The refund of withholding taxes to non-residents in Spain is gaining prominence in international taxation following several recent rulings by Spanish courts.
Essentially, Spain has made a significant shift by allowing foreign investors to claim refunds of withholding taxes levied at source in tax years for which the statute of limitations has not expired. This change in case law corrects a situation that for years created tax disparities between residents and nonresidents.
The new doctrine is consistent with the European principle of the free movement of capital and presents a significant opportunity for international funds, foreign companies, and financial institutions that have been subject to withholding taxes on dividends, interest, or royalties generated in Spain.
Withholding Taxes in Spain and Their Impact on Foreign Investors
Withholding taxes are advance tax payments applied to certain types of income earned in Spain, including:
- Dividends.
- Interests.
- Royalties
Until now, the regulations governing the Nonresident Income Tax (IRNR) treated these withholdings as final for foreign investors, even when the taxpayer could not offset them in their country of residence.
In contrast, a company resident in Spain could offset losses and, in certain cases, recover withholdings through internal adjustment mechanisms.
This difference created a clear competitive disadvantage for foreign investment and has been one of the factors behind the recent change in policy regarding the refund of withholding taxes to nonresidents.
New Case Law Ruling on Withholding Taxes on Nonresident Investors
In 2025, key rulings by the National Court and the Central Economic-Administrative Court (TEAC) marked a turning point in the treatment of withholding taxes applied to foreign investors.
These rulings recognize that denying the refund of withholding taxes to non-residents of Spain in situations comparable to those of residents may constitute a restriction on the free movement of capital.
Article 63 of the Treaty on the Functioning of the European Union (TFEU) prohibits unjustified restrictions on the movement of capital within the single market.
Under this interpretation, if a foreign investor is in a financial situation comparable to that of a resident who would be eligible for a refund of the withholding tax, a refusal to grant such a refund may be considered discriminatory.
This change in policy paves the way for potential claims regarding historical withholding taxes that are not time-barred, which may allow certain foreign investors to request a refund of amounts withheld in prior tax years.
When Can Non-Residents Claim a Refund of Withholdings in Spain?
Foreign investors who meet the following criteria may assess the feasibility of requesting a refund of withholding taxes from non-residents in Spain:
- They have been subject to withholding taxes on dividends, interest, or royalties generated in Spain.
- They are in a situation of tax losses or have been unable to offset those withholdings in their country of residence.
- They can demonstrate that their situation is comparable to that of a taxpayer residing in Spain.
- They must fall within the applicable statutory limitation period.
Each case must be evaluated on a case-by-case basis, as the application of this criterion will depend on the investor’s specific tax situation and developments in case law regarding withholding taxes on non-residents.
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Procedure for Claiming a Refund of IRNR Withholdings
Although the legal doctrine has evolved, the refund of withholdings to non-residents in Spain still requires following the corresponding administrative procedure under the Non-Resident Income Tax (IRNR) regulations.
1. Filing Form 210
Form 210 is the official form used by nonresident taxpayers to request refunds under the IRNR.
2. Documentary Evidence
To process the refund request, you must submit, among other documents:
- Certificate of Tax Residency.
- Documentation verifying the withholding that was made.
- Justification that the investor’s situation is comparable to that of a resident taxpayer.
3. Meeting Deadlines
Claims must be filed within the applicable tax statute of limitations; therefore, it is essential to act promptly to avoid losing the right to request a refund of withholdings.
The FASTER Directive and the Future of Cross-Border Tax Refunds
In December 2024, the European Union adopted Directive (EU) 2025/50, known as the FASTER Directive, which aims to simplify and expedite the procedures for refunding withholding taxes on cross-border transactions, particularly for non-resident investors.
Member States have until 2028 to transpose this directive into their respective national laws, with the provisions set to take effect in 2030.
Although its practical implementation will still take some time, the FASTER Directive aims to bring about greater harmonization of withholding tax refund procedures within the European Union and a more efficient tax framework for international investments.
Benefits for Foreign Investors and International Funds
Reducing Tax Asymmetries
Developments in case law make it possible to correct the structural disadvantage that nonresident investors have faced for years compared to entities resident in Spain with regard to withholding taxes applied to certain types of income.
Greater appeal for foreign investment
The option for non-residents in Spain to request a refund of withholding taxes enhances the country’s appeal as an investment destination, particularly for international funds, foreign companies, and other entities that earn income in Spain.
Greater legal certainty
The convergence between national case law and the principles of European Union law helps to provide greater predictability in international taxation and in the treatment of withholding taxes applicable to foreign investors.
Conclusion: A New Opportunity in International Taxation That Should Not Be Missed
Developments in Spanish case law mark a milestone in the taxation of nonresidents. The possibility for nonresidents in Spain to request a refund of withholding taxes—even for prior tax years not yet subject to the statute of limitations—corrects a situation that for years led to unequal tax treatment of foreign investment.
In addition to the European push to harmonize and simplify tax refund procedures, this new landscape presents a strategic opportunity for international companies and investors with economic interests in Spain.
In this context, reviewing withholding taxes paid in prior fiscal years and analyzing the feasibility of potential claims before the statute of limitations expires can result in a significant financial impact.
Frequently Asked Questions About Withholding Taxes for Non-Residents in Spain
Can a foreign investor claim withholding taxes in Spain?
Yes. Recent developments in case law allow nonresident investors to request a refund of withholding taxes when they are in a situation comparable to that of a resident and there is tax discrimination that is contrary to the free movement of capital.
What is the statute of limitations for claiming tax withholdings in Spain?
Refunds must be requested within the applicable tax statute of limitations, which is generally four years from the date the withholding was made.
What form is used to request a refund of withholding taxes?
Refunds of withholding taxes under the Nonresident Income Tax system are normally processed using Form 210, along with documentation proving the withholding and the taxpayer’s tax residency.
Can you only claim withholding tax on dividends?
Not necessarily. Depending on the circumstances, claims may also affect interest, royalties, or other income subject to withholding tax.
Is the refund automatic?
No. You must initiate a formal administrative proceeding and submit the relevant supporting documentation.
How long does it take to get a refund?
The timeframe depends on the applicable administrative procedure and the complexity of the specific case.
