Double Tax Treaty between Luxembourg & Spain

CONVENTION BETWEEN THE GRAND DUCHY OF LUXEMBOURG AND THE KINGDOM OF SPAIN FOR THE AVOIDANCE OF DOUBLE TAXATION IN RESPECT OF TAXES ON INCOME TAXES ON INCOME AND ON CAPITAL AND TO PREVENT TAX EVASION AND AVOIDANCE

 

The Government of the Grand Duchy of Luxembourg and the Government of the Kingdom of Spain, desiring to conclude a convention for the avoidance of double taxation with respect to 

taxes on income and on capital and to prevent tax evasion and avoidance, have agreed as follows:

Article 1

Persons Covered

This Convention shall apply to persons who are residents of one or both Contracting States.

Article 2

Taxes covered

  1. This Convention shall apply to taxes on income and on capital imposed on behalf of a Contracting State of a Contracting State, its political subdivisions or its local authorities, irrespective of the system of collection.

 

  1. The following shall be considered to be taxes on income and capital: taxes imposed on total income or on elements of income or capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amount of salaries paid by enterprises, and taxes on capital gains.

 

  1. The existing taxes to which the Convention shall apply include

(a) in the case of Luxembourg:

(1) the personal income tax;

(2) the corporate income tax;

(3) the special tax on directors’ fees

(4) the wealth tax;

(5) the municipal business tax on the basis of operating profit and capital

(6) the municipal tax on total wages

(hereinafter referred to as “Luxembourg tax”);

 

(b) in the case of Spain

(1) the personal income tax;

(2) the corporation tax

(3) the wealth tax

(hereinafter referred to as “Spanish tax”).

The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes. replace them. The competent authorities of the Contracting States shall notify each other of any substantial changes in their respective taxation laws.

 

Article 3

General Definitions

  1. For the purposes of this Convention, unless the context otherwise requires

(a) the terms “a Contracting State” and “the other Contracting State” mean, as the context requires Luxembourg or Spain, as the context requires;

(b) the term “Luxembourg” means the territory of the Grand Duchy of Luxembourg

(c) “Spain” means the territory of the Spanish State, including any area outside the territorial waters over which, in accordance with international law and under its legislation, the Spanish State exercises or may exercise in the future its rights of jurisdiction or sovereignty;

d) the term “person” includes natural persons, companies and any other group of persons

(e) “corporation” means any body corporate or any entity which is treated as a body corporate for tax purposes;

(f) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State

(g) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise whose place of effective management is in a Contracting State, except when the ship or aircraft is operated only between points in the other Contracting State;

(h) the term “competent authority” means:

(i) in the case of Luxembourg, the Minister of Finance or his duly authorized representative;

(ii) in the case of Spain, the Minister of Economy and Finance or his duly authorized representative.

 

  1. For the purposes of the application of the Convention by a Contracting State, any term not defined therein shall have the meaning which it has under the law of that State concerning the taxes to which the Convention, unless the context otherwise requires.

Article 4

Resident

  1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile

The term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax in that State by reason of the person’s domicile, residence, place of management or any other criterion of a similar nature. However, this term shall not include any person who is subject to tax in that State in respect only of income from sources within its territory. However, this term shall not include any person who is subject to tax in that State in respect only of income from sources in that State or capital situated therein.

  1. Where under the provisions of paragraph 1 an individual is a resident of both Contracting States, his status shall be determined in the following manner:

(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests);

(b) if the State in which such person has his centre of vital interests cannot be determined, or if he has no permanent home in any of the States, he shall be deemed to be a resident of the State in which he has an habitual abode;

(c) if such person has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he has the nationality;

(d) if such person is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

 

  1. Where, under the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, he shall be deemed to be a resident of the State in which his place of effective management is situated.

 

Article 5

Permanent Establishment

  1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

 

  1. The term “permanent establishment” includes, in particular

(a) a place of management

b) a branch office,

(c) an office,

(d) a factory,

(e) a workshop, and

(f) a mine, oil or gas well, quarry or other place of extraction of natural resources

 

  1. A construction or assembly site constitutes a permanent establishment only if its duration exceeds twelve months.

 

  1. Notwithstanding the foregoing provisions of this Article, the term “permanent establishment” shall be deemed not to include permanent establishment” if:

 

(a) use is made of facilities solely for the purpose of storing, displaying or delivering goods or merchandise belonging to the enterprise;

(b) use is made of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise; or

(c) goods belonging to the enterprise are stored solely for processing by another enterprise;

(d) a fixed place of business is used solely for the purpose of purchasing goods or gathering information for the enterprise;

(e) a fixed place of business is used solely for the purpose of carrying on any other activity of a preparatory or auxiliary character for the enterprise

(f) a fixed place of business shall be used solely for the purpose of carrying on cumulatively the activities mentioned in subparagraphs (a) to (e), provided that the overall activity of the fixed place of business resulting from such combination remains of a preparatory or auxiliary character resulting from such a combination is of a preparatory or auxiliary character.

 

  1. Notwithstanding the provisions of paragraphs 1 and 2, where a person – other than an agent independent status to whom paragraph 6 applies – acts on behalf of an enterprise and has in a enterprise and has and habitually exercises in a Contracting State an authority to conclude contracts on behalf of to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that enterprise, unless the activities of such person are limited to those mentioned in paragraph 4 which, if exercised through a fixed place of business, would not fixed place of business, would not make it possible to regard such place of business as a permanent establishment under the provisions of that paragraph.

 

  1. A person who engages in a Contracting State in seabed and subsoil exploration activities and subsoil or in the exploitation of natural resources situated therein and in activities complementary or ancillary to such activities complementary or auxiliary to such activities, shall be deemed to carry on such activities through a permanent establishment in that State.

 

  1. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

 

8.The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in that other State (whether through a permanent establishment or otherwise) shall not of itself constitute a permanent establishment of the other.

 

Article 6

Income from Real Property

  1. Income derived by a resident of a Contracting State from real property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

 

  1. The term “property” shall have the meaning which it has under the law of the Contracting State in which the property is situated. The term shall in any case include property accessory to immovable property, livestock and of agricultural and forestry undertakings, rights to which the provisions of private law concerning land property, the usufruct of immovable property and rights to variable or fixed payments for the use or fixed payments for the exploitation or concession of mineral deposits, natural resources; ships and aircraft are not considered as real estate property.

 

  1. The provisions of paragraph 1 shall apply to income derived from the direct exploitation The provisions of paragraph 1 shall apply to income derived from the direct operation, rental or leasing, or any other form of exploitation of real property.

 

  1. The provisions of paragraphs 1 and 3 shall also apply to income from the real estate of an property of an enterprise as well as to income from real estate used for the exercise of a independent profession.

 

Article 7

Business Profits

  1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State. unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. 

If the enterprise carries on business in such a manner, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

 

  1. Subject to the provisions of paragraph 3, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might have realized if it had constituted a separate enterprise engaged in the same or similar activities under the same or similar conditions the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

 

  1. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses incurred for the purposes of the permanent establishment, including executive and general administrative expenses incurred, whether in the State in which the permanent establishment is situated or elsewhere.

 

  1. If it is customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of an apportionment of the total profits of the enterprise to its various parts, nothing in paragraph 2 shall apply to the profits of the permanent establishment. parts, nothing in paragraph 2 shall prevent that Contracting State from determining the taxable profits according to the customary apportionment; the method of apportionment adopted shall, however, be such as to such that the result is in accordance with the principles contained in this Article.

 

  1. No profit shall be attributed to a permanent establishment by reason of its having merely purchased goods or goods for the enterprise.

 

  1. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined annually by the same method unless there are good and sufficient reasons for proceeding otherwise.

 

  1. Where profits include items of income which are dealt with separately in other Articles of this Convention, the provisions of those Articles shall not be affected by the provisions of this Article.

 

Article 8

Maritime and Air Navigation

 

  1. Profits from the operation of ships or aircraft in international traffic shall be taxable only in the shall be taxable only in the Contracting State in which the place of effective management of the enterprise is located.

 

  1. If the place of effective management of a shipping enterprise is on board a ship that place of business shall be deemed to be in the Contracting State in which the home port of that ship is situated, or, if there is no home port, in the Contracting State of which the operator of the ship is a resident.

 

  1. The provisions of paragraph 1 shall also apply to profits from the participation in a pool, joint business or international operating agency.

Article 9

Associated Enterprises

 

(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State, and in either case the two enterprises are, in their commercial or financial relations, bound by agreed terms financial relations, are bound by conditions agreed upon or imposed which differ from those which would be agreed upon or imposed, which differ from those which would be agreed upon between independent enterprises, the profits which, but for those conditions, would have been made by one of the enterprises but not the other. profits which, but for those conditions, would have accrued to one of the enterprises but, by reason of those conditions, did not in fact accrue to that enterprise, may be included in the profits of that enterprise and and taxed accordingly,

Article 10

Dividends

  1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State shall be taxed as dividends.

 

  1. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the person receiving the dividends is the beneficial owner thereof, the tax so charged shall not exceed

 

(a) in respect of dividends paid by a company which is a resident of Luxembourg to aresident of Spain:

(i) 5 percent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) that directly owns at least 25 percent of the capital of the company paying the dividends, provided that the recipient company has held such capital for a period of at least one year prior to the date of the distribution of the dividends.

(ii) 15 percent of the gross amount of the dividends, in all other cases.

(b) with respect to dividends paid by a company which is a resident of Spain to a resident of Luxembourg:

(i) 10 percent of the gross amount of the dividends if the beneficial owner is a corporation (other than a partnership) that directly owns at least 25 per cent of the capital of the corporation paying the dividends, provided that the beneficial owner has held such capital for a period of at least one year prior to the date of the distribution of the dividends

(ii) 15 percent of the gross amount of the dividends in all other cases. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of these limitations. This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are payment of dividends

 

  1. The term “dividends” as used in this Article means income from shares or profit sharing certificates, founders’ shares or other profit shares, with the exception of shares, founder’s shares or other profit shares, with the exception of debt claims, as well as income from other shares which is subject to the same tax regime as income from shares under the legislation of the income from shares by the legislation of the State of which the distributing company is a resident.

 

  1. The provisions of paragraphs 1 and 2 shall not apply where the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, either company paying the dividends is a resident, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and  situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

  1. Where a company that is a resident of a Contracting State derives profits or income from the other Contracting State, the company shall be deemed to have of the other Contracting State, that other State may not impose any tax on dividends paid by the company, except to the extent that such dividends are paid to a resident of that other State or to the extent that the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor impose any tax on the undistributed profits of the company, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other States.

 

Article 11

Interest

  1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

  1. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the person receiving the interest is the beneficial owner thereof the tax so charged shall not exceed 10 percent of the gross amount of the interest. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation.

 

  1. Notwithstanding the provisions of paragraph 2

(a) interest on loans made by a Contracting State or a resident thereof to the other Contracting State or a local authority thereof and

(b) interest on loans made by a resident of a Contracting State and guaranteed by one of the two States to a resident of the other Contracting State shall be exempt from tax in the State in which it arises.

 

  1. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits of the debtor, and in particular income from government securities and income from bonds or debentures, including premiums and prizes attached to these securities. Penalties for late payment shall not be considered interest for the purposes of this penalties for late payment shall not be considered as interest for the purposes of this section.

 

  1. The provisions of paragraphs 1, 2 and 3 shall not apply where the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein, or performs in the other Contracting State in which the interest arises independent personal services from a fixed base situated therein, and the debt-claim giving rise to the interest is effectively connected with it. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

  1. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. However, where the payer of the interest, whether or not a resident of a Contracting State, has in a Contracting State a permanent establishment, or a branch of such a permanent establishment, the interest shall be deemed to arise in that State. Contracting State has a permanent establishment or a fixed base in that State in connection with which the date on which the interest is paid was incurred and which bears the expense of that interest, such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

 

  1. Where, by reason of a special relationship between the payer and the beneficial owner, or beneficiary or between the debtor and the beneficial owner and third parties, the amount of interest, having regard to the debt-claim for which it is paid, shall be deemed to arise in the State in which the permanent establishment or fixed base is situated debtor and the beneficial owner would have agreed in the absence of such relationship, the provisions of this article shall apply only to the latter amount. only to the latter amount. In such a case, the excess part of the payments shall remain taxable according to the laws of each Contracting State and having regard to the other provisions of this Convention.

 

Article 12

Royalties

  1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

 

  1. However, such royalties may be taxed in the Contracting State in which they arise and according to the laws of that State, but if the person receiving the royalties is the beneficial owner thereof, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation

 

  1. The term “royalties” as used in this Article means remuneration paid or credited, whether periodically or not, by whatever name and for whatever purpose, in so far as they are to the extent that they are made for:

 

(a) the use of or the right to use a copyright in a literary, artistic or scientific work, a patent, a design or model, a plan, a secret formula or process, a trademark

(b) the use or grant of a copyright in a literary, artistic or scientific work, a patent, a design or model, a plan, a formula or a secret process, a trademark, or a similar property or right;

(c) the supply of information in the scientific, technical, industrial or commercial field

(d) the use of or the right to use

(i) motion picture films;

(ii) recordings or films for television transmissions; or

(iii) recordings for radio transmissions;

(e) the total or partial relinquishment of the use or assignment of any property or right referred to in this subsection.

 

  1. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, carries on business in the other Contracting State through a permanent establishment business through a permanent establishment situated therein, or performs in that other Contracting State independent personal services from a fixed base situated therein, and the right or property in respect of which the royalties are paid is effectively connected with that place. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

  1. Royalties shall be deemed to arise in a Contracting State when the payer is that State itself, a political subdivision, a local authority or a resident of that State. However, where the payer of the royalties, whether or not a resident of a Contracting State, has a permanent establishment in that Contracting State, the royalties shall be deemed to arise in that State in that Contracting State a permanent establishment or a fixed base in connection with which the contract the royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated,

 

  1. Where, by reason of a special relationship between the payer and the beneficial owner or between the payer and the beneficial owner or between both of them and other persons. the amount of the royalties, having regard to the performance for which they are paid, exceeds the amount that would have been agreed upon by the debtor and the beneficiary would have agreed in the absence of such relationship, the provisions of this Article shall apply only to the latter amount. In such a case, the excess part of the payments shall remain taxable according to the laws of each Contracting State and having regard to the other provisions of this Convention.

Article 13

Capital Gains

  1. Gains derived by a resident of a Contracting State from the alienation of real property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State. Gains from the alienation of shares or similar rights in a company whose assets consist principally of immovable property situated in a Contracting State may be taxed in that State.

 

  1. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or of movable property pertaining to a fixed base, may be taxed in that State. Movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of that permanent establishment (alone or with the whole enterprise) or of that fixed base, may be taxed in the other Contracting State. fixed base, may be taxed in that other State.

 

  1. Gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State where the place of effective management of the enterprise is situated.

 

  1. Gains from the alienation of any property other than that referred to in paragraphs 1, 2 and 3 shall be taxable only in the Contracting State of which the transferor is a resident.

Article 14

Independent Personal Services

  1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless the resident has a fixed base regularly available to him in the other Contracting State for the purpose of performing such activities. If he has such a fixed base, the income may be taxed in the other State but only to the extent that it is attributable to that fixed base.

 

  1. The term “professional services” includes, in particular, independent activities of a scientific scientific, literary, artistic, educational or teaching activities, as well as the independent activities of doctors, lawyers, engineers, architects, dentists and accountants.

Article 15

Dependent Professions

  1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall not If the employment is exercised in the other Contracting State, such salaries, wages and other similar remuneration shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is exercised in that State, remuneration derived therefrom may be taxed in that other State.

 

  1. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if

 

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, and

(b) the remuneration is paid by or on behalf of an employer who is not a resident of the other State, and

(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

 

  1. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised on board a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated.

 

Article 16

Directors’ Fees

Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the a resident of a Contracting State in his capacity as a member of the board of directors or supervisory board of a company which is a company which is a resident of the other Contracting State may be taxed in that other State.

 

Article 17

Artists and Athletes

  1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as an entertainer in a show business, from his personal activities as such in the other Contracting State, may be taxed in that other State. such as a theater, motion picture, radio or television artiste, or a musician or as an athlete, may be taxed in that other State.

 

  1. Where income from activities which an entertainer or sports person performs personally and in that capacity is attributed and in that capacity is attributed not to the entertainer or sportsman himself but to another person such income may be taxed, notwithstanding the provisions of Articles 7, 14 and 15, in the Contracting State in which the activities of the entertainer or athlete are exercised.

 

Article 18

Public Social Security Pensions and Benefits

  1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in respect of past employment shall be taxable only in that State.

 

  1. Notwithstanding the provisions of paragraph 1, pensions and other amounts paid under the social security legislation of a Contracting State may be taxed in that State.

 

Article 19

Public Offices

  1. (a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.

(b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

(i) is a national of that State, or

(ii) did not become a resident of that State solely for the purpose of rendering the services,

2. (a) Pensions paid by a Contracting State or a political subdivision or local authority thereof, either directly or out of funds established by it, to an individual in respect of services rendered to that State or subdivision or authority, shall be taxable only in that State.

(b) However, such pensions shall be taxable only in the other Contracting State if the individual is a resident of that State and has the nationality of that State,

 

  1. The provisions of Articles 15, 16 and 18 shall apply to remuneration and pensions paid in respect of services rendered in connection with a business carried on by a Contracting State or one of its Contracting State or a political subdivision or local authority thereof.

 

Article 20

Students

Amounts which a student or trainee who is, or was immediately before going to a Contracting State, a to a Contracting State, a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training, shall not be taxable in that State, provided that such amounts from sources outside that State.

 

Article 21

The remuneration of a professor or other member of the teaching staff who is, or immediately before visiting a Contracting State was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of teaching or scientific research for a period not exceeding two years at a university or other institution of higher learning in the first-mentioned State scientific research, for a period not exceeding two years, at a university or other institution for education or scientific research for a period not exceeding two years, shall be taxable only in the said other Contracting State.

 

Article 22

  1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention may be taxed only in that other State not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.

 

  1. The provisions of paragraph 1 shall not apply to income, other than income from real property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a business activity through a permanent establishment situated therein or performs in the other Contracting State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is connected with such fixed base the right or property giving rise to the income is effectively connected with it. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

 

Article 23

Assets

  1. Capital represented by immovable property referred to in Article 6 owned by a resident of a Contracting State and situated in the other Contracting State may be taxed in that other State. Capital represented by shares or similar rights in a company the assets of which consist principally of immovable property situated in a Contracting State may be taxed in that State.

 

  1. Capital represented by movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or by movable property which belong to a fixed base available to a resident of a Contracting State in the other Contracting State for the for the purpose of performing independent personal services, may be taxed in that other State.

 

  1. Capital represented by ships and aircraft operated in international traffic and by movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State where the place of effective management of the enterprise is situated.

 

  1. All other elements of the capital of a resident of a Contracting State shall be taxable only in that State.

 

Article 24

Methods for Eliminating Double Taxation

Double taxation shall be avoided as follows:

  1. In Luxembourg.

(a) Where a resident of Luxembourg receives income or has capital which, in accordance with the provisions of this Convention, may be taxed in Spain, Luxembourg shall exempt such income or capital from tax, subject to the provisions of subparagraphs (b) and (c).

(b) Where a resident of Luxembourg receives items of income which, in accordance with the provisions of Articles 10, 11, and 12, may be taxed in Spain, Luxembourg shall grant, out of the tax it collects on the income, an exemption from the tax on the income or capital. Luxembourg shall allow a deduction from the tax it levies on the income of that resident of an amount equal to the tax paid in Spain. This deduction may not, however, exceed the fraction of the tax, calculated before deduction, corresponding to those items of income received from Spain.

(c) Where, in accordance with any provision of the Convention, the income received by a resident of Luxembourg or the capital owned by him is exempt from tax in Luxembourg, Luxembourg may nevertheless, for the purpose of calculating the amount of tax on the remaining income or capital of such resident, deduct from the income or capital the amount of tax on the remaining income or capital of that resident, take into account the exempted income or capital

(d) For the purposes of subparagraph (b) above, interest which has benefited from a reduction in Spanish tax in accordance with article 25, c) 1 and 2 of Law 61/1978 of December 27, Royal Decree-Law 5/1988 of Law Decree-Law 5/1980 of 19 May, and Articles 183 to 199 of Royal Decree 2631/1982 of 18 October, provided that they are 18 October, insofar as they are in force on the date of signature of the present Convention and have not been amended since then, or have undergone only minor amendments that do not affect their the general character thereof, shall be deemed to have borne the Spanish tax at the rate of 10 per cent. The same measure will apply to any subsequent provision of a similar nature made by the Spanish authorities that replace or supplement the Decree-Law and Decree referred to in the preceding paragraph. in addition to them.

(e) For the purposes of subparagraph (b) above, the interest referred to in paragraph 3 of Article 11 paid to a resident of Luxembourg shall be considered as having been subject to Spanish tax at the rate of 10 percent.

(f) For interest paid during a period of twelve years beginning on the first day of January of the year in which the Convention first applies, the rate of 10 percent referred to in subparagraphs (d) and (e) above shall be increased to 15 percent.

 

  1. In Spain.

(a) Where a resident of Spain receives income or possesses capital which, in accordance with the Convention, may be taxed in Luxembourg, Spain shall allow a credit against the tax it levies  on the income or capital of that resident a deduction equal to the tax paid in Luxembourg. The amount so deducted may not, however, exceed the fraction of the tax, calculated before the deduction, corresponding to the income and capital taxable in Luxembourg.

(b) Where, in accordance with any provision of the Convention, income received or capital owned by a resident of Spain is exempt from tax in Spain income or capital of that resident, take into account the exempted income or capital.

 

Article 25

  1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State who are in the same circumstances are or may be subjected. This provision shall also apply, notwithstanding the provisions of Article 1, to persons who are not are not residents of one or both of the Contracting States.

 

  1. The term “nationals” means

(a) all natural persons who possess the nationality of a Contracting State;

(b) all legal persons, partnerships and associations formed under the laws in force in a Contracting State.

 

  1. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other State shall not be less favorably assessed in that other State than the taxation of enterprises of that other State carrying on the same activities. This provision shall not be construed to require a Contracting State to grant to residents of the other Contracting State such personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities as it grants to residents of that other State family responsibilities that it grants to its own residents

 

  1. Unless the provisions of Article 9, paragraph 7 of Article 11 or paragraph 6 of Article 12 are applicable paragraph 6 of Article 12 shall apply, interest, royalties and other expenses paid by an enterprise of a Contracting State to a resident of the other Contracting State shall be deductible in determining the taxable profits of that enterprise under the same conditions as if they had been  paid to a resident of the first-mentioned State Similarly, debts of an enterprise of a Contracting  State to a resident of the other Contracting State shall, for the purpose of determining the taxable the same conditions as if they had been contracted to a resident of the first-mentioned State.

 

  1. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, owned or controlled by one or more residents of the other Contracting State, shall not be subject in the first-mentioned State to the first-mentioned State to any taxation or any requirement connected therewith which is other or more than those to which other similar enterprises of the first-mentioned State are or may be subjected to the first-mentioned State.

 

  1. The provisions of this Article shall apply, notwithstanding the provisions of Article 2, to taxes of every kind and description.

 

Article 26

Mutual Agreement Procedure

  1. Where a person considers that the actions of one or both of the Contracting States result or will result States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of those States, submit its case to the competent authority of the Contracting State of which it is a resident or, if the case comes under paragraph 1 of Article 25, to the competent authority of the Contracting State of which it is a nationality. The case must be submitted within three years after the first notification of the measure that results in taxation not in accordance with the provisions of the Convention.

 

  1. The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself in a position to resolve it, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Convention. The agreement shall be applied irrespective of the time limits provided by the domestic law of the States.

 

  1. The competent authorities of the Contracting States shall endeavor by mutual agreement to resolve any difficulties or doubts arising as to the interpretation or application of the application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention and for the taking of measures to prevent the Convention.

 

  1. The competent authorities of the Contracting States may communicate directly with each other with a view to reaching an agreement as described in the preceding paragraphs. If oral exchanges of views appear to facilitate such agreement, such exchanges of views may take place in a Commission composed of representatives of the competent authorities of the Contracting States.

Article 27

Exchange of Information

  1. The competent authorities of the Contracting States shall exchange such information as is necessary the provisions of this Convention or of the domestic laws of the Contracting States relating to taxes covered by the provisions of this Convention or of the domestic laws of the Contracting States relating to taxes covered by the Convention to the extent that the taxation thereunder is contrary to the provisions of the Convention is not contrary to the Convention. The exchange of information is not restricted by Article 1. Information received by a Contracting State shall be treated as secret in the same manner as information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Convention, Such persons or authorities shall use such information only for such purposes. Such persons or authorities may disclose such information only for such purposes and may disclose such information in public court proceedings or in judicial decisions.

 

  1. In no case shall the provisions of paragraph 1 be construed to impose on a Contracting State the obligation

(a) to take administrative action at variance with the laws and administrative practice of that or of the other Contracting State

(b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State

(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or any information the disclosure of which would be contrary to public policy.

 

Article 28

Diplomatic Agents and Consular Officers

The provisions of this Convention shall not affect the fiscal privileges of diplomatic agents or consular officers diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements.

 

Article 29

Entry into force

  1. The present Convention shall be ratified and the instruments of ratification exchanged at as soon as possible.

 

  1. The Convention shall enter into force upon the exchange of the instruments of ratification and its provisions shall be applicable for the first time in each of the two States from the first day of January of the year following that in which the instruments of ratification have been exchanged  to other taxes for taxable periods ending on or after the first day of January of the year following the year in which the instruments of ratification are exchanged

 

Article 30

Denunciation

This Convention shall remain in force until terminated by a Contracting State. by a Contracting State. Each Contracting State may denounce the Convention through diplomatic channels at least six months’ notice before the end of each subsequent calendar year commencing after the expiration of a period of five years from the date of its entry into force. In such case, the Convention shall last apply in each of the two States to

a) to taxes due at source on income allocated or paid on or before December 31 of the year of denunciation

(b) to other taxes for taxable periods ending on or before December 31 of the same year

 

IN WITNESS WHEREOF the undersigned, duly authorized for such purposes, have executed this Agreement.

 

DONE in duplicate at Madrid, this 3rd day of June 1986 in the French and Spanish languages, both texts being equally authentic.

 

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