On March 10, 2026, the Spanish Council of Ministers approved the signing of a new double tax treaty between Spain and the Netherlands, formally replacing the current agreement signed in 1971, one of the oldest treaties in Spain’s tax treaty network. This step confirms earlier announcements made by the Dutch Ministry of Finance on March 14, 2024, and February 19, 2025, which indicated that the Dutch government had approved the tax treaty and would proceed with its signing in due course.

Although the final wording of the tax treaty has not yet been published, the new agreement is expected to have a significant impact on Spanish real estate investments structured through Dutch entities. Under the current tax treaty, capital gains derived from the disposal of shares in Spanish property rich companies are generally exclusively allocated to the Netherlands. In practice, this has meant that, where the Dutch participation exemption applies, such gains are typically not taxed in the Netherlands.

Once the new tax treaty enters into force, capital gains derived from the transfer of shares in Spanish property rich entities may become taxable in Spain, aligning the Spain–Netherlands tax treaty with the approach adopted in most of Spain’s tax treaties. This change could have a material impact on after-tax returns modeled by Dutch investors and should therefore be closely monitored for the purposes of future exits.

In this context, it should be noted that, even under the current treaty (1971), the Spanish tax authorities have in recent years adopted an increasingly restrictive approach to the application of the Spain–Netherlands double tax treaty in situations involving capital gains obtained by Dutch holding entities with limited functional profiles, decision making capacity or economic substance. In this regard, the Spanish tax authorities had taken the view in certain cases that meeting the so-called Dutch domestic minimum substance requirements, or the mere existence of a certain level of economic activity under Dutch regulations, does not itself guarantee access to tax treaty protection.

Finally, the new tax treaty is expected to incorporate updated international standards in line with the OECD BEPS project, including robust anti treaty shopping provisions (Action 6) and enhanced dispute resolution mechanisms, including mandatory arbitration (Action 14). Other notable features are expected to include specific rules addressing income derived through fiscally transparent entities, the inclusion of a principal purpose test (PPT), and limitations on tax treaty benefits where income is attributable to permanent establishments located in third jurisdictions with low levels of taxation.

How Can A&M Help?

The expected changes compared to the current tax treaty between the Netherlands and Spain can have a significant impact on investment returns. If you would like to discuss the impact of this development on your investment structure(s) and potential solutions, please contact your usual A&M adviser, Borja Escrivá de Romaní or Nick Crama.