Double Tax Agreement Spain Usa

As mentioned above, this new mutual agreement procedure regime applies to cases submitted to States after 27 November 2019. As we noted at the beginning of this article, this is a very interesting contract for investors from both countries in their respective territories and the fact that it reduces the double taxation burden for international investments is logically always encouraging. The second main objective of the convention is to prevent the circumvention or evasion of both countries` income taxes. To this end, the Convention provides for the United States and Spain to exchange the information necessary for the application of the Agreement and its national income tax legislation. The Convention also contains `provisions contrary to purchase contracts` intended to prevent third-country nationals from structuring their activities for the purpose of obtaining the advantages granted by the Convention. The convention contains the traditional “austerity clause” according to which each country, with certain exceptions, retains the right to tax its inhabitants and citizens as if the convention had not entered into force. The agreement is not intended to reduce the tax liability imposed on U.S. citizens or residents in the United States or the taxation of its inhabitants by Spain; Instead, it provides for a mechanism that defines which contractor reduces or mitigates double taxation when both contracting parties levy taxes on the same income. The United States and Spain negotiated the Treaty on the basis of the American Model Convention on the Prevention of Double Taxation and the Prevention of Fiscal Evasion, as revised in June 1981 (American model), several treaties recently negotiated by the two countries and the Organisation for Economic Co-operation and Development (OECD) Model Convention published in 1977.

From which a large part of the American model is derived. The new protocols will mean less confusion, more security and often less taxes for investors between Spain and the United States, thus facilitating bilateral foreign direct investment. In particular, the new agreement reduces withholding taxes on dividends, interest and profits and allows for tax-free transfer of pension plans. The main changes contained in the official text are summarised below: an arbitration clause is included in the event that the Spanish and US tax authorities fail to reach, within two years, an agreement on a cartel procedure requested by a taxable person. This procedure and its reconciliation through arbitration are not only intended to prevent cases of double taxation, but to resolve situations in which the taxable person considers that there is taxation which does not comply with the provisions of the new tax convention. The first main objective of the convention is to avoid double taxation of income from residents of the United States or Spain from sources within the other country. The convention describes the persons to whom it applies the income taxes it covers and provides that each country allows a deduction from the tax debt of its residents for income taxes paid to the other country. Rules apply to the taxation at source of different types of income such as corporate profits, capital gains, income from maritime and air transport, dividends, interest, royalties and income from work, with specific provisions for certain categories of persons such as civil servants, diplomats, students, artists and athletes. Although Spain applies a limited capital tax on natural persons, capital taxes are not covered by the Convention, since the United States does not collect these taxes and therefore there is no need to reduce or eliminate double taxation. The Convention also provides for procedures for representatives of the two countries to reach mutual agreement to resolve issues of double taxation or the application of the Convention. .

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