JUAN CARLOS I
KING OF SPAIN
For what?
on 3 June 1986, the Plenipotentiary of the Kingdom of Spain signed in Madrid, together with the Plenipotentiary of the Grand Duchy of Luxembourg, both of which were duly and properly appointed to that effect, the Convention between the Kingdom of Spain and the Grand Duchy of Luxembourg on the avoidance of double taxation on income and property taxes and on the prevention of tax evasion and evasion, and the annexed Protocol.
Viewed and examined
the thirty articles of the Convention and its annexed Protocol,
Granted
by the Cortes Generales the authorization provided for in Article 94.1 of the Constitution,
I come to approve and ratify
what it provides for, as I hereby approve and ratify it, promising to comply with it, observe it and ensure that it is fulfilled and observed in a timely manner in all its parts, to the end of which, for further validation and firmness,
I order
issue this instrument of ratification signed by Me, duly sealed and endorsed by the undersigned Minister for Foreign Affairs.
Done at Madrid, 10 April 1987.
JUAN CARLOS R.
The Minister for Foreign Affairs,
FRANCISCO FERNÁNDEZ ORDENEZ
[heading]Convention between the Kingdom of Spain and the Grand Duchy of Luxembourg to prevent double taxation on income and property taxes and to prevent tax evasion and evasion
The Government of Spain and the Government of the Grand Duchy of Luxembourg, wishing to conclude a convention to prevent double taxation of income and property taxes and to prevent tax evasion and evasion, have agreed as follows:
Article 1. Personal scope.
This Convention applies to persons resident in one or both Contracting States.
Article 2. Taxes covered.
1. This Convention applies to income and property taxes payable by each Contracting State, its political subdivisions or its local entities, irrespective of the system of its levy.
2. Income and property taxes 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 the Companies, as well as taxes on capital gains.
3. The current taxes to which this Convention specifically applies are:
(a) In Luxembourg:
1. The Income Tax of Physical Persons.
2. The Income Tax of the Entities.
3. The Special Tax on the Remuneration of Members of the Boards of Directors.
4. The Wealth Tax.
5. The communal commercial tax on profits and exploitation capital.
6. The communal wage tax (hereinafter referred to as the Luxembourg tax).
(b) In Spain:
1. The Income Tax of Physical Persons.
2. The Corporate Tax.
3. The property tax (hereinafter referred to as the Spanish tax).
4. The Convention shall also apply to taxes of an identical or similar nature which are established after the date of signature of the Convention and which are added to or replaced by existing taxes. The competent authorities of the Contracting States shall notify each other of the essential amendments made to their respective tax laws.
Article 3. General definitions.
1. For the purposes of this Convention, unless the context of the Convention is different:
(a) The terms ‘one Contracting State’ and ‘the other Contracting State’ mean, depending on the context, Luxembourg or Spain.
(b) 'Luxembourg' means the territory of the Grand Duchy of Luxembourg.
(c) The term 'Spain' means the territory of the Spanish State, including any area outside the territorial sea over which, in accordance with international law, and under its domestic law, the Spanish State exercises or may exercise in the future rights of jurisdiction or sovereignty.
(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 that is considered a legal person for tax purposes.
(f) The terms ‘Company of one Contracting State’ and ‘Company of the other Contracting State’ mean, respectively, an Enterprise operated by a resident of one Contracting State and an enterprise operated by a resident of the other Contracting State.
(g) “International traffic” means any transport by a ship or aircraft operated by an Enterprise whose effective headquarters are located in one Contracting State, except where the ship or aircraft is operated only between two points located in the other Contracting State.
(h) The expression ‘competent authority’ means:
(i) In the case of Luxembourg, the Minister of Finance or his duly authorized representative;
(ii) In the case of Spain, the Minister of Economy and Finance or his duly authorized representative.
2. For the purposes of the application of the Convention by a Contracting State, any expression not defined in the Convention shall, unless a different interpretation is given in its context, have the meaning attributed to it by the law of that State concerning the taxes which are the subject of the Convention.
Article 4. Resident.
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, place of address or any other criterion of a similar nature. However, this term does not include persons who are subject to taxation in this State solely for the income they obtain from sources located in that State or for the assets they possess in that State.
2. Where, under the provisions of paragraph 1, a natural person is a resident of both Contracting States, his or her situation shall be resolved as follows:
(a) This person shall be considered a resident of the State where 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 of the State with which he or she has closer personal and economic relations (centre of vital interests).
(b) If the State in which the person has the centre of his or her vital interests cannot be determined, 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 of the Contracting State in which he or she habitually lives.
(c) If he lives habitually in both States or does not live in either State, he or she shall be considered resident of the State of which he or she is a national.
(d) If he is a national of either State or is not a national of either State, the competent authorities of the two Contracting States shall decide the case by mutual agreement.
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 of the State in which his or her place of effective management is located.
Article 5. Permanent establishment.
1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of business through which an Enterprise carries out all or part of its activity.
2. The term ‘permanent establishment’ includes, in particular:
(a) Management offices.
(b) Branches.
(c) Offices.
(d) Factories.
(e) Workshops.
(f) Mines, oil or gas wells, quarries or any other natural resource extraction site.
3. A construction, installation or assembly work only constitutes a permanent establishment if its duration exceeds twelve months.
4. Notwithstanding the 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 enterprise.
(b) The maintenance of a warehouse of goods or goods belonging to the Enterprise for the sole purpose of storing, displaying or delivering them.
(c) The maintenance of a deposit of goods or goods belonging to the Enterprise for the sole purpose of their processing by another undertaking.
(d) The maintenance of a fixed place of business for the sole purpose of purchasing 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 for the enterprise any other activity of an auxiliary or preparatory nature.
(f) The maintenance of a fixed place of business for the sole purpose of the combined exercise of the activities referred to in subparagraphs (a) to (e), provided that all the activities of the fixed place of business remain auxiliary or preparatory.
5. By way of derogation from paragraphs 1 and 2, where a person — other than an agent enjoying an independent status, to which paragraph 7 applies — acts on behalf of an Enterprise and maintains and habitually exercises in a Contracting State powers to conclude contracts on behalf of the Enterprise, the Enterprise shall be deemed to have a permanent establishment in this State in respect of all activities carried out by that person on behalf of the Enterprise, 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, this place would not have been regarded as a permanent establishment, in accordance with the provisions of this paragraph.
6. A person who engages in exploration or exploitation of the natural resources of the seabed and subsoil of a Contracting State or activities complementary to or auxiliary to those of that Contracting State shall be considered to be engaged in an activity through a permanent establishment in that State.
7. An Enterprise is not considered to have a permanent establishment in a Contracting State merely because it carries out its activities through a broker, a general commissioner or any other agent enjoying an independent status, provided that such persons act within the ordinary framework of their activity.
8. The fact that a Company resident of a Contracting State controls or is controlled by a corporation resident of the other Contracting State, or that it engages in activities in that other State (whether by permanent establishment or otherwise), does not by itself render any of these Societies permanent establishment of the other State.
Article 6. Income from immovable property.
1. Income from immovable property (including income from agricultural or forestry holdings) located in the other Contracting State may be taxed in the 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 in question is situated. In any event, that term includes accessories, livestock and equipment used on agricultural and forestry holdings, rights to which the provisions of private law relating to real estate, the use of immovable property and rights to variable or fixed payments for the exploitation or concession of the exploitation of mineral deposits, sources and other natural resources apply; vessels, vessels and aircraft are not regarded as immovable property.
3. The provisions of paragraph 1 apply to income derived from direct use, lease or shareholding, as well as from any other form of exploitation of immovable property.
4. The provisions of paragraphs 1 and 3 also apply to income derived from the immovable property of an Enterprise and from the immovable property used for the exercise of independent work.
Article 7. Business profits.
1. The profits of an Enterprise of one Contracting State may be taxed only in this State, unless the Enterprise carries out its business in the other Contracting State through a permanent establishment located therein. If the company does so, the profits of the company may be taxed in the other State, but only to the extent that they can be attributed to this permanent establishment.
2. Without prejudice to paragraph 3, where an Enterprise of one Contracting State carries out its activity in the other Contracting State through a permanent establishment situated therein, in each Contracting State the profits it would have obtained from being a separate and separate Enterprise carrying out the same or similar activities under the same or similar conditions and dealing entirely independently with the Enterprise from which it is a permanent establishment shall be attributed to that establishment.
3. For the purpose of determining the benefit of the permanent establishment, the deduction of expenses incurred for the realization of the purposes of the permanent establishment, including management and general administrative expenses for the same purposes, shall be permitted, 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 the profits attributable to permanent establishments on the basis of a sharing of the total profits of the Enterprise among its various parties, the provisions of paragraph 2 shall not prevent that Contracting State from determining the taxable profits in this manner; 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 benefit shall be attributed to a permanent establishment merely because it buys goods or goods for the Enterprise.
6. For the purposes of the preceding paragraphs, the profits attributable to the permanent establishment shall be calculated 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.
Article 8. Shipping and air transport.
1. Profits from operating ships or aircraft in international traffic may be taxed only in the Contracting State in which the effective head office of the Enterprise is located.
2. If the place of effective management of a Navigational Enterprise is on board a ship, it shall be deemed to be in the Contracting State where the base port of the ship is located, and if there is no such base port, in the Contracting State in which the person operating the ship resides.
3. The provisions of paragraph 1 also apply to profits from participation in a pool, on a joint holding or in an international operating body.
Article 9. Associated enterprises.
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 Enterprise of one Contracting State and of an Enterprise of the other Contracting State, and in either case the two Enterprises are, in their commercial or financial relations, bound by terms accepted or imposed that differ from those agreed by independent Enterprises, the profits that would have been earned by one of the Companies in the absence of these conditions, and which in fact have not occurred because of them, may be included in the profits of this Enterprise and subject to taxation accordingly.
Article 10. Dividends.
1. Dividends paid by a company resident in 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 taxed in the Contracting State in which the company paying the dividends resides and in accordance with the law of that State, but if the recipient of the dividends is the beneficial owner, the tax thus required may not exceed:
(a) In respect of dividends paid by a Luxembourg-based company to a resident of Spain:
(i) 5 per 100 of the gross amount of dividends if the beneficial owner is a company (excluding the Companies of Persons) holding directly at least 25 per 100 of the capital of the Company that pays the dividends, provided that the beneficial owner has held that capital for a period of at least one year prior to the date of distribution of the dividends.
(ii) 15 per 100 of the amount of dividends in all other cases.
(b) In respect of dividends paid by a company resident in Spain to a resident of Luxembourg:
(i) 10 per cent of the gross amount of dividends if the beneficial owner is a company (excluding the Companies of Persons) holding directly at least 25 per cent of the capital of the Company that pays the dividends, provided that the beneficial owner has held that capital for a period of at least one year prior to the date of distribution of the dividends.
(ii) 15 per 100 of the gross amount of dividends in all other cases.
The competent authorities of the Contracting States shall, by mutual agreement, determine how these limits are to be applied.
This paragraph does not affect the Company's taxation of profits from which dividends are paid.
3. The term ‘dividends’ used in this Article means the income from the shares or enjoyment bonds, from the parties of the founder or other rights, except credit rights, which permit participation in the profits, as well as the income from other social participations subject to the same tax regime as the income from the shares by the law of the State in which the Company which distributes them resides.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the dividends, resident of one Contracting State, exercises in the other Contracting State, of which the Company that pays the dividends is resident, an industrial or commercial activity through a permanent establishment here located or provides independent work through a fixed basis herewith to which the share generated by the dividends is effectively linked. In this case, the provisions of article 7 or article 14, as appropriate, apply.
5. Where a Company resident of one Contracting State obtains profits or income from the other Contracting State, the other State may not require any tax on dividends paid by the Company, except to the extent that these dividends are paid to a resident of that other State or the share generated by the dividends is effectively linked to a permanent establishment or a fixed base situated in that other State, or subject the undistributed profits of the Society to a tax on them, even if the dividends paid or the undistributed profits consist, in whole or in part, of profits or income from that other State.
Article 11. Interest.
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, these interests may also be taxed in the Contracting State from which they come and in accordance with the law of that State, but if the recipient of the interest is the beneficial owner, the tax thus required may not exceed 10 per cent of the gross amount of interest. The competent authorities of the Contracting States shall, by mutual agreement, determine how to apply this limit.
3. Without prejudice to the provisions of paragraph 2:
(a) Interest on loans granted by a Contracting State or one of its residents to the other Contracting State or one of its local entities; and
(b) Interest on loans granted by a resident of a Contracting State and guaranteed by one of the two States to a resident of the other Contracting State is exempt from taxation in the State from which they come.
4. The term ‘interest’ used in this Article means the income from claims of any kind, with or without mortgage guarantees or participation in the debtor's profits, and in particular income from public funds or bonds or bonds, including premiums and lots attached to such securities. Penalizations for late payment are not considered as interest within the meaning 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, exercises in the other Contracting State, from which the interest is derived, an industrial or commercial activity through a permanent establishment located in that other State or provides independent services through a fixed base situated therein, with which the credit generated by the interest is effectively linked. In such cases, the provisions of article 7 or article 14 apply, as appropriate.
6. Interests are considered to come from a Contracting State when the debtor is the State itself, a political subdivision, a local entity or 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 or a fixed basis in respect of which the debt giving rise to the payment of the interest has been incurred and bears the burden thereof, the interest shall be considered as originating in the Contracting State where the permanent establishment or fixed base is situated.
7. Where, on account of the special relations between the debtor and the beneficial owner of the interest or the interest between them and third parties, the amount of interest paid, taking into account the claim for which it is paid, exceeds that agreed upon by the debtor and the creditor in the absence of such relations, the provisions of this article apply only to the latter amount. In this case, the excess may be subject to taxation, in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 12. Royalties.
1. Fees from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, these fees may be subject to taxation in the Contracting State from which they come and in accordance with the law of that State, but if the recipient of the fees is the beneficial owner, the tax thus required may not exceed 10 per 100 of the gross amount of the fees. The competent authorities of the Contracting States shall, by mutual agreement, determine how this limit is to be applied.
3. The term ‘royalties’ used in this Article means remuneration paid or credited periodically or not, whatever its denomination or method of calculation to the extent that it is made by:
(a) The use or granting of a copyright on a literary, artistic or scientific work, of a patent, drawing or model, flat, formula or secret procedure, a trademark or trade mark, a good or a similar right.
(b) Use or concession of use of industrial, commercial or scientific equipment.
(c) Provision of information in the scientific, technical, industrial or commercial fields.
(d) Use or granting of use of:
(i) Films.
(ii) Recordings or films for television broadcasting.
(iii) Recordings for radio broadcasts.
(e) The total or partial renunciation of the use or assignment of an asset or a right referred to in this paragraph.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the royalties, resident of one Contracting State, exercises in the other Contracting State from which the royalties come an industrial or commercial activity through a permanent establishment located in that other State or provides professional services through a fixed base situated therein, with which the right or property for which the royalties are paid is effectively linked. In such cases, the provisions of article 7 or article 14 apply, as appropriate.
5. The royalties are considered to come from a Contracting State where the debtor is the State itself, a political subdivision, a local entity or a resident of that State. However, where the debtor of the royalties, whether or not he is resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed basis in respect of which the contract giving rise to the payment of the royalties has been concluded and the latter assigns the royalties directly to the beneficiary, they are considered as originating in the Contracting State where the permanent establishment or fixed base is located.
6. Where, by reason of the special relations between the debtor and the beneficial owner of the royalties or of which both maintain with third parties, the amount of the fees paid, taking into account the benefit for which they are paid, exceeds that which the debtor and the beneficial owner would have agreed in the absence of such relationships, the provisions of this article apply only to the latter amount. In this case, the excess may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 13. Capital gains.
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.
Profits arising from the disposal of shares or similar rights in a company whose assets consist mainly of immovable property situated in a Contracting State may be taxed in that State.
2. Gains from the disposal of movable property forming part of the assets of a permanent establishment held by an enterprise of one Contracting State in the other Contracting State, or from movable property belonging to a fixed basis held by a resident of one Contracting State in the other Contracting State for the provision of independent work, including gains from the disposal of that permanent establishment (alone or with the enterprise as a whole) or from that fixed basis, may be taxed in that other 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 only be taxed in the Contracting State where the effective headquarters of the Enterprise is located.
4. Profits arising from the disposal of any property other than those referred to in paragraphs 1, 2 and 3 may be subject to taxation only in the Contracting State in which the transferor resides.
Article 14. Independent jobs.
1. Revenues obtained by a resident of a Contracting State through the provision of professional services or other activities of an independent nature may only be taxed in that State unless the resident has a fixed basis for the exercise of his or her activities in the other Contracting State on a regular basis. If it has such a fixed base, income may be taxed in the other State, but only to the extent that it is attributable to this fixed base.
2. The term "professional services" includes, in particular, independent scientific, literary, artistic, educational or pedagogical activities, as well as independent activities of doctors, lawyers, engineers, architects, dentists and accountants.
Article 15. Dependent jobs.
1. Without prejudice to articles 16, 18 and 19, similar salaries, salaries and salaries obtained by a resident of a Contracting State on account of employment may be subject to taxation only in that State, unless the employment is exercised in the other Contracting State. If the employment is exercised here, the remuneration received for this purpose may be subject to taxation in this other State.
2. Notwithstanding paragraph 1, remunerations obtained by a resident of one Contracting State on the basis of employment in the other Contracting State may only be taxed in the first Contracting State if:
(a) The recipient does not remain in total in the other State, in one or more periods, more than one hundred and eighty-three days during the calendar year in question.
(b) Remuneration is paid for or on behalf of an employer who is not a resident of the other State.
(c) Remuneration is not borne by a permanent establishment or a fixed basis which the employer has in the other State.
3. Notwithstanding the foregoing 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 place of effective management of the undertaking is situated.
Article 16. Directors’ fees.
Participations, attendance allowances and other similar remunerations obtained by a resident of a Contracting State as a member of a board of directors or supervisory board of a company resident of the other Contracting State may be subject to taxation in that other State.
Article 17. Entertainers and sportspersons.
1. Notwithstanding the provisions of articles 14 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, cinema, radio and television actor, or musician, or as an athlete, may be subject to taxation in that other State.
2. Notwithstanding Articles 7, 14 and 15, where the income derived from the activities of an artist or athlete personally and as such is attributed, not to the artist or athlete himself, but to another person, such income may be taxed in the Contracting State in which the activities of the artist or athlete are carried out.
Article 18. Pensions and social security benefits.
1. Without prejudice to article 19, paragraph 2, pensions and other similar remuneration paid to a resident of a Contracting State on account of previous employment may only be taxed in that State.
2. Notwithstanding the provisions of paragraph 1, pensions and other amounts paid under the social security legislation of a Contracting State may be subject to taxation in that State.
Article 19. Government service.
1. (a) Remunerations, excluding pensions, paid by a Contracting State or one of its political subdivisions or local entities to a natural person for the purpose of services rendered to that State or to that subdivision or entity, may be subject to taxation only in that State.
(b) However, such remuneration may be subject to taxation in the other Contracting State only if the services are provided in this State and the natural person is a resident of this State who:
(i) possesses the nationality of that State; or
(ii) It has not acquired the status of resident of this State solely to provide the services.
2. (a) Pensions paid by a Contracting State or by one of its political subdivisions or local entities, either directly or from funds constituted of a natural person for the purpose of services rendered to that State or to that subdivision or entity, may only be subject to taxation in that State.
(b) However, such pensions may be subject to taxation in the other Contracting State only if the natural person is a resident and a national of that State.
3. Articles 15, 16 and 18 apply to remuneration and pensions paid for services rendered within the framework of an industrial or commercial activity carried out by a Contracting State or one of its political subdivisions or local entities.
Article 20. Students.
The amounts received to cover the costs of maintaining, studying or training a student or a person in training who is or has been, immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the first State for the sole purpose of continuing his studies or training, may not be subject to taxation in that State, provided that they come from sources outside that State.
Article 21. Teachers.
The remuneration of a teacher or other member of the teaching staff who is or has been, immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the first State for the sole purpose of teaching or engaging in scientific research, for a period not exceeding two years, in a university or other non-profit educational or research institution, may be imposed only in the other Contracting State.
Article 22. Other income.
1. The income of a resident of a Contracting State, whatever its source, not referred to in the previous articles of this Convention, may be taxed only in that State.
2. Paragraph 1 does not apply to income, excluding income derived from property defined as immovable in article 6, paragraph 2, where the beneficiary of such income, resident of a Contracting State, engages in an industrial or commercial activity in the other Contracting State through a permanent establishment located therein or provides professional services, through a fixed base equally situated therein, to which the right or ownership for the income is actually linked. In such cases, the provisions of article 7 or article 14 apply, as appropriate.
Article 23. Capital.
1. Property consisting of immovable property covered by article 6 owned by a resident of one Contracting State and located in the other Contracting State may be taxed in that other State.
Assets consisting of shares or similar rights in a company whose assets consist mainly of immovable property situated in a Contracting State may be taxed in that State.
2. Property consisting of movable property forming part of the assets of a permanent establishment held by an enterprise of one Contracting State in the other Contracting State, or movable property belonging to a fixed basis held by a resident of one Contracting State in the other Contracting State for the purpose of providing independent work, may be subject to taxation in that other State.
3. Assets made up of ships or aircraft operated in international traffic, as well as movable property affected by the operation of such ships or aircraft, may be subject to taxation only in the Contracting State where the effective headquarters of the Enterprise is located.
4. All other assets of a resident of a Contracting State may be subject to taxation only in that State.
Article 24. Methods for elimination of double taxation.
Double taxation shall be avoided as follows:
1. In Luxembourg:
(a) Where a resident of Luxembourg obtains income or possesses assets which, in accordance with the provisions of this Convention, may be taxed in Spain, Luxembourg shall exempt such income or property, without prejudice to subparagraphs (b) and (c).
(b) Where a resident of Luxembourg obtains income which, in accordance with the provisions of Articles 10, 11 and 12, may be taxed in Spain, Luxembourg shall deduct from the income tax of that resident an amount equal to the tax paid in Spain. However, this deduction may not exceed the part of the tax, calculated before the deduction, corresponding to the income obtained in Spain.
(c) Where, in accordance with any provision of the Convention, the income obtained by a resident of Luxembourg or the assets held by him or her is exempt from taxation in Luxembourg, Luxembourg may, however, take account of the income or assets exempted for the purpose of calculating the amount of the tax on the rest of the income or assets of that resident.
(d) For the purpose of applying subparagraph (b) of this paragraph, the interests which benefited from a reduction of the Spanish tax pursuant to article 25.c), 1 and 2 of Law 61/1978 of 27 December; Royal Decree-Law 5/1980 of 19 May and articles 183 to 199 of Royal Decree 2631/1982 of 18 October, as long as they are in force at the time of signature of this Convention and have not been subsequently amended, or have been amended in secondary respects which do not affect their general character, shall be considered as having been taxed by the Spanish tax at the rate of 10 per 100.
The same measure shall apply to any provision of a similar nature subsequently adopted by the Spanish authorities, replacing or adding to the rules referred to in this paragraph.
(e) For the purposes of subparagraph (b) of this paragraph, the interest referred to in article 11, paragraph 3, paid to a resident of Luxembourg shall be regarded as having been taxed by the Spanish tax at the rate of 10 per 100.
(f) For interest paid over a period of twelve years from 1 January of the year in which the Convention is applied for the first time, the rate of 10 per 100 set out in subparagraphs (d) and (e) of this paragraph is set at 15 per 100.
2. In Spain:
(a) Where a resident of Spain obtains income or possesses assets which, in accordance with the provisions of this Convention, may be taxed in Luxembourg, Spain shall deduct from the income or property tax of that resident an amount equal to the tax paid in Luxembourg.
However, this deduction may not exceed the part of the tax, calculated before the deduction, corresponding to the income and wealth taxed in Luxembourg.
(b) Where, in accordance with any provision of the Convention, the income that a resident of Spain obtains or the assets that he owns is exempt from taxation in Spain, Spain may, however, take into account the exempt income or assets for the purpose of calculating the amount of tax on the rest of the income or assets of that resident.
Article 25. Non-discrimination.
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 in the same conditions are or may be subject. Notwithstanding article 1, this provision also applies to nationals of any of the Contracting States who are not residents of any of them.
2. The term ‘national’ means:
(a) All natural persons possessing the nationality of a Contracting State.
(b) All legal persons, companies of persons and associations established under the law of a Contracting State.
3. Permanent establishments held by an enterprise 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 cannot be interpreted as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, allowances and tax reductions it grants to its own residents in view of their marital status or family burdens.
4. Unless the provisions of article 9, article 11, paragraph 7, or article 12, paragraph 6, apply, interest, royalties or other expenses paid by an enterprise of one Contracting State to a resident of the other Contracting State are deductible, in order to determine the profits subject to taxation of that enterprise, under the same conditions as if they had been paid to a resident of the former State. Likewise, the debts of an enterprise of one Contracting State relating to a resident of the other Contracting State are deductible for the determination of the taxable assets of that enterprise under the same conditions as if they had been contracted with a resident of the former State.
5. Enterprises of a Contracting State whose capital is, in whole or in part, directly or indirectly detained or controlled by one or more residents of the other Contracting State are not subject in the first State to any tax or obligation relating thereto which is not or is more burdensome than those to which other similar undertakings of the first Contracting State are or may be subject.
6. Notwithstanding the provisions of Article 2, the provisions of this Article apply to all taxes, whatever their nature or name.
Article 26. Mutual agreement procedure.
1. Where a person considers that the measures taken by one or both Contracting States imply or may entail for him an imposition that 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 authority of the Contracting State of which he is a resident or, if article 25, paragraph 1, applies to that of the Contracting State of which he is a national. The case shall be brought within three years of the first notification of the measure involving an imposition not in accordance with the provisions of this Convention.
2. The competent authority, if it finds the claim well founded and if it is not in a position to adopt a satisfactory solution itself, shall endeavour to resolve the matter by amicable agreement with the competent authority of the other Contracting State in order to avoid an imposition not in conformity with this Convention. The agreement applies irrespective of the time limits provided for by the domestic law of the Contracting States.
3. The competent authorities of the Contracting States shall endeavour to resolve difficulties or to dispel doubts arising from the interpretation or application of the Convention by means of an amicable agreement. They may also agree to seek to avoid double taxation in cases not covered by the Convention and to take measures to prevent misuse of the Convention.
4. The competent authorities of the Contracting States may communicate directly with each other in order to reach agreement, as indicated in the preceding paragraphs. Where it is considered that this agreement can be facilitated through personal contacts, the exchange of views may take place within a Commission composed of representatives of the competent authorities of the Contracting States.
Article 27. Exchange of information.
1. The competent authorities of the Contracting States shall exchange the information necessary to implement the provisions of this Convention, or of the domestic law of the Contracting States, relating to taxes covered by the Convention, to the extent that the taxation required by that Convention is not contrary to the Convention. The exchange of information is not limited by Article 1. Information received by a Contracting State shall be kept secret in the same way as information obtained under the domestic law of that State and shall be communicated only to the persons or authorities (including the courts and administrative bodies) responsible for the management or collection of taxes covered by the Convention, the declaratory or executive procedures relating to such taxes or the resolution of appeals relating to such taxes. These persons or authorities will only use these reports for these purposes. They may disclose such information in public hearings of the courts or in court judgements.
2. In no case can the provisions of paragraph 1 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) Provide information that cannot be obtained on the basis of its own legislation or in the exercise of its normal administrative practice or that of the other Contracting State.
(c) Provide information revealing a commercial, industrial or professional secret or a commercial procedure, or information whose communication is contrary to public policy.
Article 28. Diplomatic agents and consular officials.
The provisions of this Convention do not affect the tax privileges enjoyed by diplomatic agents or consular officials, in accordance with the general principles of international law or under special agreements.
Article 29. Entry into force.
1. This Convention shall be ratified and the Instruments of Ratification shall be exchanged as soon as possible.
2. The Convention shall enter into force on the basis of the exchange of the Ratification Instruments and its provisions shall apply for the first time in each of the two States:
(a) Taxes withheld from the source on income earned or paid from 1 January of the year following the year in which the instruments of ratification are exchanged.
(b) Other taxes in respect of tax periods ending from 1 January of the year following the year in which the instruments of ratification are exchanged.
Article 30. Termination.
This Convention shall remain in force until reported by one of the Contracting States. Any Contracting State may denounce the Convention through diplomatic channels, at least six months before the end of each calendar year beginning after the end of a period of five years from the date of its entry into force.
In such a case, the Convention will last apply in both States:
(a) Taxes withheld from the source on income earned or paid until 31 December of the year of the complaint.
(b) For other taxes in respect of tax periods ending until 31 December of the same year.
In faith of which the undersigned, duly authorized for this purpose, have signed this Convention.
Done in duplicate in Madrid on 3 June 1986, in French and Spanish, attesting to the two texts.
For Spain,
For the Grand Duchy of Luxembourg,
FRANCISCO FERNÁNDEZ ORDÓÑEZ
JACQUES F. POOS
Minister for Foreign Affairs
Minister for Foreign Affairs, Foreign Trade and Cooperation
PROTOCOL
At the time of the signing of the Convention between Spain and the Grand Duchy of Luxembourg on the prevention of double taxation of income and property taxes and on the prevention of tax evasion and evasion, the undersigned Plenipotentiaries have agreed on the following provisions which form an integral part of the Convention:
Paragraph 1.
Ad Articles 1, 3 and 4.
This Convention does not apply to holding companies as defined in Luxembourg special legislation currently contained in the Act of 31 July 1929 and the Grand Ducal Decree of 17 December 1938 (exploding Article 1, 7b, paragraphs 1 and 2 of the Act of 27 December 1937). It also does not apply to the income that a resident of Spain obtains from shares or other securities of similar companies, nor to the assets represented by shares or other securities held in the capital of such companies that this person owns.
Paragraph 2.
Ad Article 10.
Article 10, paragraph 2, does not apply, in the case of Spain, to income, whether distributed or not, attributed to shareholders of the Companies and Entities referred to in article 12.2 and 3 of Law 44/1978 of 8 September, and article 19 of Law 61/1978 of 27 December, as long as these incomes are not subject to Spanish Company Tax. Such income is subject to taxation in Spain, in accordance with the provisions of its domestic legislation. Article 24, paragraph 1 (b), applies to these income.
This Convention entered into force on 19 May 1987, the date of the exchange of instruments of ratification, as set out in Article 29 thereof.
What is made public for general knowledge.
[ignore]Madrid, June 11, 1987.–Technical Secretary General José Manuel Paz Agüeras.