Protocol to United States-Spain income tax treaty is signed 

Read the Protocol [PDF 86 KB]

According to a U.S. Treasury Department release, the Protocol—once ratified—amends the 1990 income tax treaty to bring the treaty in line with current tax treaty policy and includes:

• Provisions setting forth the exclusive residence country taxation of (i.e., a zero (0%) withholding tax rate on) interest (subject to certain exceptions), royalties, and capital gains
• A new dividends article (Article 10) providing new reduced rates on dividends, including the availability of a zero (0%) rate for dividends for companies that (1) hold shares representing 80% or more of voting power in the subsidiary; (2) hold such shares for a minimum 12-month holding period; and (3) satisfy one of certain designated limitation on benefits (LOB) tests in the LOB article
• Similar reduced rates for branch profits tax
• A new “comprehensive” LOB article
• A new special residency provision for fiscally transparent entities
• Measures for resolving 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
• Exchange of information provisions by the Competent Authorities in each country to facilitate tax administration in each country

Entry into force, effective date

The Protocol will enter into force three months after both countries satisfy their respective internal ratification procedures and its provisions will have effect:

• With regard to taxes withheld on amounts paid or credited, on or after the date on which the Protocol enters into force
• With respect to taxes determined by reference to a tax period, for tax years beginning on or after the date on which the Protocol enters into force
• In all other cases, on or after the date on which the Protocol enters into force

Special rules apply to the application of Article 26 (Mutual Agreement Procedure) of the new Protocol to cases under consideration by the competent authorities of both the United States and Spain on the date on which the Protocol enters into force.