On 14 March 2013 the UK and Spain signed a new double taxation treaty. The treaty will come into force when the ratification procedures have been completed. When it comes into effect the new treaty will replace the treaty currently in force which was signed in 1975.
The maximum withholding tax rate is reduced to 10% for portfolio investors and to zero for direct investors and pension schemes. Withholding tax on interest and royalties is reduced to zero. The treaty contains provisions clarifying the access to treaty benefits by participants in fiscally transparent entities.
The Article in respect of the mutual agreement procedure provides for a matter to be submitted to arbitration at the request of the taxpayer if the competent authorities have not reached agreement within two years from the presentation of the issue. The arbitration decision is to be binding on both contracting states and implemented regardless of any time limits in their domestic laws.
