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Nuevo Convenio de doble imposición entre España y Reino Unido: próximo a entrar en vigor

Signed in London last 14th of March, it has been published last Friday October 4th in the Official Gazette of the Spanish Congress (BOCG), to draw up the amendments by next 23rd of October.

It will replace the old 1975 Double Tax Agreement (DTA) with some significant changes, specially regarding the taxation on shares of companies for which more than 50% of their value is based on real estate. Please check this link to our previous newsletter for further details about the new DTA:

UK tax resident selling the shares of an Offshore: last chance to get benefit from the UK-Spain DTA

The resolution V2054-13 from General Directorate of Taxes of 18/06/2013 has ruled that the sale of shares on a Gibraltar Company, for which the sole asset was a real estate property in Spain, was not subject to Spanish Capital Gain Tax provided that the seller (shareholder) was tax resident in the UK.

According to art.13 of the 1975 DTA, any capital gain derived from the transfer of shares is exclusively subject to taxation in the Country of residence of the seller. The new DTA will shift the taxation to the country where the property is situated. Thus, the sale of the shares of the above mentioned Gibraltar Company will be subject to taxation in Spain as from the approval of the new DTA.

The seller is obliged to submit a Capital Gain Tax return in Spain providing all the details and applying for the exemption on Spanish tax liability providing a tax certificate issued by the UK  HMRC according to the DTA.

If you are in the process of selling such shares and you find tax efficient to subject the taxation to UK legislation, you should take decisions before the new DTA comes into force.