United Kingdom

Madrid, 13 December 1993.

His Excellency Sir Patrick Robin Fearn, Ambassador of the United Kingdom of Great Britain and Northern Ireland. Madrid.

Mr. Ambassador,

I have the honour to refer to the Convention between Spain and the United Kingdom of Great Britain and Northern Ireland on the Prevention of Double Taxation and Tax Evasion in Tax on Income and Heritage of 21 October 1975 (hereinafter referred to as the Convention) and to propose, on behalf of the Kingdom of Spain, that for the purposes of Article 6 (Rent of Real Estate), Article 13 (Capital Gains) and Article 23 (Patrimony) of the Convention, income or capital gains derived from time-sharing rights not exceeding four weeks in any calendar year by a resident of a Contracting State, and capital constituted by such rights of a resident of a Contracting State, may only be subject to taxation in that State.

Accordingly:

(a) Paragraph (3) of Article 6 of the Convention shall be deleted and replaced by the following:

‘(3) The provisions of paragraph (1) of this article apply to income derived from the direct use, lease or any other form of exploitation of immovable property, but do not apply to income derived from the ownership of time-sharing rights relating to immovable property located in a Contracting State, held by a resident of the other Contracting State and which may be used for a period or periods not to exceed four weeks in any calendar year. For the purposes of this paragraph, for the calculation of such period or periods, account shall be taken of all multi-proprietary rights held by a resident of a Contracting State in respect of immovable property situated in the other Contracting State’;

(b) Immediately after paragraph (4) of Article 13 of the Convention, a new paragraph shall be inserted as follows:

‘(5) Notwithstanding the provisions of paragraph (1) of this Article, capital gains arising from the disposal of multi-proprietary rights which may be used for periods not exceeding four weeks in any calendar year may only be taxed in the Contracting State of which the transferor is resident. For the purposes of this paragraph, for the calculation of such period or periods, account shall be taken of all multi-proprietary rights held by a resident of a Contracting State in respect of immovable property situated in the other Contracting State’; and

(c) A new paragraph shall be inserted immediately after paragraph (4) of Article 23 of the Convention as follows:

"(5) Notwithstanding the provisions of paragraph (1) of this article, property constituted by multi-proprietary rights of a resident of a Contracting State which may be used for periods not exceeding four weeks in any calendar year may only be subject to taxation in that State. For the purposes of this paragraph, for the calculation of such period or periods, account shall be taken of all multi-proprietary rights held by a resident of a Contracting State in respect of immovable property situated in the other Contracting State.”

If the foregoing seems acceptable to the United Kingdom of Great Britain and Northern Ireland, I have the honour to propose further that this Note and your reply to it constitute an Agreement between the Kingdom of Spain and the United Kingdom of Great Britain and Northern Ireland, which will form an integral part of the Convention.

Each Government shall notify the other Government, as soon as possible, in writing, through diplomatic channels, of the fulfilment of their respective requirements for the entry into force of this Convention.

This Convention shall enter into force from 30 days after the date of the last of these notifications and thereafter shall enter into force in respect of taxes relating to any fiscal year beginning on or after the first day of January 1992.

I have the honour to confirm that the foregoing is accepted by the Government of Spain and that your letter and this letter will constitute an agreement between the two Governments. The entry into force would take place as described in the two preceding paragraphs.

I take this opportunity, Ambassador, to reiterate to you the testimony of my highest consideration.

JAVIER SOLANA

British Embassy, 17 June 1994.

His Excellency Mr. Javier Solana Madariaga, Minister for Foreign Affairs. Ministry of Foreign Affairs, Plaza de la Provincia, 1, 28071 Madrid.

Sir,

I have the honour to refer to your letter dated 13 December, which is translated as follows:

“I have the honour to refer to the Convention between Spain and the United Kingdom of Great Britain and Northern Ireland on the Prevention of Double Taxation and Tax Evasion in Tax on Income and Heritage of 21 October 1975 (hereinafter referred to as “the Convention”), and to propose, on behalf of the Kingdom of Spain, that for the purposes of Article 6 (Rents of Real Estate), Article 13 (Capital Gains) and Article 23 (Patrimony) of the Convention, income or capital gains derived from multi-proprietary rights (“time-sharing”) not exceeding four weeks in any calendar year by a resident of a Contracting State, and capital constituted by such rights of a resident of a Contracting State, may only be subject to taxation in that State.

Accordingly:

(a) Paragraph (3) of Article 6 of the Convention shall be deleted and replaced by the following:

"(3) The provisions of paragraph (1) of this article apply to income arising from the direct use, lease or any other form of exploitation of immovable property, but do not apply to income derived from the ownership of time-sharing rights relating to immovable property located in a Contracting State, held by a resident of the other Contracting State and which may be used for a period or periods not to exceed four weeks in any calendar year. For the purposes of this paragraph, for the calculation of such period or periods, account shall be taken of all multi-proprietary rights held by a resident of a Contracting State in respect of immovable property situated in the other Contracting State”;

(b) Immediately after paragraph (4) of Article 13 of the Convention, a new paragraph shall be inserted as follows:

"(5) Notwithstanding the provisions of paragraph (1) of this article, capital gains arising from the disposal of multi-proprietary rights that may be used for periods not exceeding four weeks in any calendar year may only be taxed in the Contracting State of which the transferor is resident. For the purposes of this paragraph, for the calculation of such period or periods, account shall be taken of all multi-proprietary rights held by a resident of a Contracting State in respect of immovable property situated in the other Contracting State", and

(c) A new paragraph shall be inserted immediately after paragraph (4) of Article 23 of the Convention as follows:

"(5) Notwithstanding the provisions of paragraph (1) of this article, property constituted by multi-proprietary rights of a resident of a Contracting State that may be used

For periods not exceeding four weeks in any calendar year, they may only be subject to taxation in that State. For the purposes of this paragraph, for the calculation of such period or periods, account shall be taken of all multi-proprietary rights held by a resident of a Contracting State in respect of immovable property situated in the other Contracting State.”

If the foregoing seems acceptable to the United Kingdom of Great Britain and Northern Ireland, I have the honour to propose further that this Note and your reply to it constitute an Agreement between the Kingdom of Spain and the United Kingdom of Great Britain and Northern Ireland, which will form an integral part of the Convention.

Each Government shall notify the other Government, as soon as possible, in writing, through diplomatic channels, of the fulfilment of their respective requirements for the entry into force of this Convention.

This Convention shall enter into force from 30 days after the date of the last of these notifications and thereafter shall enter into force in respect of taxes relating to any fiscal year beginning on or after the first day of 1992.

I take this opportunity, Ambassador, to reiterate to you the testimony of my highest consideration."

I have the honour to confirm that the foregoing is acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland and that your letter and this reply shall constitute an agreement between our two Governments which shall enter into force from the thirty-day date of the last of the two notifications by which each Party has notified the other of the fulfilment of the requirements necessary for that purpose.

I take this opportunity to reiterate to Your Excellency the testimony of my highest consideration.

ROBIN FEARN

This Agreement shall enter into force on 26 May 1995, 30 days after the date of the last of the cross-notifications between the Parties by reporting compliance with the respective internal requirements, as set out in the text of the Exchanged Notes.

What is made public for general knowledge.

Madrid, May 17, 1995.-The Technical Secretary General, Antonio Bellver Manrique.