The new tax agreement with the US encourages the repatriation of dividends

The new double taxation pact, effective as of Wednesday, lowers the withholdings and could accentuate the dividend advance before a tax reform of PSOE-Podemos.

The fiscal agreement sealed between Spain and the US in 1990 to avoid double taxation and prevent tax evasion has just been replaced by a new one, agreed in 2013 but which did not enter into force until Wednesday after spending six years locked in the Senate U.S. The new framework lowers some tax burdens by encouraging, for example, the repatriation of dividends.

Until now, the retention set in the country of origin of the dividends reached 15%. Since Wednesday, however, this taxation disappears when the beneficiary is a pension fund or a company that has controlled 80% of the voting rights of the firm that distributes its profits, which exempts the groups that collect from withholding dividends of its subsidiaries, for example.

From there, the tax is reduced to 5% of the gross amount of the dividends in the cases in which the company that collects them controls at least 10% of the issuer’s shareholding, half of the rate that was set before for those who owned at least 25% of the company. For all other cases, a charge of 15% is maintained.

“The main novelty of the new protocol,” explains Álvaro de la Cueva in the tax blog of the Garrigues law firm, is that “introduction of exemptions for dividend payments” but also on interest and fees on direct investments. The United States, he illustrates, is the eighth largest direct investor in Spain (984 million euros gross in 2018) and the first in total investment (7,930 million) if it is analyzed who is the last investor.

“It is expected that, with the entry into force of the changes introduced to the agreement, investment and trade flows between the two countries will be encouraged, as the taxation in the country of origin of the income has been reduced and even in some cases suppressed ”, Explains Lara de la Rosa, associate of the prosecutor area at the international law firm Bird & Bird.

By encouraging the repatriation of dividends from the United States, the entry into force of the agreement could accentuate the advance in the payment of dividend distribution of foreign subsidiaries that REAF already anticipates to occur in the final stretch of the year due to the fear of entrepreneurs to That a coalition government between PSOE and Podemos move forward and promote its plan to raise the tax on savings and reduce the total exemption that governs today on this type of dividends.