New Convention between Spain and the Netherlands to avoid double taxation

Key tax aspects and main developments of the new convention

On 10 March 2026, the Council of Ministers authorized the signing of a new Agreement between the Kingdom of Spain and the Kingdom of the Netherlands to avoid international double taxation. 

This new Agreement will replace the current one, signed in 1971, and responds to the need to adapt bilateral tax relations to current international standards, in line with the recommendations of the Organisation for Economic Co-operation and Development (OECD).

The main objective of the Agreement is to eliminate international legal double taxation and, at the same time, strengthen mechanisms to prevent situations of non-taxation or reduced taxation arising from aggressive tax planning practices. It also seeks to promote international investment and strengthen economic relations between the two States, providing a safer, more predictable, and transparent framework for individuals and entities operating in the economic sphere.

Among the most relevant updates in the Agreement is the inclusion of a new rule allowing the country of origin (source country) to tax real estate capital gains derived from the sale of shares in companies whose value is primarily based on real estate located in its territory.

Accordingly, in companies whose market value comes mostly from real estate, both Spain and the Netherlands will be able to tax the gains obtained from the sale of these shares, whereas previously this authority rested solely with the country of residence of the taxpayer.

According to Article 13(4) of the OECD Model Convention, this criterion is considered met when more than 50% of the company’s market value corresponds to real estate in the source country. 

Furthermore, the new double taxation agreement includes key updates to align with BEPS (Base Erosion and Profit Shifting) standards, an OECD initiative aimed at preventing companies from shifting profits to low-tax jurisdictions by exploiting legal loopholes. Among these updates, the treaty regulates income earned through fiscally transparent entities, introduces a principal purpose test (principal purpose test) anti-abuse clause, and limits benefits when income is attributed to permanent establishments in third countries with low taxation.

The new treaty has already been agreed upon by both jurisdictions and has received authorization from the Spanish Council of Ministers for signing. After signing, it must be approved and ratified by the parliaments of both countries before coming into force.