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Spain, US Sign DTA Protocol

by Ulrika Lomas,, Brussels

21 January 2013

Spain's Finance Minister Cristobal Montoro and the US Ambassador to Spain Alan Solomont have recently signed a protocol modifying the existing agreement between Spain and the US aimed at avoiding double taxation and preventing tax evasion.

The text, which must now be ratified by the respective national legislatures of both contracting states, replaces the existing agreement dating from February 22, 1990, and is due to enter into force three months after the ratification date.

Following the signing, both ministers underlined the importance of the accord, designed to strengthen the already close commercial relations between the two countries and to boost investment.

The protocol provides notably for improvements in the treatment of dividends, interests, royalties, and capital gains, and as well as for improvements as regards tax information exchange.

According to Spain's Secretary of State for Finance Miguel Ferre, the signed protocol reinforces legal certainty for companies and places the framework of the agreement with the US on a par with similar treaties negotiated with Spain's preferred partners in Europe.

Commenting, the US treasury explained: "Significantly, the new protocol provides for exclusive residence-country taxation of interest, royalties, certain direct dividends and capital gains. In addition, consistent with a number of recent US tax treaties, the new protocol provides for resolution through mandatory binding arbitration of certain cases that the revenue authorities of the United States and Spain have been unable to resolve after a reasonable period of time."

It added: "The new protocol contains a comprehensive limitation on benefits provision that is intended to ensure that only residents of the United States and Spain will enjoy the benefits of the treaty. The new protocol also provides for the full exchange of information between the competent authorities to facilitate the administration of each country's tax laws."

The signing of the protocol follows the announcement in December 2012 that representatives of the US and Spanish government initialed an inter-governmental agreement to implement the Foreign Account Tax Compliance Agreement provisions.

TAGS: tax | investment | double tax agreement (DTA) | interest | royalties | law | agreements | Spain | United States | dividends

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