In order to substitute the in force, however, partially obsolete double taxation treaty between Germany and Spain of 1966, the German Finance Minister and the Spanish Vice President signed a new double taxation treaty in the context of the German-Spanish Summit held in February 2012.
In July of this year the ratification process was completed and the new treaty shall enter into force on 18th October 2012. Nevertheless, in accordance with what is established in article 30 thereof, the provisions of the agreement shall not be generally effective until 1st January 2013.
One of the aims of updating the Agreement is the adaptation of the existing clauses to the necessities derived from current economic and commercial relations between Spain and Germany. Likewise, one objective was to modify the structure and contents of the treaty so that it would correspond to the Standard Agreement for the evasion of double taxation of the Organisation for Economic Co-operation and Development (OECD).
The treaty shall be applied to the following Spanish taxes: Personal Income Tax, Corporate Tax, Non-resident Personal Income Tax and Wealth Tax and local taxes on income and wealth. In Germany the treaty shall be applied to the following taxes: Income Tax (Einkommenssteuer), Corporate Tax (Körperschaftssteuer), Tax on Commercial and Professional Activities (Gewerbesteuer) and Wealth Tax (Vermögenssteuer).
Likewise, the innovations introduced by the new treaty in the article regarding capital gains should be pointed out (article 13).
Article 13.1 of the 1966 treaty already anticipated that earnings derived from the disposal of real estate property may be subject to taxation in the contracting State where the property is situated and not in the state of residence of the seller.
With the introduction of sections 13.2 and 13.3, the new treaty applies the same rules to earnings derived from the disposal of shares or participations in a company, or similar rights, the assets of which consist of at least 50%, either directly or indirectly, in real estate property; likewise earnings derived from the disposal of shares of participations or other rights which, directly or indirectly, grant the owner of such shares, participations or rights, the right to enjoy the property. In both cases, the taxation is applied in the state where the real estate property is situated.
For more information, please contact:
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