Yes there is Spanish withholding tax. It applies not only to dividends but also to all capital gains on the sale of any Santander ADR shares (since they represent shares in Spain). The withholding tax rate was raised from 18% to 19% effective as of January 1, 2010.
While you can claim the withholding amount on your federal return as a foreign tax credit (assuming you have federal income tax to pay since it is not a 'refundable' credit like the recent homebuyers giveaway), the actual dollars end up in Spanish coffers. (Why do you think Spain was behind Santander's expansion in the US?)
From a policy point of view as an AMERICAN taxpayer I would prefer that my tax dollars remain in this country and are applied to our deficits instead being sent overseas to support a foreign government. Thus with Santander's purchase of Sovereign not only did we sell out the largest savings and loan in the US into FOREIGN CONTROL but with the dividend withholding we are now indirectly helping pay for that takeover as well (sort of a backdoor LBO).
Who cares? You are getting a dividend from a SPANISH COMPANY, so why should the cap gains taxes not go to SPAIN? BTW, I am American and I have no problem w/ paying the Spanish govt taxes on divs from a Spanish company. I'm sure the US gets lots of tax dollars from cap gains taxes paid by foreigners on US-based investments. Besides, I like Spain - it's nice there.