheld.
• Instead, a Certificate of Residence, mentioning the new DTT and valid at payment date, must be submitted. UK pension schemes are also required to provide a Certificate of Residence in order to benefit from the exemption foreseen in the new DTT as of 12 June 2014.

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 12 June 2014, through the standard refund procedure, Petición de Reducción and Petición de Devolución forms will still be required.

Tax refund possibilities for UK resident beneficial owners

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

The possibilities to reclaim, for a UK resident, tax withheld on interest or dividends distributed by Spanish companies are the following:

• According to Article 10 of the DTT, a UK resident will, from 12 June 2014 onwards, generally be eligible to benefit from a 10%¹ rate of withholding tax on dividends.
• According to Article 11 of the DTT, a UK resident will, from 12 June 2014 onwards, be eligible to tax exemption on interest.

1. For UK Legal entities with at least a 10% stake in the Spanish company that distributes the dividends and for UK pension schemes, this will be 0%. For dividends paid by an investment vehicle, this will be 15%.