Panama

This Convention applies to persons resident in one or both Contracting States.

1. This Convention applies to income and property taxes payable by each of the Contracting States, their political subdivisions or their local entities, whatever the system of their levy.

2. Taxes on income and property are those which tax all or any part of the income or property, including taxes on profits resulting from the disposal of movable or immovable property, taxes on the amount of wages or salaries paid by enterprises, as well as taxes on latent capital gains.

3. The current taxes to which this Convention applies are, in particular:

(a) in Spain:

(i) Personal Income Tax;

(ii) corporation tax;

(iii) Property Tax;

(iv) Non-resident income tax; and

(v) Local taxes on income and wealth;

(hereinafter referred to as ‘the Spanish tax’);

(b) in Panama:

(i) Income Tax, as provided for in the Tax Code, Book IV, Title I, and applicable regulatory decrees; and

(ii) Operation Notice Tax;

(hereinafter referred to as the Panamanian tax).

4. The Convention shall also apply to taxes of an identical or similar nature which are established after the signature of the Convention and which are added to or replaced by existing taxes. The competent authorities of the Contracting States shall communicate to each other any amendments made to their respective tax laws.

1. For the purposes of this Convention, unless the context of the Convention is different:

(a) the term ‘Spain’ means the Kingdom of Spain and, used geographically, means the territory of the Kingdom of Spain, including airspace, its internal waters, its territorial sea and areas outside its territorial sea in which, under international law and under its domestic law, the Kingdom of Spain exercises or may exercise in future jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources;

(b) the term ‘Panama’ means the Republic of Panama and, used geographically, means the territory of the Republic of Panama, including the airspace, its internal waters, its territorial sea and areas outside its territorial sea in which, under international law and under its domestic law, the Republic of Panama exercises or may exercise in the future jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources;

(c) the words ‘one Contracting State’ and ‘the other Contracting State’ mean Spain or Panama, depending on the context;

(d) the term ‘person’ includes natural persons, companies and any other grouping of persons;

(e) the term 'company' means any legal person or any entity which is considered a legal person for tax purposes;

(f) the term ‘enterprise’ applies to the pursuit of any economic activity;

(g) the term ‘economic activity’ includes the provision of professional services as well as any other activity of an independent nature;

(h) the terms ‘undertaking of one Contracting State’ and ‘undertaking of the other Contracting State’ mean, respectively, an undertaking operated by a resident of one Contracting State and an undertaking operated by a resident of the other Contracting State;

(i) 'international traffic' means any transport carried out by a ship or aircraft operated by an undertaking whose effective headquarters are located in a Contracting State, except where the ship or aircraft is operated only between points located in the other Contracting State;

(j) the expression ‘competent authority’ means:

(i) in Spain: the Minister of Economy and Finance or his authorised representative;

(ii) in Panama: the Ministry of Economy and Finance or its authorized representative;

(k) the term 'national' means:

(i) in the case of Spain, a natural person possessing Spanish nationality; in the case of Panama, a natural person possessing Panama nationality or citizenship;

(ii) a legal person, a company of persons (partnership) or association constituted in accordance with the law in force in a Contracting State.

2. For the purposes of the application of the Convention at any time by a Contracting State, any term or expression not defined in the Convention shall have, unless a different interpretation is given in its context, the meaning attributed at that time to it by the law of that State concerning the taxes which are the subject of the Convention, the meaning attributed by the tax law to which it would result from other branches of the law of that State prevails.

1. For the purposes of this Convention, the term ‘resident of a Contracting State’ means any person who, under the law of that State, is subject to taxation in that State by reason of his domicile, residence, address, place of incorporation or any other criterion of a similar nature, including that State and its political subdivisions or local entities. This term does not, however, include persons who are subject to taxation in that State solely on the income they obtain from sources located in that State, or on the property situated therein.

2. Where, under the provisions of paragraph 1, a natural person is resident in both Contracting States, his or her situation shall be resolved as follows:

(a) Such person shall be considered a resident exclusively of the State in which he or she has permanent housing at his or her disposal; if he or she has permanent housing at his or her disposal in both States, he or she shall be considered a resident exclusively of the State with which he or she has closer personal and economic relations (centre of vital interests);

(b) If it is not possible to determine the State in which the person has the centre of his or her vital interests, or if he or she does not have permanent housing at his or her disposal in any of the States, he or she shall be considered a resident exclusively of the State in which he or she habitually lives;

(c) If he or she habitually lives in both States or does not live in either State, he or she shall be deemed to be a resident exclusively of the State of which he or she is a national;

(d) if he or she is a national of both States or is not a national of either State, the competent authorities of the Contracting States shall decide the case by mutual agreement by mutual agreement procedure.

3. Where under the provisions of paragraph 1 a person other than a natural person is a resident of both Contracting States, he or she shall be considered a resident exclusively of the State in which his or her place of effective management is located.

1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of business through which an undertaking carries out all or part of its activity.

2. The term ‘permanent establishment’ includes, in particular:

(a) the head offices;

(b) branches;

(c) Offices;

(d) factories;

(e) workshops; and

(f) mines, oil or gas wells, quarries or any other place of extraction of natural resources.

3. The term ‘permanent establishment’ also includes:

(a) a work, construction or installation or assembly project, but only when such works, construction or projects continue for a period exceeding six months, within any period of twelve months;

(b) the use of similar structures, installations, drilling platforms, vessels or other substantial equipment for the exploration or exploitation of natural resources, for a period or periods totalling more than six months within a period of any twelve months.

4. Notwithstanding the previous provisions of this Article, it is considered that the term ‘permanent establishment’ does not include:

(a) the use of facilities for the sole purpose of storing, displaying or delivering goods or goods belonging to the undertaking;

(b) the maintenance of a warehouse of goods or goods belonging to the undertaking for the sole purpose of storing, displaying or delivering them;

(c) the maintenance of a deposit of goods or goods belonging to the undertaking for the sole purpose of processing by another undertaking;

(d) the maintenance of a fixed place of business for the sole purpose of buying goods or goods, or collecting information, for the enterprise;

(e) the maintenance of a fixed place of business for the sole purpose of carrying out any other auxiliary or preparatory activity for the undertaking;

(f) the maintenance of a fixed place of business for the sole purpose of carrying out any combination of the activities referred to in subparagraphs (a) to (e), provided that the whole activity of the fixed place of business resulting from that combination retains its auxiliary or preparatory character.

5. By way of derogation from paragraphs 1 and 2, where a person, other than an independent agent to which paragraph 6 applies, acts on behalf of an undertaking and has and exercises habitually in a Contracting State powers to conclude contracts on behalf of the undertaking, that undertaking shall be deemed to have a permanent establishment in that State in respect of the activities carried out by that person for the undertaking, unless the activities of that person are limited to those referred to in paragraph 4 and if they have been carried out through a fixed place of business, they have not determined the consideration of that fixed place of business as a permanent establishment in accordance with the provisions of that paragraph.

6. An undertaking is not considered to have a permanent establishment in a Contracting State merely because it carries out its activities in that State through a broker, a general commissioner or any other independent agent, provided that such persons act within the ordinary framework of their activity. However, where that agent carries out all or almost all of its activities on behalf of such an undertaking, and the undertaking and the agent are bound in their commercial or financial relations by terms accepted or imposed that differ from those to be agreed by independent persons, he shall not be regarded as an independent agent within the meaning of this paragraph.

7. The fact that a company resident of a Contracting State controls or is controlled by a company resident of the other Contracting State, or engages in economic activities in that other State (whether by permanent establishment or otherwise), does not in itself make any of these companies permanent establishment of the other State.

1. Income from immovable property (including income from agricultural or forestry holdings) situated in the other Contracting State may be taxed in that other Contracting State.

2. The term ‘real property’ shall have the meaning attributed to it by the law of the Contracting State in which the property is situated. In any event, that term includes property attached to immovable property, livestock and equipment used on agricultural and forestry holdings, the rights to which private law provisions relating to real estate apply, the use of immovable property and the right to receive fixed or variable payments in exchange for exploitation, or the granting of exploitation, of mineral deposits, sources and other natural resources. Ships, vessels and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 are applicable to income derived from direct use, lease or shareholding, as well as from any other form of exploitation of immovable property.

4. Where ownership of shares or other rights directly or indirectly confers on the owner of such shares or rights the right to the enjoyment of immovable property, income derived from the direct use, lease or use in any other form of such right of enjoyment may be subject to taxation in the Contracting State in which the immovable property is situated.

5. The provisions of paragraphs 1, 3 and 4 also apply to income derived from the immovable property of an undertaking.

1. The profits of an undertaking in a Contracting State may be taxed only in that State unless the undertaking carries out its business in the other Contracting State through a permanent establishment situated therein. If the undertaking does so, the profits of the undertaking may be taxed in the other State, but only to the extent that they are attributable to that permanent establishment.

2. Without prejudice to the provisions of paragraph 3, where an undertaking of a Contracting State carries out its business in the other Contracting State by means of a permanent establishment situated therein, in each Contracting State the profits it could have obtained from being a separate and separate undertaking carrying out the same or similar activities shall be attributed to that permanent establishment under the same or similar conditions and shall deal entirely independently with the undertaking from which it is a permanent establishment.

3. For the purpose of determining the benefit of the permanent establishment, the deduction of expenses incurred for the purposes of the permanent establishment shall be permitted, including management and general administrative expenses for the same purposes, whether incurred in the State in which the permanent establishment is located or elsewhere.

4. As long as it is customary in a Contracting State to determine profits attributable to a permanent establishment on the basis of a division of the total profits of the enterprise among its various parties, the provisions of paragraph 2 shall not prevent that Contracting State from determining taxable profits in this way; however, the method of distribution adopted shall be such that the result obtained is in accordance with the principles contained in this Article.

5. No profits shall be attributed to a permanent establishment by reason of the mere purchase of goods or goods by that permanent establishment for the enterprise.

6. For the purposes of the preceding paragraphs, the profits attributable to the permanent establishment shall be determined each year by the same method, unless there are valid and sufficient grounds for proceeding otherwise.

7. Where profits include income covered separately by other articles of this Convention, the provisions of those articles shall not be affected by those of this Article.

1. Profits from the operation of ships or aircraft in international traffic may be taxed only in the Contracting State in which the effective head office of the undertaking is situated.

2. In this Article, the term ‘benefits’ includes profits, net profits, gross revenue and income derived directly from the operation of ships or aircraft in international traffic.

3. For the purposes of this Article, the profits of an undertaking of a Contracting State arising from the operation of ships or aircraft in international traffic comprise without exception:

(a) the benefits of bareboat chartering of ships or aircraft;

(b) profits from the use or rental of containers, or equipment related to the transport of containers, used for the transport of goods or goods;

(c) the sale of tickets or tickets for the provision of services related to international transport, whether for the undertaking itself or for any other undertaking, provided that such activity is auxiliary to the operation of ships or aircraft in international traffic and is carried out by that undertaking.

4. If the place of effective management of a shipping undertaking is on board a ship, it shall be deemed to be located in the Contracting State where the base port of the ship is located, or if there is no such base port, in the Contracting State of which the person operating the ship is resident.

5. The provisions of paragraph 1 also apply to profits accruing from participation in a pool, on a joint holding or on an international holding body but only to that part of the profits thus realized attributable to each shareholder in proportion to its participation in the joint venture.

6. The provisions of this Agreement in its entirety shall not apply in relation to fees, tolls and similar payments to be paid for the purpose of crossing the Panama Canal.

1. When:

(a) an undertaking of a Contracting State participates directly or indirectly in the direction, control or capital of an undertaking of the other Contracting State; or

(b) the same persons participate directly or indirectly in the direction, control or capital of an undertaking of a Contracting State and of an undertaking of the other Contracting State,

And in either case the two companies are, in their commercial or financial relations, bound by accepted or imposed conditions that differ from those that would be agreed by independent companies, the profits that would have been obtained by one of the companies in the absence of such conditions, and which in fact have not been realized because of them, may be included in the profits of that company and subject to taxation accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that State - and consequently subjects to taxation - the profits on which an enterprise of the other State has been taxed in that other Contracting State, and that other State recognizes that the profits thus included are profits that would have been realized by the enterprise of the State concerned in the first place if the terms agreed between the two companies had been those agreed between independent companies, that other State shall make the adjustment that would result in the amount of the tax that has taxed those profits. In determining such adjustment, account shall be taken of the other provisions of this Convention and the competent authorities of the Contracting States shall be consulted where necessary.

1. Dividends paid by a company resident of one Contracting State to a resident of the other Contracting State may be taxed in that other State.

2. However, such dividends may also be subject to taxation in the Contracting State in which the company paying the dividends resides and in accordance with the law of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax thus required may not exceed:

(a) 5 per cent of the gross amount of dividends if the beneficial owner is a company (other than a company of persons) holding directly at least 40 per cent of the capital of the company that pays the dividends;

(b) 10 per cent of the gross amount of dividends in all other cases.

3. Notwithstanding paragraph 2, the Contracting State in which the company paying the dividends is resident shall treat as exempt 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 holds directly at least 80 per cent of the capital of the company paying the dividends and that one of the following situations occurs:

(a) where the company receiving the dividends shares in a recognised securities market; or

(b) where the company receiving the dividends is owned by residents of one or both Contracting States by at least 50 per cent; or

(c) where the company receiving the dividends is held by members or shareholders resident in third States holding directly less than 25 per cent of its capital; or

(d) where the company receiving the dividends is owned by members or shareholders resident in third States who hold more than 25 per cent of their capital and that third State has a Convention to prevent double taxation with the State of the company paying the dividends, which provides for conditions that are equal or more favourable than those provided for in this Article.

4. By way of derogation from paragraph 2, the Contracting State in which the company paying the dividends is resident shall exempt dividends paid by that company to a pension fund as a partner or shareholder.

5. An entity which, pursuant to paragraph 3, is not entitled to the profits derived therefrom may, however, obtain such profits if the competent authorities of the Contracting States agree, pursuant to Article 25 of the Convention, that the establishment of the entity and the conduct of its operations have a sound business basis, and therefore its primary purpose is not to obtain such profits.

6. For the purposes of subparagraph 3 (a), recognized securities market means:

(a) any securities market regulated in accordance with Directive 2004/39/EC of the European Parliament and of the Council;

(b) The NASDAQ system owned by the National Association of Securities Dealers, Inc., and any stock exchange registered with the Securities and Exchange Commission as a national stock exchange for the purposes of the Securities Exchange Act of 1934 of the United States of America;

(c) The Panama Stock Exchange; and

(d) Any other stock exchange as agreed by the competent authorities of the Contracting States, provided that the purchase and sale of securities on that stock exchange is not implicitly or explicitly restricted to a limited group of investors.

7. Paragraphs 2, 3 and 4 do not affect the company's taxation of profits from which dividends are paid.

8. The term ‘dividends’ within the meaning of this Article means the income from shares, shares or enjoyment bonds, parts of mines, parts of founders or other rights, except credit rights, which allow participation in profits, as well as income from other social shares subject to the same tax regime as the income from shares under the law of the State of which the distribution company is resident.

9. The provisions of paragraphs 1, 2, 3 and 4 do not apply if the beneficial owner of the dividends, resident of one Contracting State, carries out in the other Contracting State, of which the company paying the dividends is resident, an economic activity through a permanent establishment located there, and the share generated by the dividends is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 apply.

10. Where a company resident of one Contracting State obtains profits or income from the other Contracting State, that other State may not require 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 the share generated by the dividends is effectively linked to a permanent establishment located in that other State, or subject the undistributed profits of the company to a tax on them, even if dividends paid or profits not distributed consist, in whole or in part, of profits or income from that other State.

11. Without prejudice to other provisions of this Convention, where a company resident of one Contracting State has a permanent establishment in the other Contracting State, the taxable profits under article 7, paragraph 1, may be subject to an additional tax in that other State, in accordance with its law, but such additional tax may not exceed:

(a) 0 per cent of the total amount of such profits, where the undertaking meets the requirements of paragraph 3 (a), (b), (c) and (d),

(b) 5 per cent of the total amount of such benefits in the remaining cases.

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

2. However, such interests may also be subject to taxation in the Contracting State from which they come and under the law of that State, but, if the beneficial owner of the interest is a resident of the other Contracting State, the tax thus required may not exceed 5 per cent of the gross amount of interest.

3. By way of derogation from paragraph 2, interest from one Contracting State and paid to a resident of the other Contracting State may be subject to taxation in that other State only if the recipient agrees with the beneficial owner of the interest and:

(a) is the State itself or the Central Bank, one of its political subdivisions, or local entities;

(b) The payer of the interest is the State from which it originates, or one of its political subdivisions, local authorities or public bodies;

(c) interest is paid on the basis of a loan or credit from that State or one of its political subdivisions, local authorities or export credit agency, or granted by any of the above;

(d) is a State financial institution;

(e) interest is paid on account of a debt arising as a result of the sale on credit of any equipment, goods or service;

(f) is a pension fund approved for tax purposes by that State and the income of that fund is generally exempt from taxation in that State.

4. 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 public securities and the return on bonds or bonds, including premiums and lots attached to such securities. Penalizations for late payment are not considered interest for the purposes of this article.

5. The provisions of paragraphs 1, 2 and 3 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 derives, an economic 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.

6. Interest is considered to come from a Contracting State when the debtor is a resident of that State. However, where the debtor of interest, whether or not resident of a Contracting State, has in a Contracting State a permanent establishment in respect of which the debt for which the interest is paid has been incurred, and the latter is assumed by the said permanent establishment, such interest shall be deemed to have come from the Contracting State in which the permanent establishment is situated.

7. Where due to special relations between the debtor and the beneficial owner, or between them and third parties, the amount of interest in the light of the claim for payment exceeds that agreed by the debtor and the creditor 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.

1. Royalties or royalties from one Contracting State and the beneficial owner of which is a resident of the other Contracting State may be subject to taxation in that other State.

2. However, such royalties or royalties may also be subject to taxation in the Contracting State from which they come and in accordance with the law of that State, but if the beneficial owner of the royalties or royalties is a resident of the other Contracting State, the tax thus required may not exceed 5 per cent of the gross amount of the royalties or royalties.

3. The term ‘royalties’ or ‘gifts’ within the meaning of this Article means the quantities of any kind paid for the use, or the granting of use, of copyright on, inter alia, literary, artistic or scientific works or software, including film or film, tapes and other means of reproduction of the image and sound, patents, trademarks, designs, drawings, formulas or secret procedures, or for the use, or the granting of use, of industrial, commercial or scientific equipment, or for information relating to industrial, commercial or scientific experience.

4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the royalties or royalties, resident of one Contracting State, carries out in the other Contracting State, from which the royalties or royalties come, an economic activity through a permanent establishment located in that other State, and the right or for which the royalties or royalties are paid is effectively linked to that permanent establishment. In such cases the provisions of Article 7 shall apply.

5. Royalties or royalties shall be deemed to come from a Contracting State where the debtor is a resident of that State. However, where the debtor of the royalties or royalties, whether or not he or she is a resident of a Contracting State, has a permanent establishment in one of the Contracting States in respect of which the obligation to pay the royalties has been entered into and which the latter bears the burden of the royalties, such royalties or royalties shall be deemed to come from the State where the permanent establishment is situated.

6. Where, by reason of the special relations between the debtor and the beneficial owner of the royalties or royalties, or of which both have with third parties, the amount of royalties or royalties, in view of the use, right or information for which they are paid, exceeds that for which the debtor and beneficial owner would have agreed 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.

1. Profits that a resident of one Contracting State obtains from the disposal of immovable property as defined in article 6 located in the other Contracting State may be taxed in that other State.

2. Gains from the disposal of movable property forming part of the assets of a permanent establishment held by an undertaking of one Contracting State in the other Contracting State, including gains from the disposal of that permanent establishment (either with the enterprise as a whole or with the enterprise as a whole), may be taxed in that other Contracting State.

3. Profits arising from the disposal of ships or aircraft operated in international traffic or from movable property affected by the operation of such vessels or aircraft may be taxed only in the Contracting State in which the effective head office of the undertaking is situated.

4. Earnings obtained by a resident of a Contracting State from the disposal of shares or similar shares may be subject to taxation in the other State if he has held a share of more than 10 per cent in the right to vote, in the value or in the share capital of a company resident of that Contracting State for a period of less than 12 months.

5. Profits that a resident of a Contracting State obtains from the disposal of shares or other rights of participation whose value is derived directly or indirectly from more than 50 per cent of immovable property located in the other Contracting State may be taxed in that other State.

6. Gains arising from the disposal of shares or other rights which, directly or indirectly, grant the owner of such shares or rights, the right to the enjoyment of immovable property situated in a Contracting State, may be subject to taxation in that State.

7. Profits resulting from the disposal of any property other than those referred to in paragraphs 1, 2, 3, 4, 5 and 6 may be taxed only in the Contracting State in which the transferor resides.

1. Income obtained by a resident of one Contracting State for the provision of services performed in the other Contracting State may be taxed in the Contracting State mentioned first. However, such income may also be taxed in the other Contracting State, provided that the services are professional services, consultancy services, industrial or commercial advice, technical or management services or other similar services. However, the tax thus required may not exceed 7.5 per cent of the gross amount of such payments where the actual beneficiary of such payments is a resident of the other Contracting State.

2. The term “professional services” includes independent, scientific, literary, artistic, educational or educational activities, as well as independent activities of doctors, lawyers, engineers, architects, dentists and accountants.

3. The provisions of paragraph 1 do not apply if the person providing the services, resident of one Contracting State, carries out activities in the other Contracting State through a permanent establishment situated in that other State, and the payments received for its services are effectively linked to that permanent establishment. In such cases the provisions of Article 7 shall apply.

4. Where the payer of such income, whether or not he is a resident of a Contracting State, has in one of the Contracting States a permanent establishment in respect of which the obligation to pay for the services derives and which the latter bears the burden thereof, such income for services shall be deemed to have come from the State where the permanent establishment is situated.

5. Where, by reason of the special relations between the service provider and the payer of the services, or between them and third parties, the amount of service income exceeds the amount agreed by the service provider and the payer in the absence of such relations, 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.

1. Without prejudice to articles 16, 18 and 19, salaries, wages and other similar remuneration obtained by a resident of a Contracting State on account of employment may be subject to taxation in that State only unless the employment is exercised in the other Contracting State. If the employment is thus exercised, the remuneration derived therefrom may be subject to taxation in that other State.

2. By way of derogation from paragraph 1, remuneration obtained by a resident of a Contracting State on account of employment in the other Contracting State may be taxed only in the State referred to above if:

(a) the recipient remains in the other State for a period or periods of not more than 183 days together in any twelve-month period beginning or ending in the fiscal year concerned; and

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

(c) Remuneration is not borne by a permanent establishment held by the employer in the other State.

3. Notwithstanding the preceding provisions of this Article, remunerations earned on account of employment on board a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the effective head office of the undertaking is situated.

Participations and other similar remunerations obtained by a resident of a Contracting State by virtue of his status as director or member of a Board of Directors of a company resident of the other Contracting State may be taxed in that other State.

1. By way of derogation from Articles 7 and 15, any income which a resident of a Contracting State obtains from the exercise of his personal activity in the other Contracting State as a performer, theatre, film, radio or television actor, or musician, or as an athlete, may be subject to taxation in that other State.

2. Notwithstanding the provisions of Articles 7 and 15, where the income derived from the personal activities of the performing artists or sportsmen, in that capacity, is attributed not to the performer himself or to another person, such income may be taxed in the Contracting State where the activities of the performing artist or sportsperson are carried out.

Without prejudice to Article 19(2), pensions and similar remuneration paid to a resident of a Contracting State on account of previous employment may only be taxed in that State.

1.

(a) Wages, salaries and other similar remuneration paid by a Contracting State or by one of its political subdivisions or local entities to a natural person for services rendered to that State or to that subdivision or entity may only be subject to taxation in that State.

(b) Such salaries, salaries and similar remuneration may, however, be subject to taxation in the other Contracting State only if the services are provided in that State and the natural person is a resident of that State who:

(i) is a national of that State; or

(ii) has not acquired the status of resident of that State solely to provide the services.

2.

(a) By way of derogation from paragraph 1, pensions and other similar remuneration paid by a Contracting State or one of its political subdivisions or local entities, either directly or from funds constituted, to a natural person on the basis of services provided to that State or to that subdivision or entity, may be subject to taxation only in that State.

(b) Such pensions and similar remuneration may, however, be subject to taxation in the other Contracting State only if the natural person is a resident and a national of that State.

3. The provisions of Articles 15, 16, 17 and 18 apply to salaries, salaries, pensions and other similar remuneration paid for services rendered in the context of an economic activity carried out by a Contracting State or by one of its political subdivisions or local authorities.

The amounts received to cover the costs of maintenance, study or practical training by a student or a trainees who is, or was, immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the State referred to first for the sole purpose of continuing his studies or practical training, may not be subject to taxation in that State provided that they come from sources outside that State.

1. The income of a resident of a Contracting State, whatever its source, not referred to in the previous articles of this Convention, shall be subject to taxation only in that State.

2. Paragraph 1 does not apply to income, other than that derived from immovable property within the meaning of Article 6(2), where the beneficiary of such income, resident of a Contracting State, carries out an economic activity in the other Contracting State through a permanent establishment situated in that other State, and the right or for which the income is paid is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 apply.

3. Where, by reason of a special relationship between persons engaged in activities that generate the income set out in paragraph 1, if payment for such activities exceeds the amount agreed upon by independent persons, the provisions of paragraph 1 shall apply only to the latter. In such a case, the surplus shall be taxable in accordance with the laws of each Contracting State, taking into account the other conditions of this Convention.

1. Property constituted by immovable property within the meaning of Article 6, which has a resident of one Contracting State and is situated in the other Contracting State, may be taxed in that other State.

2. Property consisting of movable property forming part of the assets of a permanent establishment held by an undertaking of one Contracting State in the other Contracting State may be taxed in that other Contracting State.

3. Assets made up of ships or aircraft operated in international traffic, as well as movable property affected by the operation of such vessels and aircraft, may be taxed only in the Contracting State in which the place of effective management of the undertaking is situated.

4. Property constituted by shares or other rights in a corporation or any other type of legal person, the value of which derives by more than 50 per cent, directly or indirectly, from immovable property located in a Contracting State or by shares or other rights which grant the owner of such property the right to the enjoyment of immovable property located in a Contracting State, may be taxed in the Contracting State in which the immovable property is located.

5. All other assets of a resident of a Contracting State may be subject to taxation only in that State.

1. In Spain, double taxation shall be avoided either in accordance with the provisions of its domestic law or in accordance with the following provisions, subject to Spanish domestic law:

(a) Where a resident of Spain obtains income or possesses assets which, in accordance with the provisions of this Agreement, may be taxed in Panama, Spain shall permit:

(i) the deduction of the income tax of that resident in an amount equal to the income tax paid in Panama;

(ii) the deduction of the property tax of that resident in the amount equal to the tax paid in Panama on those assets;

(iii) the deduction of corporation tax actually paid by the company which distributes the dividends corresponding to the profits from which the dividends are paid, in accordance with its domestic law.

However, such deduction may not exceed the part of the income tax or property tax, calculated before the deduction, corresponding to the income or assets that may be taxed in Spain.

(b) Where, under any provision of this Agreement, the income obtained by a resident of Spain or the property he holds is tax-exempt in Spain, Spain may, however, take into account the income or wealth exempted in calculating the tax on the rest of the income or property of that resident.

2. In Panama:

(a) Where a resident of Panama obtains income or possesses assets which, under the provisions of this Agreement, may be taxed in Spain, Panama shall grant an exemption from such income.

(b) When, under any provision of this Agreement, the income obtained by a resident of Panama is exempt from taxes in Panama, Panama may, however, take into account the exempt income in calculating the tax on the rest of the income of that resident.

1. Nationals of one Contracting State shall not be subject in the other Contracting State to any taxes or obligations relating thereto which are not or are more burdensome than those to which nationals of that other State who are under the same conditions, in particular with regard to residence, are or may be subject. Notwithstanding Article 1, this provision shall also apply to persons who are not residents of one or any of the Contracting States.

2. Permanent establishments held by an undertaking of one Contracting State in the other Contracting State shall not be subject to taxation in that State in a less favourable manner than undertakings of that other State carrying out the same activities. This provision may not be interpreted as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, reliefs and tax reductions it grants to its own residents in view of their marital status or family burdens.

3. Unless the provisions of Article 9(1) of Article 11(7) or Article 12(6) apply, interest, royalties or other expenses paid by an undertaking of a Contracting State to a resident of the other Contracting State shall be deductible to determine the profits subject to taxation of that undertaking under the same conditions as if they had been paid to a resident of the State referred to first. Similarly, the debts of an undertaking of a Contracting State contracted with a resident of the other Contracting State shall be deductible for the determination of the assets subject to taxation of that undertaking under the same conditions as if they had been contracted with a resident of the State referred to in the first instance.

4. Undertakings of a Contracting State whose capital is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State shall not be subject in the State referred to above to any tax or obligation relating thereto which is not or is more burdensome than those to which other similar undertakings of the State referred to in the first instance are or may be subject.

5. Notwithstanding Article 2, the provisions of this Article apply to all taxes irrespective of their nature or name.

1. Where a person considers that the measures taken by one or both Contracting States involve or may entail for him an imposition which is not in conformity with the provisions of this Convention, irrespective of the remedies provided for by the domestic law of those States, he may submit his case to the competent authority of the Contracting State of which he is resident or, if Article 24(1) applies, to that of the Contracting State of which he is a national. The case must arise within three years of the first notification of the measure involving an imposition not in accordance with the provisions of the Convention.

2. The competent authority shall, if it considers the complaint well founded and if it is not in itself able to reach a satisfactory solution, make every effort to resolve the matter by means of an amicable agreement with the competent authority of the other Contracting State, in order to avoid an imposition which does not comply with this Convention. The agreement shall apply irrespective of the time limits laid down by the national law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavour to resolve any difficulties or doubts arising from the interpretation or application of the Convention by means of an amicable agreement. They may also agree to try to avoid double taxation in cases not covered by the Convention.

4. The competent authorities of the Contracting States may communicate directly with each other in order to reach agreement within the meaning of the preceding paragraphs. Where it is considered that this agreement may be facilitated by an oral exchange of views, it may be carried out through a committee composed of representatives of the competent authorities of the Contracting States.

1. The competent authorities of the Contracting States shall exchange information likely to be relevant to the application of this Convention, or to the administration or application of national law relating to taxes of any kind or designations required by the Contracting States, their political subdivisions or local authorities, to the extent that such taxation is not contrary to the Convention. The exchange of information is not limited by Articles 1 and 2.

2. 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 only be communicated to the persons or authorities (including courts and administrative bodies) responsible for the management or collection of the taxes referred to in paragraph 1 of the legal proceedings or procedures for the effective application of these taxes or for the resolution of appeals relating thereto or for the prosecution of tax offences. These persons or authorities shall use this information only for these purposes. They may disclose the information at public court hearings or in court judgements.

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

(a) take administrative measures contrary to its legislation or 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; and

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

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

5. In no case shall the provisions of paragraph 3 be interpreted as allowing a Contracting State to refuse to provide information solely because it is held by banks, other financial institutions, or by any person acting in a representative or fiduciary capacity or because it relates to property rights or participation in a person.

The provisions of this Convention shall not affect the tax privileges enjoyed by members of diplomatic missions or consular offices in accordance with the general rules of international law or under the provisions of special agreements.

1. Each Government of the Contracting States shall notify the other, through diplomatic channels, that the internal procedures required in each Contracting State for the entry into force of this Convention have been complied with.

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

(a) in respect of taxes withheld at source, on amounts paid or owed to non-residents from the date, including on which the Convention enters into force;

(b) in respect of other taxes, for fiscal years beginning from the date, including the date, on which the Convention enters into force; and

(c) in the remaining cases, on or after the date on which the Convention enters into force.

3. Notwithstanding the provisions of the preceding paragraph, information exchange requirements may be made in relation to tax obligations that have been incurred on any date within three years prior to the entry into force of this Agreement.

This Convention shall remain in force until its denunciation by one of the Contracting States. Any Contracting State may notify in writing the denunciation of the Convention to the other Contracting State, through diplomatic channels, at least six months before the end of any calendar year commencing after a period of five years from the date on which the Convention enters into force. In such a case, the Convention shall cease to have effect:

(a) in relation to taxes withheld at source, on amounts paid or owed to non-residents from the end of that calendar year;

(b) in respect of other taxes, for fiscal periods beginning from the end of that calendar year; and

(c) in the remaining cases, after the end of that calendar year.

In faith, the signatories, duly authorized to do so, have signed this Convention.

Done at Madrid on 7 October 2010, in duplicate, in the Spanish language.

At the time of signing the Convention between the Kingdom of Spain and the Republic of Panama to Prevent Double Taxation of Income and Property Taxes and to Prevent Tax Evasion, the signatories have agreed on the following provisions which form an integral part of the Convention:

I. Ad. Article 5.3(a).

Inspection and supervision activities carried out by the undertaking itself carrying out the work, construction or installation or assembly project shall be taken into account for the purpose of calculating the time limit provided for in this paragraph.

II. Ad. Article 7.3.

With regard to the term ‘as elsewhere’, it refers exclusively to third States with which the State of residence has signed a convention to prevent double taxation with an information exchange clause.

III. Ad. Article 10.

This article will apply, in the case of Panama, to all taxes that are established on the distribution of benefits, both at the time of payment of the dividend and at a previous time (minimum or supplementary tax).

In relation to the minimum or supplementary tax, it shall be refunded provided that the application of the Convention cannot be fully recovered as a tax credit at the time of the formal distribution of dividends and payment of the corresponding tax.

IV. For Articles 10 (dividends), 11 (interest), 12 (royalties) and 13 (capital gains),

These Articles shall not apply where:

(a) an entity resident in Panama that pays dividends, interest, royalties or capital gains to a resident of Spain, and that has obtained its income from Spain or from a country or territory that has not concluded an agreement to avoid double taxation with Spain; and

(b) This income has been exempted or not subject to taxation in Panama.

An entity which, according to the preceding paragraph, is not entitled to the profits derived from the Convention in respect of the above-mentioned income may nevertheless obtain such profits if the competent authorities of the Contracting States agree, pursuant to article 25 of the Convention, that the establishment of the entity and the conduct of its operations have a sound business basis and therefore its primary purpose is not to obtain such profits.

V. Ad. Article 14.

The limits provided for in paragraph 1 shall apply where services are carried out in one of the Contracting States.

VI. Ad. Article 16.

This Article applies to the amounts received as a result of attendance at boards of directors or boards of directors; in no case would it affect the amounts received as a result of an employment relationship.

VII. Articles 6 to 22 of the Convention shall not apply:

(1) Entities resident in a Contracting State where the income obtained is exempt in that State as a result of the foreign effects of the services provided, unless they are related to storage or manufacturing activities when they are carried out in that Contracting State.

It shall not apply, inter alia, when the conditions set out in the preceding paragraph are met, to free zones and other special regimes.

(2) Trusts, foundations of private interest and non-governmental organizations.

The preceding paragraph shall not apply to foundations of private interest where information relating to the beneficiaries and the income obtained and distributed by them can be obtained.

VIII. Right to benefit from the Convention.

A. This Convention shall not be construed as preventing a Contracting State from applying the provisions of its domestic legislation relating to the prevention of tax evasion and avoidance.

B. The benefits of this Convention shall not be deemed to be granted to a person other than the beneficial owner of the income from the other Contracting State.

C. The provisions of articles 10, 11 and 12 do not apply where the primary purpose or one of the primary purposes of any person related to the creation or assignment of the shares or other rights generated by the dividends, the creation or assignment of the receivable generated by the interest, the creation or assignment of the right generated by the royalties or royalties, is to obtain the benefit of those articles through such creation or assignment.

IX. With regard to article 26.

Desiring to facilitate the exchange of information in furtherance of Article 26 of the Convention, Article 26 shall be understood to apply in accordance with the following guidelines:

1. The competent authority of a Contracting State shall, upon request, provide information for the purposes set out in Article 26. Such information shall be exchanged irrespective of whether the conduct under investigation could constitute a criminal offence under the laws of that Contracting State if such conduct had occurred in that State.

2. It is clarified that the understanding of Contracting States is that the exchange of information would only be requested when each and every source of information available under their domestic tax legislation has been used.

3. It is clarified that the understanding of Contracting States is that the administrative assistance mechanisms provided for in Article 26 do not include measures (i) aimed at the mere collection of data not related to an open verification or investigation, or (ii) where the requested information is unlikely to be relevant to the control or administration of the tax affairs of a Contracting State taxpayer (‘fishing expeditions’).

4. If expressly requested by the competent authority of a Contracting State, the competent authority of the other Contracting State shall provide information pursuant to Article 26, to the extent permitted by its national law, in the form of witness statements and authenticated copies of original documents.

5. Each Contracting State declares that, for the purposes expressed in Article 26, its competent authorities are empowered to obtain and provide, upon request, information of any kind with tax significance concerning the legal and effective ownership of any person.

6. It is clarified that the understanding of the Contracting States is that the tax administration of the Contracting State requesting information under Article 26, at the time of making its request, shall provide the other Contracting State with the following information:

(i) sufficient information to identify the person under audit or investigation (e.g. name, date and place of birth or registration data and, to the extent known, address, tax identification number, bank account number or similar identifying information);

(ii) the period of time for which the requested information is requested;

(iii) a detailed description of the information requested, including its nature and the manner in which the requesting State wishes to receive it;

(iv) the purpose or reason, and the tax basis for which the information is requested;

(v) To the extent known, the name and address of any person believed to be in possession of the requested information.

7. The competent authority of one Contracting State shall send the requested information as soon as possible to the other Contracting State. In order to ensure a prompt response, the competent authority of the Contracting State referred to first:

(a) acknowledge receipt of the written request to the competent authority of the other Contracting State at the latest within 15 days of its receipt.

(b) Notify the competent authority of the other Contracting State of any defects in the request within 60 days of acknowledgement of receipt.

(c) Contracting States shall make their best efforts to obtain and exchange the information required within a period of not more than six months from the acknowledgement of receipt, unless due to the complexity of the information requested or the difficulties presented in obtaining it, a longer period is required. In such cases, the requested State shall notify the requesting State of such a situation, as well as of the estimated time to deliver the information.

The temporary restrictions referred to in this Article in no way affect the validity and legality of the information exchanged under this Convention.

8. It is clarified that the understanding of the Contracting States is that Article 26 does not oblige any Contracting State to exchange or provide information automatically or spontaneously, but must be subject to prior request.

9. The rights and guarantees accorded to persons in a Contracting State shall be deemed to apply in that Contracting State in the course of the information exchange procedure. It is also understood by the Contracting States that this requirement seeks to ensure a fair procedure for the taxpayer and not to prevent or establish obstacles that delay the process of exchange of information. Delays in the exercise of the rights and guarantees accorded to persons in respect of the decision of the Administration of a Contracting State, in relation to the transmission of information to the competent authorities of the other Contracting State, shall not be computable for the purpose of applying the time limits provided for in the tax legislation of the second Contracting State in respect of the tax procedures of its tax administration.

10. Information received by a Contracting State may be used for other purposes when such use is permitted by the laws of the receiving State and the competent authority of the supplying State authorizes such use. If the authorization is given, the receiving State shall ensure that the information shall be transmitted only to the governmental entity for which authorization was sought and that that authority in turn may not disclose it or deliver it to any other authority.

In no case may the information be transmitted to a third State.

In faith, the signatories, duly authorized to do so, have signed this Protocol.

Done at Madrid on 7 October 2010, in duplicate, in the Spanish language.

This Convention enters into force on 25 July 2011, after a period of three months from the date of receipt of the last of the notifications of compliance with the internal procedures required by each state, as set out in its Article 28.

Madrid, June 20, 2011.–The Technical General Secretary of the Ministry of Foreign Affairs and Cooperation, Rosa Antonia Martínez Frutos.