Spain-Germany double taxation treaty

What the Spain-Germany treaty is and who it applies to

The Spain-Germany double taxation treaty was signed on 5 December 1966 and has been in force since 1968, with a 2011 protocol that updated the exchange of information between the two administrations. Its function is to share the taxing power: it establishes which country taxes each type of income and with what cap.

It applies to individuals and companies that are tax residents in Spain or Germany. Residency is set by each country under its own domestic rules: in Spain, by living more than 183 days a year or having the centre of economic interests here; in Germany, by residence or habitual abode.

If your GmbH is a tax resident in Germany but you live in Spain, the treaty sets what Germany can tax (where the company is established) and what you must declare in Spain, and stops both taxes adding up without compensation.

Maximum withholding rates: dividends, interest and royalties

The treaty sets a cap on the withholding the source country can apply to cross-border payments. Without a treaty, Germany would apply its domestic rates, which are clearly higher.

• Dividends: 15% (10% if the beneficiary company holds at least 25% of the capital)
• Interest: 10%
• Royalties: 5%

Dividends from your GmbH: the practical case of the Spanish shareholder

The most common case: you distribute profits from your GmbH and are a tax resident in Spain. The treaty allows Germany to withhold at most 15% on the gross dividend, instead of the internal 26.375% (25% plus the solidarity surcharge).

As both countries are in the EU, the parent-subsidiary Directive can reduce that withholding to zero if your Spanish company holds at least 10% of the GmbH's capital for a minimum of one year. That is why many SMEs route the holding through a Spanish SL: they save the source withholding entirely.

The dividend you receive is then taxed in Spain as savings income, but you can deduct the German withholding already paid so you do not pay tax twice on the same amount.

Capital gains and other income

Gains from the sale of holdings in the GmbH are taxed, as a general rule, in the seller's country of residence. If you sell your holdings while living in Spain, you will be taxed here.

The exception is real estate: if the company's value comes mainly from property located in Germany, Germany can tax the capital gain.

Employment income, pensions and income from business activities also have their own rules in the treaty, linked to concepts such as the permanent establishment and the number of days of presence.

How it is applied: the tax residence certificate

To benefit from the reduced rates you must prove to the payer (or to the German authority) that you are a tax resident in Spain. This is done with the tax residence certificate issued by the AEAT.

In Germany it is submitted to the Bundeszentralamt für Steuern (BZSt), together with the Spanish certificate, so that your GmbH applies the reduced source withholding. Without this step, the withholding is applied at the full domestic rate.

If you have already been over-withheld, you can request a refund of the excess from the German administration. At Filnet we manage this step as part of the monthly tax plan; write to us at hola@filnet.app if you need it.

How the Spain-Germany double taxation treaty avoids paying twice

The treaty eliminates double taxation through two methods: exemption (the income is only taxed in one country) and credit (it is taxed in both, but the country of residence credits the tax paid in the other).

Spain generally applies the credit method: you include the income in your Spanish tax base and credit the tax paid in Germany, up to the limit of what would correspond to pay in Spain on that same income.

The practical result is simple: you pay the higher of the two taxes, but never the sum of both. Having the treaty correctly applied is as important as choosing the right corporate structure.