Switzerland

Article 2(3)(a) (Objective scope) of the Convention is replaced by the following Article 2(3)(a):

'(a) in Spain:

(i) income tax on natural persons;

(ii) corporate income tax;

(iii) income tax on non-residents;

(iv) property tax; and

(v) local income and property taxes;

(hereinafter referred to as “Spanish tax”).’

Article 3(1)(a) (General definitions) of the Convention is replaced by the following Article 3(1)(a):

‘(a) the term “Spain” means the Kingdom of Spain and, used geographically, means the territory of the Kingdom of Spain, including internal waters, airspace, territorial sea and areas external to the 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;’

1. The following subparagraph (f) is added to Article 5(3) (Permanent establishment) of the Convention:

‘(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 is of an auxiliary or preparatory nature.’

2. Article 5(4) (Permanent establishment) of the Convention is replaced by the following Article 5(4):

‘4. By way of derogation from paragraphs 1 and 2, where a person, other than an independent agent to which paragraph 5 applies, is acting on behalf of an undertaking and has and normally exercises in a Contracting State powers which enable it 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 3 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.’

The paragraph constituting Article 9 (Partners) of the Convention becomes paragraph 1 and the following two new paragraphs 2 and 3 are added to Article 9:

‘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.

3. Paragraph 2 shall not apply in the event of intentional fraud or non-compliance.’

1. Article 10(2)(b) (Dividends) of the Convention is replaced by the following:

'(b) By way of derogation from the preceding subparagraph, 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 10 per cent of the capital of the company paying the dividends for at least one year, and provided that the company paying the dividends is subject to and not exempt from the taxes covered by Article 2 of the Convention, and that none of the companies is resident of a third State under an agreement to avoid double taxation with that third State. Both companies must take the form of capital companies.’

2. The following subparagraph (c) is added to Article 10(2) (Dividends) of the Convention:

'(c) Notwithstanding subparagraph (a), dividends paid to a recognised pension fund or scheme resident in a Contracting State may only be taxed in that Contracting State.'

1. The following paragraph 3 replaces the current Article 13(3) (Capital gains) of the Convention:

‘3. Profits obtained by a resident of a Contracting State from the disposal of shares or similar rights, the value of which derives by more than 50 per cent, directly or indirectly, from immovable property situated in the other Contracting State, may be taxed in that other State. The above sentence shall not apply:

(a) the disposal of shares listed on a Swiss or Spanish Stock Exchange, or on any other stock exchange that may be agreed by the competent authorities; or

(b) the disposal of shares or shares in a company if the company uses the immovable property for its own industrial activity.’

2. Article 13(3) is replaced by the following paragraph, which becomes paragraph 4:

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

Article 23 (Provisions to avoid double taxation) of the Convention is replaced by the following provisions:

‘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, in accordance with Spanish domestic law:

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

(i) the deduction from that resident's income tax of an amount equal to the income tax paid in Switzerland;

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

(iii) the deduction of corporation tax actually paid by the company distributing the dividends, corresponding to the profits from which the dividends are paid, in accordance with Spain's 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 Switzerland.

(b) Where, under any provision of this Convention, income obtained by a resident of Spain, or the property held by him, 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 Switzerland, double taxation will be avoided as follows:

(a) Where a resident of Switzerland obtains income or possesses property which, pursuant to the provisions of this Convention, may be taxed in Spain, Switzerland, subject to subparagraph (b), he shall exempt from taxation such income or property; however, when calculating the tax applicable to the remaining income or property of that resident, he may apply the tax rate which would have been applicable if the income or property had not been exempted. However, that exemption shall apply to the profits referred to in Article 13(3) only where it is established that Spain is actually taxing them.

(b) Where a resident of Switzerland obtains dividends or royalties which, in accordance with the provisions of Articles 10 or 12, may be taxed in Spain, Switzerland shall grant relief to that resident. Such relief may consist of:

(i) the deduction in the income tax of that resident from an amount equal to the tax required in Spain in accordance with the provisions of Article 10 or Article 12; however, that deduction may not exceed the amount of Swiss tax, calculated before the deduction, corresponding to the income that may be taxed in Spain;

(ii) a reduction in a fixed amount of Swiss tax; or

(iii) a partial exemption from Swiss tax for such dividends or royalties, consisting in any case at least of the deduction of the tax required in Spain from the gross amount of dividends or royalties.

Switzerland shall determine the applicable relief and regulate the corresponding procedure in accordance with the Swiss provisions relating to the application of the international conventions signed by the Swiss Confederation to prevent double taxation.

(c) companies resident in Switzerland which obtain dividends from companies resident in Spain shall be entitled, for the purposes of Swiss tax on such dividends, to the same relief to which a company could access when the company paying the dividends is resident in Switzerland.’

1. Article 25(1) (mutual agreement procedure) is replaced by the following:

‘1. Where a person considers that the measures taken by one or both Contracting States imply or may entail for him an imposition not in accordance 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 be brought within three years of the first notification of the measure involving an imposition not in accordance with the provisions of the Convention.’

2. The following sentence is added at the end of Article 25(2):

‘The agreement shall apply irrespective of the time limits laid down by the national law of the Contracting States, but in no case after seven years from the date of the first notification referred to in paragraph 1.’

3. the following paragraph 5 is added to Article 25:

‘5. When,

(a) pursuant to paragraph 1 a person has referred his case to the competent authority of a Contracting State on the grounds that the measures taken by one or both Contracting States entail for him an imposition not in conformity with the provisions of this Convention; and

(b) the competent authorities may not agree to settle the matter in accordance with paragraph 2 within three years of the submission of the case to the competent authority of the other Contracting State,

At the request of the taxpayer, any unsolved question relating to that case shall be submitted to arbitration.

Such arbitration may not, however, take place where a person directly concerned may still exercise the right of appeal, under the domestic law of any State, to the courts or administrative bodies of that State for the purpose of deciding on such matters, or where a court or administrative body has already previously ruled on them. Unless a person directly affected by the case rejects the amicable agreement applying the opinion, it shall be binding on both Contracting States and applicable irrespective of the time limits provided for by the domestic law of those States. The competent authorities of the Contracting States shall, by mutual agreement, determine the method of application of this paragraph.

The Contracting States may provide the advisory commission set up pursuant to this paragraph with any information necessary for the conduct of the arbitral proceedings. The members of the advisory commission shall be subject to the limitations on the communication of information referred to in Article 25a(2) with regard to the information thus provided.’

1. Article 25a (Exchange of information) of the Convention is replaced by the following article:

‘Article 25a. Exchange of information.

1. The competent authorities of the Contracting States shall exchange information which is likely to be relevant to the implementation of this Convention or to administer and require the provisions of the national legislation of the Contracting States relating to taxes of any kind and nature received by the Contracting States, their political subdivisions or local authorities to the extent that the taxation provided for therein is not contrary to the Convention. The exchange of information shall not be limited by Articles 1 and 2.

2. Information received by a Contracting State pursuant to paragraph 1 shall be kept secret in the same way as information obtained under the domestic law of that State and shall be disclosed only to the persons or authorities (including courts and administrative bodies) responsible for the settlement or collection of the taxes referred to in paragraph 1 of their effective application or for the prosecution of the non-compliance relating thereto, or for the determination of the remedies relating thereto. Such persons or authorities shall use this information only for these purposes. They may disclose the information in public hearings of the courts or in court judgements. Notwithstanding the above, information received by a Contracting State may be used for other purposes when such information may be used for other purposes in accordance with the laws of both States and the competent authority of the supplying State authorizes such use.

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

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

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

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

4. Where a Contracting State requests information under this Article, the other Contracting State shall use the measures available to it to gather information for the purpose of obtaining the information requested, even if that other State may not need such information for its own tax purposes. The above obligation is limited by paragraph 3, but in no case may such limitations be interpreted as a basis for refusing the exchange of 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 the exchange of information solely because it is held by banks, other financial institutions or any person acting in a representative or fiduciary capacity, including designated agents, or because it relates to shares or shares in a person. In order to obtain such information, the tax authorities of the Contracting State to which the information is required, where necessary in order to fulfil its obligations under this paragraph, shall be empowered to require the communication of information referred to in this paragraph, notwithstanding paragraph 3 or any provision to the contrary in its domestic law.’

New paragraph I bis is inserted into the Protocol after paragraph I:

‘Ia. With reference to article 4.

With regard to Article 4(1), the term “resident of a Contracting State” shall be understood to include recognized pension funds or schemes established in that State.

The term "recognised fund" means any plan, fund, mutual fund or other institution incorporated in a Contracting State.

(i) managing the right of persons in whose favour they are constituted to receive income or capital for retirement, survival, widowhood, orphanhood or disability; and

(ii) where contributions to such contributions are eligible for tax benefits in the form of a reduction in the income tax base of natural persons.’

The following new paragraph III bis is inserted into the Protocol after paragraph III:

‘It shall be understood that, in accordance with the first sentence of Article 23(1) of the Convention, a resident of Spain may choose to eliminate double taxation in accordance with the methods and requirements laid down in Spanish legislation for income obtained abroad (e.g. Articles 21 or 22 of Royal Legislative Decree 4/2004 of 5 March, approving the consolidated text of the Company Tax Act or in accordance with the methods provided for in this Article 23.’

Paragraph IV of the Protocol, with reference to Article 25 bis, is replaced by the following new paragraph IV:

‘1. It is understood that the exchange of information may be requested only after all the usual sources of information of the Contracting State requiring the information, available to it under its domestic tax procedure, have been exhausted, except for those which may lead to disproportionate difficulties.

2. In making a request for information under article 25 bis of the Convention, the competent authorities of the requesting State shall be deemed to provide the following information to the competent authorities of the requested State:

(a) the identity of the person under inspection or investigation;

(b) the dates for which the information is requested;

(c) a statement of the requested information showing its nature and the manner in which the requesting Party wishes to receive the information from the requested Party;

(d) the tax purpose for which the information is requested;

(e) to the extent known, the name and address of any person in whose possession the requested information is believed to be acting;

3. The “predictable relevance” approach is understood to be intended to provide for an exchange of tax information as wide as possible and at the same time to clarify that States are not free to undertake indefinite searches for evidence. (“fishing expeditions”), or to request information of doubtful relevance with regard to the tax situation of a particular taxpayer. While paragraph 2 contains important procedural requirements in order to ensure that indefinite searches for evidence are not undertaken, subparagraphs (a) to (e) should be interpreted in such a way as not to spoil the effective exchange of information.

4. Article 25 bis of the Convention shall also be deemed not to oblige Contracting States to exchange information automatically or spontaneously.

5. In the event of the exchange of information, the rules of administrative procedure concerning the rights of taxpayers applicable in the Contracting State to which the information is requested shall be deemed to remain applicable before the transmission of the information to the Contracting State which has requested it. It shall also be understood that the purpose of this provision is to ensure a fair procedure for the taxpayer and not to prevent or unduly delay the process of exchange of information.

6. The competent authority shall forward the requested information to the other Contracting State as soon as possible. The time elapsed from the request for information to its receipt by the requesting State shall not be considered for the purpose of calculating the time limits provided for in Spanish tax legislation in respect of the tax procedures of the tax administration.

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

Should the taxpayer appeal the decision taken by the Swiss Federal Tax Administration concerning the transmission of information to the Spanish competent authority, any delay for this reason shall not be computable in the application of the time limits provided for in Spanish tax law in respect of the tax procedures of the Tax Administration.’

1. The Governments of the Contracting States shall, through diplomatic means, notify each Contracting State of compliance with the internal procedures necessary for the entry into force of this Amending Protocol.

2. The amending Protocol shall enter into force within three months of the date of receipt of the last notification referred to in paragraph 1 and its provisions shall apply:

(i) in respect of taxes withheld at source, on amounts paid or due from the date, including on which the Amending Protocol enters into force;

(ii) in respect of other taxes, for fiscal years beginning from the date, including when the amending Protocol enters into force;

(iii) in relation to the new Article 25a, with regard to taxes covered by Article 2 of the Convention, for tax years beginning on or after 1 January 2010, or for taxes payable on the amounts paid or due since that date;

(iv) with regard to new Article 25a, as regards other taxes, for fiscal years beginning on the first day of January of the year immediately after the entry into force of this Amending Protocol, or for taxes levied on the amounts paid or due since that date; and

(v) in relation to the new paragraph 5 of Article 25 of the Convention, to the amicable procedures initiated since the entry into force of this Amending Protocol.

3. Article 25 bis of the Convention and paragraph IV of the Protocol, as amended by the Protocol of 29 June 2006, shall continue to apply to cases of tax fraud or equivalent infringement committed after 29 June 2006, until the effect of this Amending Protocol.

In faith, the signatories, duly authorized for this purpose by their respective Governments, have signed this Amending Protocol.

Done in duplicate in Madrid on 27 July 2011 in the English, French and Spanish languages. All texts are equally authentic.

This Protocol shall enter into force on 24 August 2013, three months after the date of receipt of the last notification of compliance with the necessary internal procedures, as provided for in Article 13.

Madrid, June 5, 2013.–The Technical General Secretary of the Ministry of Foreign Affairs and Cooperation, Fabiola Gallego Caballero.