Kuwait

PERSONS COVERED

This Convention shall apply to persons who are residents of one or both of the

Contracting States.

TAXES COVERED

1. This Convention shall apply to taxes on income and on capital imposed on behalf

of a Contracting State or of its political subdivisions or local authorities,

irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income and on capital all taxes imposed on

total income, on total capital, or on elements of income or of capital, including

taxes on gains from the alienation of movable or immovable property, taxes on

the total amounts of wages or salaries paid by enterprises, as well as taxes on

capital appreciation.

3. The existing taxes to which this Convention shall apply are, in particular:

a) in the case of Kuwait:

(1) the corporate income tax;

(2) the contribution from the net profits of the Kuwaiti shareholding

companies payable to the Kuwait Foundation for Advancement of

Science (KFAS);

(3) the contribution from the net profits of Kuwaiti shareholding companies

payable to support the National Budget;

(4) the Zakat; and

(5) the tax imposed to support national employees;

(hereinafter referred to as "Kuwaiti tax");

b) in the case of Spain:

(1) the income tax on individuals;

(2) the corporation tax;

(3) the income tax on non residents;

(4) the capital tax; and

(5) local taxes on income and on capital;

(hereinafter referred to as “Spanish Tax”).

4. This Convention shall apply also to any identical or substantially similar taxes

which are imposed after the date of signature of this Convention in addition to, or

in place of, the existing taxes. The competent authorities of the Contracting

States shall notify each other of any significant changes which have been made

in their respective taxation laws.

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

Kuwait or Spain, as the context requires;

b) the term "Kuwait" means the territory of the State of Kuwait including any

area beyond the territorial sea which in accordance with international law has

been or may hereafter be designated, under the laws of Kuwait, as an area

over which Kuwait may exercise sovereign rights or jurisdiction;

c) the term “Spain” means the Kingdom of Spain and, when used in a

geographical sense, means the territory of the Kingdom of Spain, including

inland waters, the air space, the territorial sea and any area outside the

territorial sea upon which, in accordance with international law and on

application of its domestic legislation, the Kingdom of Spain exercises or may

exercise in the future jurisdiction or sovereign rights with respect to the

seabed, its subsoil and superjacent waters, and their natural resources;

d) the term "person" includes an individual, a company and any other body of

persons;

e) the term "national" means:

(1) any individual possessing the nationality of a Contracting State;

(2) any legal person, partnership or association deriving its status as such

from the laws in force in a Contracting State;

f) the term "company" means any body corporate or any entity which

is treated as a body corporate for tax purposes;

g) 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;

h) the term “enterprise” applies to the carrying on of any business;

i) the term "international traffic" means any transport by a ship or aircraft

operated by an enterprise that has its place of effective management in a

Contracting State, except when the ship or aircraft is operated solely

between places in the other Contracting State;

j) the term "business” includes the performance of professional services and of

other activities of an independent character.

k) the term "competent authority" means:

(1) in the case of Kuwait: the Minister of Finance or an authorized

representative of the Minister of Finance;

(2) in the case of Spain the Minister of Economy and Finance or an

authorized representative of the Minister of Economy and Finance.

2. As regards the application of this Convention at any time by a Contracting State,

any term not defined therein shall, unless the context otherwise requires, have

the meaning which it has at that time under the law of that Contracting State for

the purposes of the taxes to which this Convention applies, any meaning under

the applicable tax laws of that Contracting State prevailing over a meaning given

to the term under other laws of that Contracting State.

RESIDENT

1. For the purposes of this Convention, the term "resident of a Contracting State"

means:

a) in the case of Kuwait: an individual who has his domicile in Kuwait and is a

Kuwaiti national, and a company which is incorporated in Kuwait;

b) in the case of Spain: any person who, under the laws of Spain is liable to tax

therein by reason of his domicile, residence, place of management or any

other criterion of a similar nature, and also includes that State and any

political subdivision or local authority thereof. This term, however, does not

include any person who is liable to tax in Spain in respect only of income from

sources in Spain or capital situated therein.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of

both Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident only of the Contracting State in which he

has a permanent home available to him; if he has a permanent home

available to him in both Contracting States, he shall be deemed to be a

resident only of the Contracting State with which his personal and economic

relations are closer (center of vital interests);

b) if the Contracting State in which he has his center of vital interests cannot be

determined, or if he has not a permanent home available to him in either

Contracting State, he shall be deemed to be a resident only of the Contracting

State in which he has an habitual abode;

c) if he has an habitual abode in both Contracting States or in neither of them,

he shall be deemed to be a resident only of the Contracting State of which he

is a national;

d) if his status cannot be determined under the provisions of subparagraph c),

the competent authorities of the Contracting States shall settle the question

by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a person other than an

individual is a resident of both Contracting States, then it shall be deemed to be

a resident only of the Contracting State in which its place of effective

management is situated.

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.

2. The term "permanent establishment" includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop;

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

resources.

3. The term permanent establishment also encompasses any place relating to the

exploration of natural resources, provided such activities exists for a period or

periods aggregating more than six months within any twelve-month period.

4. A building site, a construction, assembly, or installation project constitutes a

permanent establishment only if such site or project continues for a period of

more than nine months.

5. Consultancy services provided by an enterprise of a Contracting State through

employees or other personnel engaged by the enterprise for such purpose in

the other Contracting State, constitutes a permanent establishment only if

activities of that nature continue, for the same project, for a period or periods

aggregating more than six months within any twelve-month period.

6. Notwithstanding the preceding provisions of this Article, the term "permanent

establishment" shall be deemed not to include:

a) the use of facilities solely for the purpose of storage, display or delivery of

goods or merchandise belonging to the enterprise;

b) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of storage, display or delivery;

c) the maintenance of a stock of goods or merchandise belonging to the

enterprise solely for the purpose of processing by another enterprise;

d) the maintenance of a fixed place of business solely for the purpose of

purchasing goods or merchandise, or of collecting information, for the

enterprise;

e) the maintenance of a fixed place of business solely for the purpose of carrying

on, for the enterprise, any other activity of a preparatory or auxiliary character;

f) the maintenance of a fixed place of business solely for any combination of

activities, mentioned in subparagraphs a) to e), provided that the overall

activity of the fixed place of business resulting from this combination is of a

preparatory or auxiliary character.

7. Notwithstanding the provisions of paragraphs 1 and 2, where a person -other than

an agent of an independent status to whom paragraph 8 applies- is acting on

behalf of an enterprise and has, and habitually exercises, in a Contracting State

an authority to conclude contracts in the name of the enterprise, that enterprise

shall be deemed to have a permanent establishment in that State in respect of

any activities which that person undertakes for the enterprise, unless the

activities of such person are limited to those mentioned in paragraph 6 which, if

exercised through a fixed place of business, would not make this fixed place of

business a permanent establishment under the provisions of that paragraph.

8. An enterprise of a Contracting State shall not be deemed to have a permanent

establishment in the other Contracting State merely because it carries on business

in that other Contracting 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. However, when conditions are made or imposed

between that enterprise and the agent in their commercial or financial relations

which differ from those which would have been made between independent

persons, he will not be considered an agent of an independent status within the

meaning of this paragraph.

9. 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 Contracting State (whether through a

permanent establishment or otherwise), shall not of itself constitute either

company a permanent establishment of the other.

INCOME FROM IMMOVABLE PROPERTY

1. Income derived by a resident of a Contracting State from immovable property

(including income from agriculture or forestry) situated in the other Contracting

State may be taxed in that other Contracting State.

2. The term "immovable property" shall have the meaning which it has under the law

of the Contracting State in which the property in question is situated. The term

shall in any case include property accessory to immovable property, livestock

and equipment used in agriculture and forestry, rights to which the provisions of

general law respecting landed property apply, usufruct of immovable property

and rights to variable or fixed payments as consideration for the working of, or

the right to work, mineral deposits, sources and other natural resources; ships

and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 shall apply to income derived from the direct use,

letting, or use in any other form of immovable property.

4. Where the ownership of shares or other rights directly or indirectly entitles the

owner of such shares or rights to the enjoyment of immovable property, the

income from the direct use, letting or use in any other form of such right to the

enjoyment may be taxed in the Contracting State in which the immovable

property is situated.

5. The provisions of paragraphs 1, 3 and 4 shall also apply to income from

immovable property of an enterprise.

BUSINESS PROFITS

1. The profits of an enterprise of a Contracting State shall be taxable only in that

Contracting State unless the enterprise carries on business in the other

Contracting State through a permanent establishment situated in that other

Contracting State. If the enterprise carries on business as aforesaid, the profits

of the enterprise may be taxed in the other Contracting State but only so much of

them as is attributable to that permanent establishment. Payments of any kind

received as a consideration for the use of, or the right to use, industrial,

commercial or scientific equipment, shall be deemed to be profits of an

enterprise to which the provisions of this Article shall apply.

2. Subject to the provisions of paragraph 4, 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 be expected to make if

it were a distinct and separate enterprise engaged in 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.

3. In determining the profits of a permanent establishment, there shall be allowed as

deductions expenses which are incurred for the purposes of the permanent

establishment, including executive and general administrative expenses so

incurred, whether in the Contracting State in which the permanent establishment

is situated or elsewhere.

4. No profits shall be attributed to a permanent establishment by reason of the mere

purchase by that permanent establishment of goods or merchandise for the

enterprise.

5. For the purposes of the preceding paragraphs, the profits to be attributed to the

permanent establishment shall be determined by the same method year by year

unless there is good and sufficient reason to the contrary.

6. Where profits include items of income which are dealt with separately in other

Articles of this Convention, then the provisions of those Articles shall not be

affected by the provisions of this Article.

SHIPPING AND AIR TRANSPORT

1. Profits from the operation of ships or aircraft in international traffic shall be

taxable only in the Contracting State in which the place of effective management

of the enterprise is situated.

2. For the purposes of this Article, profits of an enterprise of a Contracting State

from the operation of ships or aircraft in international traffic include all of the

following:

a) profits from the rental on a bareboat basis of ships or aircraft;

b) profits from the rental of containers, including trailers and related equipment

for the transport of containers, used for the transport of goods or

merchandise;

provided that such rental is ancillary to the operation of ships or aircraft in

international traffic and performed by that enterprise.

3. If the place of effective management of a shipping enterprise is aboard a ship,

then it shall be deemed to be situated in the Contracting State in which the home

harbour of the ship is situated, or, if there is no such home harbour, in the

Contracting State of which the operator of the ship is a resident.

4. The provisions of paragraph 1 and 2 shall also apply to profits derived from the

participation in a pool, a joint business or an international operating agency.

ASSOCIATED ENTERPRISES

1. Where

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 conditions are made or imposed between the two enterprises

in their commercial or financial relations which differ from those which would be

made between independent enterprises, then any profits which would, but for

those conditions, have accrued to one of the enterprises, but, by reason of those

conditions, have not so accrued, may be included in the profits of that enterprise

and taxed accordingly.

2. Where a Contracting State includes in the profits of an enterprise of that

Contracting State - and taxes accordingly - profits on which an enterprise of the

other Contracting State has been charged to tax in that other Contracting State

and that other Contracting State agrees that the profits so included are profits

which would have accrued to the enterprise of the first-mentioned Contracting

State if the conditions made between the two enterprises had been those which

would have been made between independent enterprises, then that other

Contracting State shall make an appropriate adjustment to the amount of the tax

charged therein on those profits. In determining such adjustment, due regard

shall be had to the other provisions of this Convention and the competent

authorities of the Contracting States shall, if necessary, consult each other.

DIVIDENDS

1. Dividends paid by a company which is a resident of a Contracting State to a

resident of the other Contracting State may be taxed in that other State.

2. 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 beneficial owner of the dividends is a resident of the other

Contracting State, the tax so charged shall not exceed 5 per cent of the gross

amount of the dividends.

Notwithstanding the provisions of the paragraph above, the Contracting State of

which the company paying the dividends is a resident shall exempt from tax the

dividends paid by that company to a company the capital of which is wholly or

partly divided into shares and which is a resident of the other Contracting State,

as long as it holds directly at least 10 per cent of the capital of the company

paying the dividends.

These last two paragraphs shall not affect the taxation of the company in respect

of the profits out of which the dividends are paid.

3. The term "dividends" as used in this Article means income from shares,

"jouissance" shares or "jouissance" rights, mining shares, founders' shares or

other rights, not being debt-claims, participating in profits, as well as income from

other corporate rights which is subjected to the same taxation treatment as

income from shares by the taxation laws of the Contracting State of which the

company making the distribution is a resident.

4. The provisions of paragraphs 1 and 2 shall not apply if 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,

through a permanent establishment situated therein, and the holding in respect

of which the dividends are paid is effectively connected with such permanent

establishment. In such case the provisions of Article 7 shall apply.

5. Where a company which is a resident of a Contracting State derives profits or

income from the other Contracting State, that other State may not impose any

tax on the dividends paid by the company, except insofar as such dividends are

paid to a resident of that other State or insofar as the holding in respect of which

the dividends are paid is effectively connected with a permanent establishment

situated in that other State, nor subject the company's undistributed profits to a

tax on the company's undistributed profits, even if the dividends paid or the

undistributed profits consist wholly or partly of profits or income arising in such

other State.

INTEREST

1. Interest arising in a Contracting State and beneficially owned by a resident of the

other Contracting State shall be taxable only in that other Contracting State.

2. 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, and in particular, income from

government securities and income from bonds or debentures, including

premiums and prizes attaching to such securities, bonds or debentures, as well

as all other income assimilated to income from money lent by the taxation laws

of the State in which the income arises. Penalty charges for late payment shall

not be regarded as interest for the purpose of this Article.

3. The provisions of paragraph 1 shall not apply if 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 arises, through a permanent

establishment situated therein, and the debt-claim in respect of which the

interest is paid is effectively connected with such permanent establishment. In

such case the provisions of Article 7 shall apply.

4. Where, by reason of a special relationship between the payer and the beneficial

owner of the interest, or between both of them and some other person, the

amount of the interest, having regard to the debt-claim for which it is paid,

exceeds the amount which would have been agreed upon by the payer and the

beneficial owner in the absence of such relationship, the provisions of this Article

shall apply only to the last-mentioned amount. In such case, the excess part of

the payments shall remain taxable according to the laws of each Contracting

State, due regard being had to the other provisions of this Convention.

ROYALTIES

1. Royalties arising in a Contracting State and paid to a resident of the other

Contracting State may be taxed in that other Contracting State.

2. However, such royalties may also be taxed in the Contracting State in which they

arise and according to the laws of that Contracting State, but if the beneficial

owner of the royalties is a resident of the other Contracting State the tax so

charged shall not exceed 5 per cent of the gross amount of such royalties.

3. The term "royalties" as used in this Article means payments of any kind received

as a consideration for the use of, or the right to use, any copyright of literary,

artistic or scientific work including cinematography films and works on films,

tapes or other means of reproduction for use in connection with television or

radio broadcasting, any patent, trade mark, design or model, plan, secret formula

or process, or for information (know-how) concerning industrial, commercial or

scientific experience.

4. The provisions of paragraph 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, through a permanent

establishment situated therein and the right or property in respect of which the

royalties are paid is effectively connected with such permanent establishment. In

such case the provisions of Article 7 shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is a

resident of that Contracting State. Where, however, the person paying the

royalties, whether he is a resident of a Contracting State or not, has in a

Contracting State a permanent establishment in connection with which the

liability to pay the royalties was incurred, and such royalties are borne by such

permanent establishment, then such royalties shall be deemed to arise in the

Contracting State in which the permanent establishment is situated.

6. Where, by reason of a special relationship between the payer and the beneficial

owner of the royalties or between both of them and some other person, the

amount of the royalties, having regard to the use, right or information for which

they are paid, exceeds the amount which would have been agreed upon by the

payer and the beneficial owner in the absence of such relationship, the

provisions of this Article shall apply only to the last-mentioned amount. In such

case, the excess part of the payments shall remain taxable according to the laws

of each Contracting State, due regard being had to the other provisions of this

Convention.

CAPITAL GAINS

1. Gains derived by a resident of a Contracting State from the alienation of

immovable property referred to in Article 6 and situated in the other Contracting

State may be taxed in that other Contracting State.

2. 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 including such gains from the alienation

of such a permanent establishment (alone or with the whole enterprise) may be

taxed in that other Contracting State.

3. 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 in which the place of effective management

of the enterprise is situated.

4. Gains derived by a resident of a Contracting State from the alienation of shares

or comparable interests deriving more than 50 per cent of their value directly or

indirectly from immovable property situated in the other Contracting State may

be taxed in that other State.

5. Gains from the alienation of shares or other rights, which directly or indirectly

entitle the owner of such shares or rights to the enjoyment of immovable

property situated in a Contracting State, may be taxed in that State.

6. Gains from the alienation of any property other than that referred to in the

preceding paragraphs of this Article shall be taxable only in the Contracting State

of which the alienator is a resident.

INCOME FROM EMPLOYMENT

1. Subject to the provisions of Articles 15, 17, 18, 19 and 20 salaries, wages and

other similar remuneration derived by a resident of a Contracting State in respect

of an employment shall be taxable only in that Contracting State unless the

employment is exercised in the other Contracting State. If the employment is so

exercised, such remuneration as is derived there from may be taxed in that other

Contracting State.

2. 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 Contracting

State if:

a) the recipient is present in the other Contracting State for a period or periods

not exceeding in the aggregate 183 days in any twelve-month period

commencing or ending in the fiscal year concerned; and

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

of the other Contracting State; and

c) the remuneration is not borne by a permanent establishment which the

employer has in the other Contracting State.

3. Notwithstanding the preceding provisions of this Article, remuneration derived in

respect of an employment exercised aboard 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.

DIRECTORS' FEES

Directors' fees and other similar payments derived by a resident of a Contracting

State in his capacity as a member of the board of directors of a company which is a

resident of the other Contracting State may be taxed in that other State.

ARTISTES AND SPORTSPERSONS

1. Notwithstanding the provisions of Articles 7 and 14, income derived by a resident

of a Contracting State as an entertainer, such as a theatre, motion picture, radio

or television artiste, or a musician, or as a sportsperson, from his personal

activities as such exercised in the other Contracting State, may be taxed in that

other Contracting State.

2. Where income in respect of personal activities exercised by an entertainer or a

sportsperson in his capacity as such accrues not to the entertainer or the

sportsperson himself but to another person, that income may, notwithstanding

the provisions of Articles 7 and 14, be taxed in the Contracting State in which the

activities of the entertainer or sportsperson are exercised.

3. The provisions of paragraphs 1 and 2 shall not apply if the activities exercised by

an entertainer or a sportsperson in a Contracting State are supported wholly or

substantially from the public funds of the other Contracting State or a political

subdivision or local authority thereof, within the framework of a cultural or sports

exchange programs approved by both Contracting States. In such a case, the

income derived from those activities may only be taxed in the other Contracting

State.

PENSIONS

Subject to the provisions of paragraph 2 of Article 18, pensions and other similar

remuneration paid to a resident of a Contracting State in consideration of past

employment shall be taxable only in that State.

GOVERNMENT SERVICE

1. a) Salaries, wages and other similar remuneration paid by a Contracting State or

a political subdivision or a 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 salaries, wages and other similar 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:

(1) is a national of that State; or

(2) did not become a resident of that State solely for the purpose of rendering

the services.

2. a) Notwithstanding the provisions of paragraph 1, pensions and other similar

remuneration paid by, or out of funds created by, a Contracting State or a

political subdivision or a 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 pensions and other similar remuneration shall be taxable only

in the other Contracting State if the individual is a resident of, and a national

of, that State.

3. The provisions of Articles 14, 15, and 16 shall apply to salaries, wages,

pensions, and other similar remuneration in respect of services rendered in

connection with a business carried on by a Contracting State or a political

subdivision or a local authority thereof.

TEACHERS AND RESEARCHERS

An individual who is or was immediately before visiting a Contracting State a

resident of the other Contracting State and who, at the invitation of the Government

of the first-mentioned Contracting State or of a university, college, school, museum or

other cultural institution in that first-mentioned Contracting State or under an official

programme of cultural exchange, is present in that Contracting State for a period not

exceeding two consecutive years solely for the purpose of teaching, giving lectures

or carrying out research at such institution shall be exempt from tax in that

Contracting State on his remuneration for such activity.

STUDENTS AND TRAINEES

1. Payments which a student or business trainee who is or was immediately before

visiting a Contracting State a resident of the other Contracting State and who is

present in the first-mentioned Contracting State solely for the purpose of his

education or training receives for the purpose of his maintenance, education or

training shall not be taxed in that Contracting State provided that such payments

arise from sources outside that Contracting State.

2. Notwithstanding the provisions of paragraph 1, remuneration which a student or

business trainee who is or was immediately before visiting a Contracting State a

resident of the other Contracting State and who is present in the first-mentioned

Contracting State solely for the purpose of his education or training derives from

temporary services rendered in the first-mentioned Contracting State shall not be

taxed in that Contracting State, provided that such services are in connection

with his education or training and that the remuneration for such services is

necessary to supplement the resources available to him for the purpose of his

maintenance.

OTHER INCOME

1. Items of income of a resident of a Contracting State, wherever arising, not dealt

with in the foregoing Articles of this Convention shall be taxable only in that

Contracting State.

2. The provisions of paragraph 1 shall not apply to income, other than income from

immovable 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 permanent establishment situated therein and the

right or property in respect of which the income is paid is effectively connected

with such permanent establishment. In such case the provisions of Article 7 shall

apply.

CAPITAL

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 Contracting State.

2. 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 may be taxed in that other Contracting State.

3. Capital represented by ships and aircraft operated in international traffic and by

movable property pertaining to the operation of such ships and aircraft shall be

taxable only in the Contracting State in which the place of effective management

of the enterprise is situated.

4. Capital constituted by shares or other rights in a company or any other body of

persons, deriving more than 50 per cent of their value directly or indirectly from

immovable property situated in a Contracting State or by shares or other rights

which entitle its owner to a right of enjoyment of immovable property situated in a

Contracting State, may be taxed in the Contracting State in which the immovable

property is situated.

5. All other elements of capital of a resident of a Contracting State shall be taxable

only in that Contracting State.

ELIMINATION OF DOUBLE TAXATION

1. In the case of Kuwait, where a resident of Kuwait derives income or owns capital

which, in accordance with the provisions of this Convention, may be taxed in both

Kuwait and Spain, Kuwait shall allow as a deduction from the tax on the income

of that resident, an amount equal to the income tax paid in Spain and as a

deduction from the tax on the capital of that resident an amount equal to the

capital tax paid in Spain.

Such deduction in either case shall not, however, exceed that part of the tax on

income or on capital, as computed before the deduction is given, which is

attributable, as the case may be, to the income or the capital which may be taxed

in Spain.

2. In the case of Spain, double taxation shall be avoided following either the

provisions of its internal legislation or the following provisions in accordance with

the internal legislation of Spain:

a) Where a resident of Spain derives income or owns elements of capital which, in

accordance with the provisions of this Convention, may be taxed in Kuwait,

Spain shall allow:

(1) as a deduction from the tax on the income of that resident, an amount

equal to the income tax paid in Kuwait;

(2) as a deduction from the tax on the capital of that resident, an amount

equal to the tax paid in Kuwait on the same elements of capital;

(3) the deduction of the underlying corporation tax shall be given in

accordance with the internal legislation of Spain.

Such deduction shall not, however, exceed that part of the income tax or

capital tax, as computed before the deduction is given, which is attributable,

as the case may be, to the income or the same elements of capital which may

be taxed in Kuwait.

b) Where in accordance with any provision of the Convention income derived or

capital owned by a resident of Spain is exempt from tax in Spain, Spain may

nevertheless, in calculating the amount of tax on the remaining income or

capital of such resident, take into account the exempted income or capital.

c) Spain will only eliminate double taxation of Zakat paid by a resident in Spain

when its effective payment to the Kuwait Zakat House or Tax Authority can be

documentarily proved. To these effects, the double taxation will be

correspondingly eliminated upon production of a certificate stating the

foregoing, issued by the Ministry of Finance of Kuwait.

NON-DISCRIMINATION

1. Individuals possessing the nationality 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 individuals possessing the nationality of that other

Contracting State in the same circumstances are or may be subjected.

2. The taxation on a permanent establishment, which an enterprise of a Contracting

State has in the other Contracting State, shall not be less favorably levied in that

other Contracting State than the taxation levied on enterprises of third states,

carrying on the same activities in the same circumstances. This provision shall

not be construed as obliging a Contracting State to grant to residents of the other

Contracting State any personal allowances, relieves and reductions for taxation

purposes on account of civil status or family responsibilities which it grants to its

own residents.

3. Enterprises of a Contracting State, the capital of which is wholly or partly owned

or controlled, directly or indirectly, by one or more residents of the other

Contracting State, shall not be subjected in the first-mentioned Contracting State

to any taxation or any requirement connected therewith which is other or more

burdensome than the taxation and connected requirements to which other

similar enterprises the capital of which is wholly or partly owned or controlled

directly or indirectly by one or more residents of any third states are or may be

subjected.

4. Nothing in this Article shall be interpreted as imposing a legal obligation on a

Contracting State to extend to the residents of the other Contracting State, the

benefit of any treatment, preference or privilege which may be accorded to any

third state or its residents by virtue of the formation of a customs union,

economic union, a free trade area or any regional or sub-regional arrangement

relating wholly or mainly to taxation or movement of capital to which such the

first-mentioned Contracting State may be a party.

5. In this Article, the term "taxation" means taxes which are the subject of this

Convention.

MUTUAL AGREEMENT PROCEDURE

1. Where a person considers that the actions of one or both of the Contracting

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 Contracting States, present his case to the competent

authority of the Contracting State of which he is a resident or, if his case comes

under paragraph 1 of Article 24, to that of the Contracting State of which he is a

national. The case must be presented within three years from the first

notification of the action resulting in taxation not in accordance with the

provisions of this Convention.

2. The competent authority shall endeavor, if the objection appears to it to be

justified and if it is not itself able to arrive at a satisfactory solution, to resolve the

case by mutual agreement with the competent authority of the other Contracting

State, with a view to the avoidance of taxation which is not in accordance with

this Convention. Any agreement reached shall be implemented notwithstanding

any time limits in the domestic law of the Contracting States.

3. The competent authorities of the Contracting States shall endeavor to resolve by

mutual agreement any difficulties or doubts arising as to the interpretation or

application of this Convention. They may also consult together for the

elimination of double taxation in cases not provided for in this Convention.

4. The competent authorities of the Contracting States may communicate with each

other directly for the purpose of reaching an agreement in the sense of the

preceding paragraphs. When it seems advisable in order to reach agreement to

have an oral exchange of opinions, such exchange may take place through a

Commission consisting of representatives of the competent authorities of the

Contracting States.

EXCHANGE OF INFORMATION

1. The competent authorities of the Contracting States shall exchange such

information as is forseeably relevant for carrying out the provisions of this

Convention or to the administration or enforcement of the domestic laws

concerning taxes of every kind and description imposed on behalf of the

Contracting States, or of their political subdivisions or local authorities, insofar as

the taxation thereunder is not contrary to the Convention. The exchange of

information is not restricted by Articles 1 and 2.

2. Any information received under paragraph 1 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, the determination of

appeals in relation to the taxes referred to in paragraph 1, or the oversight of the

above. Such persons or authorities shall use the information only for such

purposes. They may disclose the information in public court proceedings or in

judicial decisions.

Notwithstanding the foregoing, information received by a Contracting State may

be used for other purposes when such information may be used for such other

purposes under the law of the requesting State.

3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to

impose on a Contracting State the obligation:

a) to carry out administrative measures 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 trade process, or information

the disclosure of which would be contrary to public policy (ordre public).

4. If information is requested by a Contracting State in accordance with this Article,

the other Contracting State shall use its information gathering measures to

obtain the requested information, even though that other State may not need

such information for its own tax purposes. The obligation contained in the

preceding sentence is subject to the limitations of paragraph 3 but in no case

shall such limitations be construed to permit a Contracting State to decline to

supply information solely because it has no domestic interest in such

information.

5. In no case shall the provisions of paragraph 3 be construed to permit a

Contracting State to decline to supply information solely because the information

is held by a bank, other financial institution, nominee or person acting in an

agency or a fiduciary capacity or because it relates to ownership interests in a

person.

MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR POSTS

Nothing in this Convention shall affect the fiscal privileges of members of a

diplomatic mission or a consular post under the general rules of international law or

under the provisions of special agreements.

ENTRY INTO FORCE

1. The Governments of the Contracting States shall notify each other, through

diplomatic channels that the internal procedures required by each Contracting

State for the entry into force of this Convention have been complied with.

2. The Convention shall enter into force after the period of three months following

the date of receipt of the later of the notifications referred to in paragraph 1 and

its provisions shall have effect:

a) regarding taxes withheld at source, on amounts paid or credited on or after

the date in which the Convention enters into force; and

b) regarding all other taxes, for taxation years or periods beginning on or after

the date in which the Convention enters into force.

TERMINATION

This Convention shall remain in force for a period of five years and shall

continue in force thereafter for a similar period or periods unless either Contracting

State notifies the other in writing, six months before the expiry of the initial or any

subsequent period, of its intention to terminate this Convention. In such event, the

Convention shall cease to have effect

a) regarding taxes withheld at source, on amounts paid or credited on or after

the date in which the notice of termination is given; and

b) regarding all other taxes, for taxation years or periods beginning on or after

the date in which the notice of termination is given.

In WITNESS WHEREOF the respective plenipotentiaries of both Contracting

States have signed this Convention.

Done at ........................... this ................... day of ........................ 142 H

corresponding to the....................... day of ...................... 200 , in two originals, in the

Arabic, Spanish and English languages, all texts being equally authentic. In case of

divergence between the texts, it shall be resolved in accordance with the English

text.

For the State of Kuwait For the Kingdom of Spain

At the moment of signing the Convention between the Kingdom of Spain and

the State of Kuwait for the avoidance of double taxation and the prevention of fiscal

evasion with respect to taxes on income and on capital, the undersigned have

agreed upon the following provisions which shall be an integral part of the

Convention.

I. Entitlement to treaty benefits

a) The Contracting States declare that their domestic rules and procedures with

respect to the abuses of law (including tax treaties) may be applied to the treatment

of such abuses.

b) It is understood that the benefits under this Convention shall not be granted to a

person, which is not the beneficial owner of the items of income derived from the

other Contracting State or items of capital situated therein.

II. The laws in force in either of the Contracting States shall continue to govern

the taxation in the respective Contracting State except where provisions to the

contrary are made in this Convention.

III. Ad. Article 2

It is understood that if Kuwait would introduce an income tax on individuals, this tax

will be considered to be an identical or substantially similar tax as meant in

paragraph 4 of Article 2.

IV. Ad Article 4, paragraph 1 a)

For the purposes of paragraph 1 a), a “resident of a Contracting State” shall include

all of the following:

a) that Contracting State and any political subdivision or local authority thereof;

b) any governmental institution created in that Contracting State under public law

such as a corporation, Central Bank, fund, authority, foundation, agency or other

similar entity;

c) any entity established in that Contracting State all the capital of which has been

provided by that Contracting State or any political subdivision or local authority

thereof or any governmental institution as defined in subparagraph b), together

with other states.

V. Ad Article 7

The provisions of this Article shall be applied according to the internal legislation and

regulations of the Contracting States, provided that they are consistent with the

principles of this Article. To this aim, it shall be understood that the term “regulations”

means any rule, order, principle or precept whatsoever of a public nature.

VI. Ad Article 7, paragraphs 1 and 2

1. Where an enterprise of a Contracting State sells goods or merchandise or carries

on business in the other State through a permanent establishment situated

therein, the profits of that permanent establishment shall not be determined on the

total amount received by the enterprise, but shall be determined only on the basis

of that part of the receipts which is attributable to the actual activity of the

permanent establishment for such sales or business.

2. Likewise in the case of contracts for the survey, supply, installation or construction

of industrial, commercial or scientific equipment or premises, or of public works,

when the enterprise has a permanent establishment, the profits of such

permanent establishment shall not be determined on the total amount of the

contract, but shall be determined only on the basis of that part of the contract,

which is effectively carried out by the permanent establishment in the State where

the permanent establishment is situated.

3. Only those profits may be attributed to a building site, a construction, assembly, or

installation project in the Contracting State in which the building site, construction,

assembly, or installation project is located which result from the activity of the

building site, construction, assembly, or installation project itself. This means that

in particular:

(a) profits which arise from a delivery of goods, machines or equipments made,

whether in connection with this activity or independently of it, by the principal

permanent establishment or another permanent establishment of the

enterprise or a third party shall not be attributed to the building site,

construction, assembly, or installation project;

(b) profits arising from planning, project work, design or research as well as

technical services which a resident of one Contracting State performs for the

building site, construction, assembly, or installation project located in the

other Contracting State shall, so far as these activities are performed outside

the other Contracting State, not be attributed to that building site,

construction, assembly, or installation project.

VII. Ad. Article 7, paragraph 3

It is understood that, concerning this paragraph, the term "expenses which are

incurred for the purposes of the permanent establishment" means all expenses

actually incurred whether in the Contracting State in which the permanent

establishment is situated or elsewhere, reasonably allocable to and effectively

connected with such permanent establishment.

VIII. Ad. Article 24

In case Kuwait introduces an income tax applicable to its nationals who are resident

in Kuwait, or the existing tax will be modified accordingly, then the two Contracting

States shall enter into negotiations in order to modify this Article consequently.

IX. Ad. Article 26

In obtaining the information mentioned in this Article, each Contracting State shall

apply its own regulations and procedures; in no case shall these regulations and

procedures be construed to permit a Contracting State to decline to supply this

information.

Information exchanged under this Article will be considered to be sufficient, unless

the internal legislation of each Contracting State otherwise states.

In witness whereof the undersigned, duly authorised thereto, have signed this

Protocol.

Done at ........................... this ................... day of ........................ 142 H

corresponding to the....................... day of ...................... 200 , in two originals, in the

Arabic, Spanish and English languages, all texts being equally authentic. In case of

divergence between the texts, it shall be resolved in accordance with the English

text.

For the State of Kuwait For the Kingdom of Spain