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HMRC internal manual

Double Taxation Relief Manual

HM Revenue & Customs
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Double Taxation Relief Manual: Guidance by country: Spain: Interest and Royalties

Article 11 provides that interest arising in Spain which is beneficially owned by a resident of the United Kingdom is taxable in Spain at a rate not exceeding 12 per cent. Article 12 provides that royalties arising in Spain to a United Kingdom resident are taxable there at a rate not exceeding 10 per cent of the royalties.

The EC Directive on Interest and Royalties (2003/49EC) (see INTM400010 to INTM400110) provides for the abolition of source state taxation on interest and royalty payments made between associated companies in different Member States. It also ensures that the payments are subject to tax once in a Member State.

However, Spain has obtained a derogation in respect of royalties and will be allowed to defer full implementation of the Directive and carry on deducting withholding taxes until the expiry of an six year period commencing at the date of application of the EC Savings Directive in Spain. The specified withholding rate permitted by the Directive is 10 per cent.