Before the 2015 reforms, dividends in Spain were an investment strategy that allowed tax savings (the first €1,500 were exempt from taxation). After changes, dividend taxation in Spain no longer has great advantages compared to other savings and investment products. Currently, taxes must be paid on the entire amount received without any exemptions.
Dividend taxation in Spain depends on the method of payment. From the tax authority’s point of view, receiving dividends in cash is different from receiving them in shares.
When filing your tax declaration, you must separately account for profits from selling shares and for income received in the form of dividends.
Cash Dividends Taxation
Dividends are taxed as capital income under savings income.
This means that money from stock dividends will be added to income from deposits, current accounts, or government bonds, and taxed at the following rates:
- Up to €6,000 — 19%
- From €6,000 to €50,000 — 21%
- From €50,000 to €200,000 — 23%
- From €200,000 to €300,000 — 27%
- Over €300,000 — 28%
The same taxation applies to cash dividends from unlisted companies. It doesn’t matter whether the company is listed or not. Shareholders of limited liability companies (sociedad limitada) may apply a deduction to avoid double domestic taxation of dividends — so as not to pay taxes twice: first corporate income tax, then IRPF (personal income tax).
All dividends from Spanish listed companies are taxed under IRPF at 19%, while dividends from foreign companies are withheld at the rate established in the country of origin.
Dividends Paid as Shares
Dividends paid in the form of shares have become popular via so-called scrip dividends, where a company offers the option to receive dividends as shares through subscription rights.
In that case, taxation is deferred until the new shares are sold. In other words, you don’t pay tax when you receive the shares.
When you sell those shares, taxation will be the same as for any other shares, treated as capital gain or loss. It’s important to correctly establish the acquisition cost.
Example: Taxation of Dividends as Shares
A concrete example: You originally bought 300 Santander shares at €4.50 (cost €1,350), which later entitle you to receive 2 additional Santander shares as dividends.
The tax authority will not withhold anything for these new shares at the moment of receipt. Suppose you held them in your portfolio one year. Then you decide to sell when the shares are worth €7 each.
To determine capital gain, you must first calculate the purchase price by dividing €1,350 by 302 (original shares plus dividend shares). The result is an acquisition cost of approximately €4.47 per share, and capital profit is computed on that basis.
In this example, the transaction yields a gain of about €764.06, for which you owe €145.17 in tax.
Dividends from Funds and Other Financial Products
Dividends can come not only through stocks. There are other financial products that invest in equities and pay dividends to participants.
The key is whether the fund is distributing or accumulating. If it distributes dividends from the portfolio to participants, those dividends are taxed as ordinary dividends.
In other words, dividends from an investment fund are considered capital income and taxed at 19%.
For accumulating (non‑distributing) funds, you do not pay tax as an investor because the income has not reached your account yet.
ETF dividends are treated similarly: if an ETF pays dividends, those are taxed as capital income.
For a regular investor, dividends from a SOCIMI (a type of real estate investment trust) are taxed like any other company dividend — as savings income at 19%.
Withholding Tax on Dividends
Dividend payouts may or may not be subject to IRPF withholding depending on how they are received and who receives them.
When dividends are distributed, the company should withhold IRPF and remit it within required deadlines.
The general rule is that dividends are subject to IRPF withholding at 19%.
Exceptions to IRPF Withholding on Dividends
These exceptions depend on who is receiving the dividends, whether a limited company or individual investor.
- If the recipient is an individual, the standard IRPF rate is 19%, except when the dividends are in the form of shares—those are not taxed until sold.
- If the recipient is a company with less than 5% ownership, the 19% rate applies.
- If the recipient is a company owning 5% or more, no IRPF is withheld, provided that the shareholding has been held for more than one year.
Double Dividend Taxation
Every country has its own tax laws concerning companies and dividends.
For example: a Spanish company in the IBEX must withhold tax at 19% on dividends paid. A German company would possibly have 26.375%. This creates double dividend taxation, meaning taxes are paid twice on the same income (domestic withholding + IRPF).
In theory, tax is paid in the country of origin, and also in Spain at the minimum 19%. But double tax treaties often allow relief.
Spain’s autonomous tax treaties usually stipulate that the withholding on foreign dividends should be around 15%.
How to Recover Withholding
If a double taxation treaty exists, you may recover 15% according to the treaty when filing your tax return. This is done via declaration form where you declare source withholding.
If there is no treaty, you may still recover tax, although the process is more complex. Generally, the Spanish tax authority allows reclaiming the lesser of the foreign withholding or the equivalent tax in Spain. It’s also advisable to review digital nomad tax rules in Spain, which sometimes provide alternative, more favorable tax treatments for remote income.
