Switzerland

Article 10(2) is deleted and replaced by the following:

‘2. (a) However, such dividends may also be taxed in the Contracting State in which the company paying the dividends resides and in accordance with the law of that State, but if the actual beneficiary of the dividends is a resident of the other Contracting State, the tax thus required may not exceed 15 per cent of the gross amount of the dividends.

(b) Notwithstanding the provisions of the preceding subparagraph, the Contracting State in which the company paying the dividends is resident shall treat as exempt the dividends paid by that company to a company whose capital is wholly or partly divided into shares or shares and which is resident of the other Contracting State, provided that it owns directly at least 25 per cent of the capital of the company paying the dividends for at least two years and provided that the company paying the dividends is subject to and not exempt from the taxes covered by Article 2 of the Convention, and that, by virtue of any agreement to avoid double taxation with a third State, none of the companies is resident of that third State. Both companies must take the form of capital companies.

The competent authorities of the Contracting States shall, by mutual agreement, determine how these limits are to be applied.

The provisions of this paragraph do not affect the company’s taxation in respect of the profits from which dividends are paid.’

Article 11 is deleted and replaced by the following:

‘1. Interest from one Contracting State and paid to a resident of the other Contracting State may be taxed only in that other State.

2. The term ‘interest’ within the meaning of this Article means the return on claims of any kind, with or without a mortgage guarantee or a benefit-sharing clause of the debtor, and in particular the return on bonds or bonds, including premiums and lots linked thereto. Penalizations for late payment are not considered interest for the purposes of this article.

3. The provisions of paragraph 1 do not apply if the beneficial owner of the interest, resident of one Contracting State, carries out in the other Contracting State, from which the interest is derived, a business activity through a permanent establishment located in that other State and the credit generated by the interest is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 shall apply.

4. Where, by reason of the special relations between the debtor and the beneficial owner of the interest, or of which both have with third parties, the amount of interest in the light of the receivable for which it is paid exceeds that agreed upon by the debtor and beneficial owner in the absence of such relationships, the provisions of this article shall apply only to the latter amount. In such a case, the excess may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.’

A new paragraph 7 is added to Article 12 of the Convention:

‘7. By way of derogation from paragraphs 1 and 2, royalties from a Contracting State and paid between associated companies shall not be subject to taxation in the State of source if:

Such companies are affiliated by a minimum direct holding of 25 per cent, held for at least two years, or by a third company holding a minimum direct holding of 25 per cent in both the capital of the first company and the capital of the second company, for at least two years; and

Such companies are residents of a Contracting State; and

Under any agreement to avoid double taxation with a third State, none of the companies is resident in that third State; and

All companies are subject to corporation tax and not exempt, in particular in respect of royalty payments, and each of them takes the form of capital companies.’

Article 23(5) of the Convention is deleted and replaced by the following:

‘For the purposes of applying the provisions of paragraph 3, interest on amounts borrowed from 1 January 1966 which enjoy a reduction in the Spanish tax in accordance with the Decree-Law of 19 October 1961 or rules supplementing or replacing it shall be deemed to have paid the Spanish tax at the rate of 10 per cent.’

A new Article 25a concerning the exchange of information is added to the Convention:

‘Article 25.bis.

1. The competent authorities of the Contracting States shall, upon request, exchange such information as may be necessary:

(a) to implement the provisions of this Convention relating to taxes subject thereto;

(b) for the administration or application of national law relating to taxes covered by the Convention, in the case of securities holding entities;

(c) for the administration or application of national law in cases of tax fraud or equivalent infringement involving a resident of a Contracting State, or a person subject to limited taxation in a Contracting State, in relation to the taxes covered by this Convention.

2. Any information received by a Contracting State pursuant to paragraph 1 shall be kept secret in the same manner as information obtained under the domestic law of that State and shall be communicated only to the persons or authorities (including courts and administrative bodies) responsible for the management or collection of taxes covered by this Convention, to the declaratory or executive procedures relating to such taxes, or to the resolution of appeals relating thereto. Such persons or authorities shall use this information only for those purposes. They may disclose the information at public court hearings or in court judgements.

3. In no case may the provisions of paragraphs 1 and 2 be interpreted as obliging a Contracting State to:

(a) take administrative measures contrary to its legislation and administrative practice or those of the other Contracting State;

(b) to provide information which cannot be obtained on the basis of their own legislation or in the exercise of their normal administrative practice, or that of the other Contracting State;

(c) providing information revealing business, industrial, commercial or professional secrecy, or an industrial procedure, or information the communication of which is contrary to public policy (ordre public).

4. Where a Contracting State requests information under this Article, the other Contracting State shall use the measures available to it to gather information for the purpose of obtaining the information requested, even if that other Contracting State may not need such information for its own tax purposes. The above obligation is limited by paragraph 3, except where such limitations prevented a Contracting State from providing information solely because of the absence of national interest in it.

5. In cases of tax fraud or equivalent infringement, the provisions of paragraphs 1 and 3 shall not be construed as preventing a Contracting State from providing information solely because it is held by banks, other financial institutions or any person acting in a representative or fiduciary capacity, including designated agents, or because it relates to shares or shares in a person.’

The following Protocol shall be added to the Convention:

'Protocol to the Convention of 26 April 1966 between the Swiss Confederation and Spain on the avoidance of double taxation on income and property taxes.

At the time of signature of the Protocol amending the Convention on the Prevention of Double Taxation of Income and Property Taxes signed by the Swiss Confederation and Spain on 26 April 1966, the authorized signatories have agreed on the following provisions which form an integral part of that Convention:

I. Right to benefit from the Convention.

(i) Contracting States declare that their rules and procedures of domestic law concerning abuses of the rule (including tax treaties) are applicable to combat such abuses. In the case of Spain, the abuse of the rule includes the situations provided for in article 15 of the General Tax Law (Law 58/2003 of 17 December) or any other provision of a similar nature as reflected in any tax regulations in force or established in the future.

(ii) The benefits of this Convention shall not be granted to a person other than the actual beneficiary of income from the other Contracting State or of assets located in the other Contracting State.

(iii) This Convention shall not prevent the Contracting States from applying their domestic rules relating to international tax transparency, Controlled Foreign Companies.

II. With reference to Article 10(2)(b).

With reference to Article 10(2)(b) of this Convention, a company resident in a Contracting State may not benefit from the total exemption from withholding tax on dividends from the other Contracting State where the majority of its shares are held primarily, directly or indirectly, by persons who are not residents of a Contracting State, or by a Member State of the European Union, unless the company receiving the dividends:

Effectively engage in a business activity directly related to the business activity carried out by the company paying the dividends; or

The primary purpose of this is the management and management of the company that pays dividends through the proper organization of material and personal means; or

Prove that it has been constituted for valid economic reasons and not only to benefit from Article 10(2)(b).

In relation to the benefit limitations outlined above in this provision of the Protocol, Spain shall in all cases accord to a company resident in Switzerland the same treatment as to any company resident in a Member State of the European Union in a comparable situation.

Ill. With reference to Article 10(2)(b) and Article 12(7).

As regards the application of Article 10(2)(b) and Article 12(7), the terms used therein are defined in accordance with Council Directive 2003/49/EC of 3 June 2003 on the common system of taxation applicable to interest and royalty payments made between associated companies of different Member States and Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable to parent companies and subsidiaries of different Member States.

As regards Switzerland, the term ‘capital company’ includes:

Public limited company — equivalent French, German and Italian legal-form designations;

Société à responsabilité limitée/Gesellschaft mit beschränkter Haftung/società a responsabilità limi-tata;

Partnership limited by shares — equivalent French, German and Italian legal-form designations.

IV. With reference to article 25 bis.

1. Both Contracting States have agreed that, under Article 25a(1)(b), only information held by the tax authorities which does not require the use of specific investigative measures may be exchanged.

2. With regard to subparagraph (b) above, Swiss companies to which Article 28(2) of the Loi fédérale sur I’harmonisation des impôts directs (Federal Law on the Harmonization of Direct Taxes) of 14 December 1994 and Spanish companies eligible for Articles 116 to 119 of the Spanish Company Tax Act (Royal Legislative Decree 4/2004 of 5 March) are deemed to be holding securities.

3. The term ‘tax fraud’ shall be understood to imply fraudulent behaviour defined as an offence under the law of both States, punishable by custodial sentences, either on the date on which the offence was committed or on the date on which the request for information was sent.

4. The term ‘tax fraud or equivalent infringement’ includes:

(a) Cases below the monetary limit provided for in article 305 of the Spanish Penal Code (Organic Law 10/1995 of 23 November) which constitute tax fraud under the law of the requested State.

(b) Simulation cases processed in accordance with the procedure provided for in Article 16 of the Spanish General Tax Act (Law 58/2003 of 17 December); simulation shall be understood only in accordance with article 1275 of the Spanish Civil Code.

5. In particular, fraudulent behaviour shall be presumed in situations where the taxpayer uses, or intends to use, false documentary evidence and in situations where the taxpayer uses, or intends to use, a plot (Lügengebäude) in order to deceive the tax authorities.

6. In order to determine the existence of tax fraud or equivalent infringement in a case involving the actual pursuit of a professional or business activity [including professional or business activities carried out through a single-member company, a personalist company (Partnership) or similar entity], the requested State shall assume as its own the requirements relating to the accounting records applicable under the law of the requesting State.

7. In any event, an exchange of information presupposes a direct link between fraudulent behaviour and the required administrative assistance.

8. It shall also be understood that the administrative assistance provided for in paragraph 1 of this Article does not cover measures aimed exclusively at the preliminary search for compromising evidence (fishing expeditions )

9. Notwithstanding Article 25a(2), information received by a Contracting State may be used for other purposes where such information may be used for the same purposes in accordance with the law of the State providing it. In case of doubt, the competent authorities shall make every effort to resolve by amicable agreement any differences relating to the interpretation of the laws of the requested State.

10. The requested State shall provide information where the requesting State has a reasonable suspicion that a particular proceeding constitutes tax fraud or an equivalent offence. Suspicion of tax fraud or equivalent infringement in the requesting State may be based on:

(a) documents, authenticated or not, including, inter alia, business documents, accounting records or bank account information;

(b) the taxpayer's testimony;

(c) information obtained from an informant or from a third party that has been independently corroborated or for other reasons is credible; or

(d) circumstantial evidence.

11. (a) Should Switzerland conclude with a Member State of the European Union, relating to the exchange of information, an agreement of any kind or nature, or a provision contained in a Double Taxation Convention, in relation to taxes covered by this Convention, Switzerland shall grant to Spain the same level of cooperation as that provided for in such an agreement, provision or part thereof, and Spain shall proceed in the same manner.

(b) Notwithstanding paragraph 11, subparagraph (a) above, where Switzerland has defined in a convention to avoid double taxation with another Member State of the European Union one or more specific categories of cases which could be regarded as tax fraud or equivalent infringement pursuant to Article 10(4) of the Agreement between the Community and the Swiss Confederation on the establishment of measures equivalent to those provided for in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, as well as its Memorandum of Understanding, and Spain considers that there is a similar situation under its domestic law, the Spanish competent authorities shall then address the Swiss competent authorities with a view to agreeing to the adaptation of the Protocol accordingly. The agreement shall be subject to parliamentary approval in both Contracting States.

12. As regards the procedures followed in Spain to obtain information, including bank information, in the case of tax fraud or equivalent infringement pursuant to Article 25a, the Spanish competent authorities shall apply the internal procedures provided for in Spanish law in order to satisfy the information requirement of the Swiss competent authorities.

Persons involved in an action in Spain may not invoke irregularities in the procedure followed in Switzerland to appeal their case to the Spanish courts.

Should the taxpayer appeal the decision of the Swiss Federal Tax Administration regarding the transmission of information to the Spanish competent authorities, any delay for this reason shall not be computable in the application of the time limits provided for in Spanish tax legislation in respect of the tax procedures of the Tax Administration.

In faith of whichthe signatories, duly authorized to do so, have signed and sealed this Protocol.

Done in duplicate in Madrid on 29 June 2006 in the English, French and Spanish languages, all texts being equally authentic. In the event of a divergence in interpretation, the interpretation shall be decided in accordance with the English text.’

1. The Governments of the Contracting States shall notify each other, through diplomatic channels, of compliance with the internal procedures provided for in their legislation for the entry into force of this Amending Protocol.

2. The amending Protocol shall enter into force three months after the date of receipt of the last of the notifications referred to in paragraph 1 and its provisions shall take effect:

(a) In the case of periodic accrual taxes, in respect of income or property taxes for any fiscal year beginning from the date on which the Amending Protocol enters into force;

(b) With regard to the remaining taxes, on the date on which the Amending Protocol enters into force.

3. By way of derogation from paragraph 2, this Amending Protocol shall not take effect:

(i) in conjunction with Articles 1 and 2 of this Amending Protocol, before the date of application of the Agreement between the Community and the Swiss Confederation on the establishment of measures equivalent to those provided for in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments;

(ii) in relation to Article 3 of this Amending Protocol, before the day following the expiry of the six-year transitional period beginning on the date of commencement of application of the Agreement referred to in subparagraph (i) above.

4. The exchange of information shall be effective in cases of tax fraud or equivalent infringement occurring after the date of signature of this Amending Protocol.

In faith of whichthe signatories, duly authorised to do so, have signed and sealed this Amending Protocol.

Done in duplicate in Madrid on 29 June 2006 in the English, French and Spanish languages, all texts being equally authentic. In the event of a divergence in interpretation, interpretation shall be decided in accordance with the English text.

This Protocol shall enter into force on 1 June 2007, three months after the date of receipt of the last cross-notification between the Parties through diplomatic channels of compliance with the internal procedures provided for in their respective laws, as provided for in Article 7.2 thereof.

What is made public for general knowledge.

Madrid, March 9, 2007. –The Technical Secretary General of the Ministry of Foreign Affairs and Cooperation, Francisco Fernández Fábregas.