Investment approach
Dividends from a Spanish SL to a Non-Resident: Withholding, Treaties
Dividends from a Spanish SL to a non-resident are taxed at 19%, withheld by the SL itself. A tax treaty usually caps the rate at 15%, and an EU parent company may be exempt.
Dividends from a Spanish SL (sociedad limitada, limited company) to a non-resident are taxed under IRNR (Impuesto sobre la Renta de no Residentes, non-resident income tax) at 19%, and the SL itself withholds the tax on payment. A double taxation treaty can lower the rate: the AEAT (Spanish tax agency) gives a general limit of 15%, but each country has its own text. A parent company from the EU holding at least 5% for at least a year may receive dividends tax-free. To get the reduction, tax residence must be proved.
The basic rule: 19% and withholding at source
The 19% rate is set for dividends and other income from holding shares (art. 25.1.f TRLIRNR). The recipient bears the tax, but the paying party, that is the SL, withholds and pays it (art. 31 TRLIRNR). Withholdings for the quarter are paid in the first 20 days of April, July, October and January (Modelo 216), and the annual summary of them is filed in January (Modelo 296) (art. 15 Reglamento IRNR). If the full withholding has been made, the recipient is usually not required to file a return of their own (art. 7.3 Reglamento). This is the second layer after the SL's own corporate income tax, covered in the article on SL taxes.
Three regimes for the recipient
| Recipient | Regime | Rate | What is needed |
|---|---|---|---|
| Individual or company from a country without a treaty | General rule | 19% | No proof of status required |
| Resident of a country with a treaty | Treaty limit | As in the treaty; the AEAT gives a general limit of 15% | Certificado de residencia (tax residence certificate) or the form under the treaty |
| EU parent company | Exemption under art. 14.1.h | 0% | Holding of 5% or more for at least a year, both companies in a form listed in the annex to Directive 2011/96/EU, proof of status |
Sources: AEAT on dividends under treaties, art. 31.2 TRLIRNR (withholding at the treaty rate), art. 14.1.h TRLIRNR (exemption).
The parent company exemption is limited (additional conditions apply to companies from the EEA). It does not apply if the majority of voting rights in the parent company belong to persons outside the EU and EEA, except where the company's creation and operation are explained by real economic reasons and business considerations. What counts as such reasons is judged on the facts of each structure, and that is a question for the asesor fiscal (tax adviser).
How to apply a treaty
The countries with a treaty are listed on an AEAT page (list of treaties). The rate and conditions are read from the text of the particular treaty. When claiming under a treaty, you attach a certificado de residencia issued by your country's tax authority, or the form from the treaty orders (art. 7.1 Reglamento).
If the SL withheld 19% but the treaty provides for less, the difference can be reclaimed within four years from the date the withholding was paid or the period for paying it ended (art. 16.4 Reglamento IRNR). It is wiser to give the SL the documents before payout so that it withholds less at once: the law itself allows withholding at the treaty rate. More on the mechanics in the article on double taxation treaties.
A worked example
A worked example, not a forecast. An SL pays a non-resident €100,000.
| Situation | Withholding | Recipient receives |
|---|---|---|
| No treaty, 19% | €19,000 | €81,000 |
| Treaty limit of 15% (hypothetical) | €15,000 | €85,000 |
| EU parent company, exemption | €0 | €100,000 |
| 19% withheld, then refund down to 15% | €19,000, refund €4,000 | €85,000 |
This is the tax in Spain. The recipient's country of residence may tax the same dividend and credit the Spanish tax. The outcome depends on its laws, and not only on Spanish ones.
Who this is not for, and what to ask
The table does not fit dividends that an SL pays to a Spanish tax resident, payments through intermediate structures, or cases where the recipient is not treated as a tax resident in their own country. In these situations the rate and the documents are determined individually.
Questions for the asesor fiscal: which regime do I fall under, which residence document does the SL accept, is a translation needed, how is this tax credited in my country, and does the parent company restriction affect me. The overall picture of taxes on a project is shown by the investor tax map, and the deadlines for returns are collected in the tax calendar.
Questions and answers
Who withholds tax on dividends to a non-resident?
The paying SL. It pays the withholding on Modelo 216 in the first 20 days of the month after the quarter and files the annual summary on Modelo 296 in January.
Can dividends be received without Spanish tax?
Yes, if the recipient is an EU parent company, the holding of at least 5% has been kept for at least a year and the conditions of art. 14.1.h TRLIRNR are met. Individuals have no parent company exemption: for them the 19% rate or the treaty limit applies.
What if the SL withheld 19% but the treaty gives 15%?
File a claim for a refund of the difference. The period is four years from the date the withholding was paid (art. 16.4 Reglamento IRNR). It is better to hand over the certificado de residencia before payout.
Do I need to file a return in Spain on dividends?
If the withholding has been made, there is usually no obligation to file a return (art. 7.3 Reglamento IRNR). A return is filed when a treaty must be applied or tax reclaimed.
