🇵🇹 Portugal — 🇪🇸 Spain

Tax Treaty / Double Tax Avoidance Agreement detail

Signed in Madrid on 26 October 1993 and entering into force on 28 June 1995 (effective 1 January 1996), the Portugal-Spain Convention for the Avoidance of Double Taxation follows the OECD Model closely. The two countries share one of Western Europe's longest land borders, producing significant cross-border economic activity — particularly between Galicia and northern Portugal, and between Extremadura and Alentejo — making this treaty practically important for individuals and businesses on both sides. Dividends may be taxed in the source state at a maximum rate of 10% where the beneficial owner holds at least 25% of share capital, and 15% in all other cases; EU Parent-Subsidiary Directive and Interest-and-Royalties Directive substantially reduce or eliminate these rates for qualifying intra-group flows. Interest is capped at 15% and royalties at 5% at source. Portugal's Non-Habitual Resident (NHR) regime historically attracted Spanish, French, and Italian retirees and high earners to Portugal by offering a flat 20% rate on Portuguese-source professional income and exemptions on most foreign-source income; NHR was closed to new applicants from 1 January 2024 and replaced by the much narrower IFICI (Tax Incentive for Scientific Research and Innovation), reducing Portugal's inbound appeal for retirees. Spain's Beckham Law (Régimen Especial de Trabajadores Desplazados) continues to offer inbound assignees a flat 24% rate on Spanish-source income. The treaty includes cross-border worker provisions of particular relevance to daily commuters across the Galician and Extremaduran borders. Both Portugal and Spain have signed and ratified the OECD Multilateral Instrument (MLI), which modifies the treaty to introduce the Principal Purpose Test anti-avoidance rule and make mandatory binding arbitration available for unresolved competent-authority cases. Social security coordination operates via EU Regulation 883/2004 rather than a bilateral totalization agreement. The treaty is of consistent interest to property investors moving capital between the two Iberian markets, given specific source-state taxing rights over real estate gains.