Japan and Spain signed a new tax treaty on October 16. The tax treaty wholly amends the existing tax treaty between Japan and Spain, which entered into force in 1974.
As per the new tax treaty, a withholding tax exemption applies to investment income from interest and royalties. Withholding tax on dividends is also exempt in certain situations.
Only residents who satisfy specified conditions, such as qualified persons, may be entitled to the exemption from tax on investment income.
Further, any benefit under the tax treaty will not be granted if it is reasonable to conclude that obtaining such a benefit was one of the principal purposes of any transaction.
Under the tax treaty, mutual agreement procedure cases not resolved within two years shall be resolved using arbitration.
Finally, the new tax treaty expands the provisions on exchange of information concerning tax matters and introduces new provisions on mutual assistance in the collection of tax claims.