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In brief

On 26 February 2021, the new Tax Convention for the Elimination of Double Taxation signed between Spain and Japan (“New Tax Convention“) was published in Spain’s Official State Gazette.

The New Tax Convention is generally aimed at adapting its previous version to the most recent standards issued by the Organization for Economic Cooperation and Development (OECD) and, in particular, the Model Tax Convention published in 2017 by the OECD (“Model OECD“).

Main features

Below we include some of the most relevant developments that the New Tax Convention includes:

  • New definitions of “business” and “recognized pension fund” are included. The latter definition has relevant implications for residence, dividends and entitlement to benefits purposes.
  • Those individuals subject to tax in a state exclusively on income obtained from that state will not be deemed “residents.” In addition, “place of effective management” is seen as a factor when solving by mutual agreements those enterprises’ dual tax residence situations.
  • The “permanent establishment” definition is adapted to the Model OECD, with major developments in the fields of “preparatory or auxiliary activities” and “dependent agents.”
  • Taxation of dividends is significantly improved, including a new 5% reduced tax rate (15% before) and a new exemption (a 10% taxation existed). A new exemption will apply when the stake in a dividend’s payer meets certain conditions or when dividends are received by a “recognized pension fund.”
  • Taxation of interests, royalties and capital gains is adapted to the Model OECD, including a new general exemption regarding the first two incomes (a 10% taxation existed before) and a new taxing right over capital gains derived from “real estate-orientated companies.”
  • Mechanisms to eliminate double taxation and mutual agreement procedures are further developed in detail, as well as the clauses of nondiscrimination and exchange of information. Likewise, a new clause limits the entitlement to benefits of the New Tax Convention.

In practice

The New Tax Convention will enter into force on 1 May 2021 and it will generally have effect from 1 January 2022 onward, although clauses regarding exchange of information and assistance in the collection of taxes will have effect from 1 May 2021.

The New Tax Convention introduces major tax rules in comparison with its prior version, with the aim of boosting economic exchanges between both countries and facilitating the cooperation between both tax authorities. Because of this, it is key for companies to review the taxation of their investments in light of the new tax rules that the New Tax Convention includes.

Click here to access the Spanish version: España: el nuevo Convenio con Japón entrará en vigor en dos meses


Isabel de Otaola has been a partner at Baker McKenzie’s Madrid office since 1999. She is a member of the Firm’s European Tax Practice Group. She is also active in the Tax Planning and Employee Benefits subgroups, as well as in the Global Reorganizations Practice Group. She regularly lectures in various conferences and seminars, and has authored several publications and articles, particularly for BNA’s Tax Management International Forum. Ms. de Otaola is also a certified public accountant from the Instituto Censores Jurados de Cuentas, and is a member of the Madrid Bar Association.


Ana Royuela is a partner in Baker McKenzie’s Tax Practice Group in Barcelona. She regularly handles complex tax matters, as well as tax controversies and litigation. Ms. Royuela has spoken at local and international conferences and client seminars on topics related to her field. She has contributed articles on indirect taxation and tax proceedings to various economic journals, including BNA International Indirect Taxes Journal and lectured on public tax administration. She joined the Firm in 1999.


Javier Esain is an Associate in Baker McKenzie Madrid office.


Javier Blázquez is a Partner in Baker McKenzie, Barcelona office.