On numerous occasions, individuals and entities may be exposed to being taxed on the same income, profit, or asset in more than one country due to discrepancies in tax regulations between jurisdictions. This tax issue can generate a duplicate tax burden, negatively impacting those individuals and legal entities that carry out their operations internationally.
For this, it is essential to put in place measures to prevent international double taxation in the tax area, ensuring fairness and efficiency in the taxation of income that could be taxed in more than one country. These measures are mainly divided into unilateral and bilateral measures.
Unilateral measures refer to decisions taken individually by individual states within the scope of their domestic legislation. In the context of Spanish legislation, this includes the provision on the deduction for international double taxation, applicable to both natural and legal persons, and regulated in the Personal Income Tax (IRPF) and Corporate Income Tax (IS) regulations, respectively.
Bilateral measures arise from the collaboration between two States that sign a Double Taxation Avoidance Convention (DTA). These agreements seek to clarify and unify the tax situation of individuals and entities involved in international activities. The Double Taxation Conventions, of which Spain has signed several with different countries, seek to address and resolve these issues. The provisions established in these treaties and conventions take precedence over domestic tax regulations, being automatically and compulsorily applicable, with no possibility of waiver.
The provisions established in these treaties and conventions take precedence over domestic tax regulations, being automatically and compulsorily applicable, with no possibility of waiver. The Double Taxation Conventions, of which Spain has signed several with different countries, seek to address and resolve these issues. Therefore, the first step in determining the tax treatment of income obtained in Spain by a non-resident is to identify the country of tax residence and verify the existence and content of the Double Taxation Agreement with that country, in order to define the tax treatment corresponding to that income.
In conclusion, international double taxation involves complex challenges for individuals and entities with international operations. Both unilateral and bilateral measures are essential pillars to ensure fairness and efficiency in cross-border taxation, preventing duplication of tax burdens and establishing a robust framework to address tax complexity in an international environment.
Sandra Gámez Chaves