Reclaim your Withholding Tax on Dividends in Spain: A comprehensive guide for Non-Resident Taxpayers

Have you invested in Spanish companies and received dividends? As a non-resident taxpayer in Spain, these dividends are subject to a 19% withholding tax by default. However, depending on the tax treaty arrangements between Spain and your country of residence, you may be entitled to a lower withholding tax rate or even a full refund of the withheld amount.

Understanding Withholding Tax and Double Tax Agreements

 It's important to know both the withholding percentage applied to your dividends and the applicable DTA limit to identify the potential recoverable withholding tax on your Spanish dividends:

Withholding Tax 

When you receive dividends from a Spanish company, the company is obligated to withhold 19% of the gross dividend amount as Withholding Tax. This Withholding Tax is intended to cover the taxes you owe on the dividends in Spain.

Double Tax Agreements 

Double Tax Agreements are treaties between countries that aim to prevent double taxation of income earned in both countries. They typically specify the tax rates and rules applicable to various types of income, including dividends.

With a Double Tax Agreement between Spain and your country of residence, you can reclaim excess withholding tax on your Spanish dividends. This means you can get a refund for the difference between the tax rate actually applied (usually 19%) and the lower rate stipulated in the DTA (which could be 15% or a reduced rate).

Example: Let's say you're a non-resident taxpayer and hold investments in a Spanish company. You receive a gross dividend of 2,000€. By default, the company withholds 19% WHT, resulting in a deduction of 380€ (2,000€ * 19%) and a net dividend payment of 1,620€.

However, imagine your country has a DTA with Spain that establishes a lower withholding tax rate of 15% for dividends. In this scenario, the appropriate WHT amount should be 300€ (2,000€ * 15%).

Because the applied withholding tax (19%) is higher than the DTA-specified rate (15%), you're entitled to reclaim the 80€ difference (380€ withheld - 300€ DTA rate).

Steps to Reclaim Excess Withholding Tax

1. Gather Required Documents: Collect the necessary documents, including:

• Proof of dividend income (e.g., withholding tax certificate, bank statement)
• Certificate of Tax Residency in your country of residence
• Bank holder´s certificate where the refund should be made.

2. Calculate the Excess WHT: Calculate the difference, which represents the excess WHT you can reclaim. At IberianTax, we can help you calculate the potential claim.

3. Submit your claim: File your claim for the excess withholding tax refund using the Modelo 210 form. 

4. Timeline and Processing: The Spanish tax authorities typically process claims within 6 months. If your claim is approved, you will receive the refund directly into your bank account.

Filing period

The filing period typically opens on February 1st of the following year. The overall claim period is four years.

For instance, imagine that a German tax resident received dividends from Banco Santander in Spain in January 2023. The standard 19% withholding tax was applied, but the DTA between Germany and Spain allows a lower rate of 15%. The taxpayer can reclaim the 4% difference (19% withheld - 15% DTA rate) by filing a claim with the Spanish tax authorities. While the deadline to submit the claim typically falls on February 1st of the following year (in this case, February 1st, 2024), the taxpayer generally has four to make the reclaim.

At IberianTax, we offer a seamless solution to help you reclaim your excess withholding tax on Spanish dividends. Our team of tax experts can guide you through every step, from identifying the applicable DTA rate to filing your claim with the Spanish tax authorities. Contact IberianTax today and let us simplify your tax reclaim process!