Executive summary

On 10 March 2026, the Spanish Council of Minister authorized the signature of the new tax treaty between Spain and the Netherlands. Once signed and in force, it will replace the treaty originally concluded in 1971.¹

The new agreement introduces significant changes that align its provisions with current Organization for Economic Co-operation and Development (OECD) international tax standards and trends.

One of the most notable new provisions grants taxing rights to the source country on capital gains from disposing of shares in entities that derive their value primarily from immovable property located in that jurisdiction. This represents a significant shift for cross-border real estate structures and investment planning.

Taxation of real estate-rich entities at source

Under the new treaty, gains arising from disposing of shares in companies with more than 50% of their fair market value attributable to real estate located in the source country will be taxable in that jurisdiction. This provision follows Article 13(4) of the OECD Model Convention and aims to ensure that taxation occurs where the underlying economic value is situated.

Previously, such gains were generally taxable only in the transferor's country of residence. Many investors channel Spanish real estate investments through Dutch holding structures. The new treaty affects these structures by granting both Spain and the Netherlands the right to tax these gains locally.

Other relevant provisions

The new treaty aligns with BEPS minimum standards by introducing a Principal Purpose Test (PPT) clause, an arbitration mechanism and specific provisions for income earned through tax-transparent entities. It also regulates triangular cases involving low-taxed permanent establishments in third countries.

Status and timelines

Representatives from both jurisdictions have already agreed to the new treaty, and the Spanish Council of Ministers has authorized its formal signature. Once signed, the new treaty must undergo parliamentary approval and ratification procedures in both countries.

The treaty will enter into force once both Spain and the Netherlands complete their respective ratification processes and exchange instruments of ratification.

The new source-taxation provisions will generally apply from 1 January of the year following the treaty's entry into force, in line with standard treaty application rules.

Taxpayers should monitor the progress of the ratification processes in both jurisdictions, as timing will determine when gains from disposals of Spanish real estate-rich entities become subject to source taxation.

Implications

Investors using Dutch intermediate holding companies to own Spanish real estate assets may face source-country taxation upon exit. Determining whether more than 50% of an entity's value derives from real estate will require robust documentation and periodic asset composition reviews. Investors may need to revisit existing structures, consider alternative jurisdictions or explore restructuring options to optimize tax efficiency under the new regime.