🇪🇸 Spain — 🇮🇹 Italy

Tax Treaty / Double Tax Avoidance Agreement detail

The Spain–Italy Convention for the Avoidance of Double Taxation was signed in Rome on 8 September 1977 and entered into force on 24 November 1980 (published in the Spanish BOE on 22 December 1980). The treaty follows the OECD Model of its era and sets maximum withholding rates of 15% on dividends, 12% on interest, and 4% on copyright royalties / 8% on other royalties. In practice, intra-EU transactions are often governed by more favourable EU directives: the Parent-Subsidiary Directive eliminates withholding on qualifying dividend flows between EU-resident companies, while the Interest and Royalties Directive removes withholding on inter-company interest and royalty payments between associated EU entities, making treaty rates largely relevant only for portfolio investors and non-qualifying corporate structures. Both Spain and Italy have signed and ratified the OECD Multilateral Instrument (MLI), which modifies the 1977 treaty to include a Principal Purpose Test anti-avoidance clause and introduces mandatory binding arbitration for unresolved mutual agreement procedure cases. The permanent establishment definition has been updated under the MLI to close commissionnaire and anti-fragmentation loopholes. For individuals relocating between the two countries, the treaty is particularly relevant in conjunction with Spain's Beckham Law regime (flat 24% tax on Spanish-source income for qualifying inbounds) and Italy's impatriate regime (50–90% income exemption for qualifying workers relocating to Italy), since the treaty's tie-breaker rules determine which state has primary residence taxing rights. Social security coordination between Spain and Italy is governed separately by EU Regulation 883/2004, which ensures workers pay contributions in only one state at a time and aggregates contribution periods for pension entitlement, superseding any bilateral social security agreements. The treaty's anti-treaty-shopping provisions have been reinforced by the MLI, and both tax authorities actively apply the OECD commentary on beneficial ownership.