The Spanish Supreme Court issued a decision on 6 March in relation to application of the double tax agreement between Spain and the Netherlands signed on 16 June 1971. The Court confirmed that the 5% reduced rate for withholding tax under the DTA would apply in the case of dividends paid by a Spanish company to a Dutch resident shareholder when the dividend income is tax exempt owing to the participation exemption rules in the Netherlands. This applies whatever the level of shareholding by the Netherlands entity in the Spanish company.
Taxpayers in the Netherlands should review the withholding tax currently being applied to their dividends from entities in Spain and look into the possibility of submitting a claim for a refund if the correct rate has not been applied.
