Spain-France double taxation treaty

What is the Spain-France double taxation treaty?

The Spain-France double taxation treaty is the agreement signed between both countries to share the power to tax the income generated between them. It was signed on 10 October 1995 and follows the OECD model: it assigns each country what it can tax and limits source withholdings.

In practice, if your French company distributes dividends or pays interest or royalties to Spain, the treaty sets a maximum withholding rate lower than what France would apply under its domestic rules. To benefit, you must prove your tax residence in Spain.

The mechanism for eliminating double taxation combines the exemption and credit methods depending on the type of income: Spain usually applies exemption with progression, while France recognises a tax credit for the tax paid in Spain.

Dividends: the withholding your SAS pays

France applies by default an internal withholding of 25% to dividends paid to non-residents. The Spain-France double taxation treaty reduces it to 15% as the general maximum rate.

If the recipient is a Spanish company holding a stake in your SAS, you can reach 0%. The EU parent-subsidiary Directive exempts dividends from withholding when the parent holds at least 10% of the subsidiary's capital uninterruptedly for a minimum period.

• General dividends: maximum withholding of 15% at source
• Spanish parent company with ≥10% of the SAS: 0% (parent-subsidiary Directive)
• Without a treaty or directive: the internal French 25% would apply

Interest and royalties: reduced rates

The treaty also limits the withholding on interest and royalties that your French company pays to residents of Spain.

If the two companies are associated —with a direct holding of at least 25%—, the EU Interest and Royalties Directive allows these payments to flow without withholding between France and Spain.

• Interest: a maximum of 10% under the treaty
• Royalties: a maximum of 5% under the treaty
• Associated EU companies (≥25%): 0% under the Interest and Royalties Directive

Capital gains and other income

Capital gains follow the usual OECD model rules: those derived from real estate are taxed in the country where the property is located, and those from holdings in companies whose assets are mainly real estate may be taxed where the company resides.

The rest of capital gains —for example, the sale of shares in your SAS when it is not a real estate company— is taxed in the seller's country of residence. This is key if you plan to transfer the company or part of it.

How to apply the treaty: tax residence certificate

For France to apply the reduced treaty rates of the Spain-France double taxation treaty, you must prove that you are a tax resident in Spain. The tax residence certificate is issued by the Tax Agency (AEAT) using form 01, both in person and electronically.

That certificate is submitted to the French administration together with the corresponding forms (5000 for dividends, 5001 for interest and 5002 for royalties). Without this step, the withholding is applied at the internal rate of 25%, and recovering the excess later requires a refund procedure.

At Filnet we process the residence certificate and coordinate the documentation with your advisor in France so you apply the correct withholdings from the first distribution.