The double tax treaty Spain and South Korea

 

The Double Tax Treaty between Spain and South Korea has entered into force on 21st of November in 1994, the primary objective is to avoid International Juridical Double Taxation and to eliminate or prevent the negative impact of Double Taxation by allowing the tax paid in one of the two countries (Spain and South Korea) to be offset against the taxes payable in the other country[i].

The Double Tax Treaty (Double Taxation Agreement, DTA) reduces tax impediments to cross-border trade and investment and assist tax administration in both Spain and South Korea. The Double Tax Treaty (Double Taxation Agreement, DTA) between Spain and South Korea has provided numerous new opportunities for both inward and outbound investment. Although countries like Spain and South Korea are around 10.179 km (map data 2017) away from each other, Spain and South Korea have concluded Tax Treaties (Double Taxation Agreement, DTA) with each other for the purposes of avoiding Double Taxation of personal / corporate income internationally and preventing tax evasion; in other words, the taxation authorities Spanish Tax Agency (Agencia Tributaria) and South Korea National Tax Service (NTS) exchange information about such declarations, and so may investigate any anomalies that might indicate tax evasion.[ii]

According to the stipulations of the Treaty, the following Tax Treaties, which are the most important and biggest ones that are dealt with between Spain and South Korea, are carried out by the local authorities and in accordance with the local legislation:

The taxes to which this Convention shall apply are:

  • In the case of Korea:

(ⅰ) The income tax (소득세)

(ⅱ) The corporation tax (법인세)

(ⅲ) The inhabitant tax (주민세)

  • in the case of the Spain:

(ⅰ) The income tax on individuals (el Impuesto sobre la Renta de las persons fisicas)

(ⅱ) The corporation tax (el Impuetto Sobre Sociedades)

(ⅲ) The local tax on the increase of value of urban land[iii]

Tax Treaties serve purposes such as promoting exchanges of advanced technology and capital from abroad as well as encouraging business expansion of domestic companies in foreign countries. There are various limitations on these withholding taxes for residents of countries with a Tax Treaty with South Korea. For dividends, interest, and royalties, the withholding tax rates are limited as follows for Spain. (The domestic withholding tax rate will apply if it is lower than the treaty rate.) [iv]

Dividends (%)Interest (%)Royalties (%)
South Korea – Spain10,151010

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[i] Double Taxation Agreements and Your China Investment Strategy – China Briefing

[ii]Darren Rykers (2009): A Critical Analysis of how Double Tax Agreements can facilitate Fiscal Avoidance and Evasion; The Taxpayer and the Lotus, 17 Nov.2009.

 [iii]National Tax Service South Korea

 [iv] PKF Worldwide Tax Guide 2015/16