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An analysis by Garrigues, Taxand Spain
A recent Spanish Supreme Court ruling confirmed that when the EU Interest and Royalties Directive cannot be applied because the recipient of royalties is not the “beneficial owner,” the Spanish domestic withholding tax rate should be used instead of the reduced rate from the Spain-Netherlands Tax Treaty. The Court emphasised the primacy of EU law, requiring domestic law to take precedence over the treaty rate.
The Supreme Court’s decision has sparked debate, as it suggests a conflict between EU directives and tax treaties, which are traditionally seen as complementary. The judgment raises concerns about legal certainty, especially regarding the application of anti-abuse measures and the interpretation of beneficial ownership in tax treaties.
Rafael Calvo Salinero from our Spanish member firm Garrigues has analysed this ruling in further detail here.
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