JUAN CARLOS I
KING OF SPAIN
For what?
on 14 March 1989, the Plenipotentiary of Spain signed in Manila, together with the Plenipotentiary of the Republic of the Philippines, the Convention between Spain and the Republic of the Philippines on the prevention of double taxation and the prevention of tax evasion in respect of income taxes, as an integral part of an annexed Protocol,
Viewed and examined
the twenty-nine articles of the Convention and the text of the Protocol,
Granted
by the Cortes Generales the authorization provided for in Article 94.1 of the Constitution,
I come to approve and ratify
as provided for therein, as I hereby approve and ratify it, promising to comply with it, observe it and ensure that it is implemented and observed in a timely manner in all its parts, for the purpose of which, for further validation and firmness, I command to issue this Instrument of Ratification signed by Me, duly sealed and endorsed by the undersigned Minister for Foreign Affairs.
Done at Madrid on 7 September 1994.
JUAN CARLOS R.
The Minister for Foreign Affairs,
JAVIER SOLANA MADARIAGA
[precept] CONVENTION BETWEEN SPAIN AND THE REPUBLIC OF PHILIPPINES TO AVOID DOUBLE IMPOSITION AND PREVENT TAX EVASION ON RENT TAX
The Government of Spain and the Government of the Republic of the Philippines, wishing to conclude an agreement to avoid double taxation and prevent tax evasion in the area of income taxes, 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 taxes payable by each Contracting State, irrespective of the system of its levy.
2. Income taxes are those that tax the entire income or any part thereof, including taxes on profits arising from the disposal of movable and immovable property, as well as taxes on the amount of wages or salaries paid by enterprises.
3. The current taxes to which this Convention specifically applies are:
(a) In Spain: (ii) Personal Income Tax.
(i) Corporate Income Tax.
Hereinafter referred to as ‘Spanish tax’.
(b) The Philippines:
Income taxes levied by the Government of the Republic of the Philippines (hereinafter referred to as the Philippine 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.
Article 3. General definitions.
1. In this Convention, unless there is a different interpretation of its context:
(a) The term 'Spain' refers to the territory of the Spanish State, including any areas outside the territorial sea over which, in accordance with international law and in application of its legislation, the Spanish State exercises or may exercise in the future rights of jurisdiction or sovereignty.
(b) The term ‘Philippines’ means the Republic of the Philippines and, when used geographically, designates the territory comprising the Republic of the Philippines.
(c) The terms ‘one Contracting State’ and ‘the other Contracting State’ refer to Spain or the Philippines, depending on the context.
(d) The term ‘tax’ refers to the Spanish tax or Philippine tax, depending on the context.
(e) The term ‘person’ means natural persons, partnerships, corporations, inheritances, trusts and any other grouping of persons.
(f) the term ‘company’ means any legal person or any entity that is considered a legal person for tax purposes.
(g) The terms ‘undertaking of one Contracting State’ and ‘undertaking of the other Contracting State’ mean, respectively, an undertaking operated by a resident of one Contracting State and an undertaking operated by a resident of the other Contracting State.
(h) The term ‘national’ means:
(a) In the case of Spain, any natural person possessing Spanish nationality.
(b) In the case of the Philippines, any natural person possessing Philippine citizenship.
(c) Any legal person, association or entity having such status under the laws in force in a Contracting State.
(i) “International traffic” means any transport by a ship or aircraft operated by an undertaking of a Contracting State, except where the ship or aircraft is operated only between two points situated in the other Contracting State.
(j) ‘competent authority’ means:
(i) In the case of Spain, the Minister of Economy and Finance or his authorized representative; and
(ii) In the case of the Philippines, the Minister of Finance or his authorized representative.
2. For the purposes of the application of this Convention by a Contracting State, any expression not defined therein shall have, unless its context indicates a different interpretation, the meaning attributed to it by the law of that Contracting State concerning taxes which are the subject of the Convention.
Article 4. Tax address.
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 on the basis of his domicile, residence, 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.
2. Where, under the provisions of paragraph 1, a natural person is resident in both Contracting States, his or her situation shall be resolved as follows:
(a) This person shall be considered a resident of the State where he or she has permanent housing at his or her disposal. If it has a permanent dwelling at its disposal in both Contracting States, it shall be considered a resident of the Contracting State with which it maintains closer personal and economic relations (centre of vital interests).
(b) If the Contracting State in which that 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 Contracting States, he or she shall be considered a resident of the Contracting State in which he or she habitually lives.
(c) If he or she habitually lives in both Contracting States or does not live in either Contracting State, he or she shall be considered a resident of the Contracting State of which he or she is a national.
(d) If he is a national of either Contracting State or is not a national of either Contracting 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, his or her situation shall be resolved by mutual agreement.
Article 5. Permanent establishment.
1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of business in which an undertaking carries out all or part of its activity.
2. The term ‘permanent establishment’ includes, but is not limited to:
(a) Management offices.
(b) Branches.
(c) Offices.
(d) Factories.
(e) Workshops.
(f) Warehouses, in the case of persons providing storage services to third parties.
(g) Stores or premises in which sales are made.
(h) Mines, oil wells, quarries or any other natural resource extraction site.
(i) Work, construction or installation or assembly project or inspection activities related thereto, but only when such work, construction or activities continue for a period exceeding six months.
(j) The provision of services, including the services of consultants, through employees or other personnel provided by the company for that purpose, where such activities continue, in connection with the same project or a related project, for a period or periods totalling more than 180 days within a period of any twelve months.
3. The term ‘permanent establishment’ is considered not to 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. However, where such goods or goods are sold directly in storage tanks, they shall be considered as permanent establishments.
(c) The maintenance of a deposit of goods or goods belonging to the undertaking 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 advertising, providing information, conducting scientific research or carrying out similar preparatory or auxiliary activities for the enterprise.
4. A person acting in a Contracting State for an undertaking of the other Contracting State, other than an agent enjoying an independent status to which paragraph 6 applies, shall be regarded as a permanent establishment in the Contracting State referred to first when:
(a) Has and habitually exercises in that Contracting State powers to conclude contracts on behalf of the undertaking, unless its activities are limited to the purchase of goods or goods for the undertaking.
(b) Maintains in that Contracting State a deposit of goods or goods belonging to the undertaking which it uses to deliver goods or goods on a regular basis on behalf of the undertaking.
5. An insurance undertaking in a Contracting State shall be deemed to have a permanent establishment in the other Contracting State, except for reinsurance, if it collects premiums in the territory of that Contracting State or if it secures against risks situated therein by means of an employee or a representative other than an agent enjoying an independent status within the meaning of paragraph 6.
6. An undertaking of a Contracting State shall not be considered to have a permanent establishment in the other Contracting State merely because it carries out activities in that other State 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. However, where all or almost all of the activities of such an agent are carried out on behalf of that undertaking, the latter shall not be regarded as an agent enjoying independent status within the meaning of this paragraph if it is proved that the transactions between the agent and the undertaking were not carried out under conditions to be agreed between independent parties.
7. The fact that a company of a Contracting State controls or is controlled by a company of the other Contracting State or a company carrying out activities of that other Contracting State (either through a permanent establishment or otherwise) does not in itself make any of these companies permanent establishment of the other State.
Article 6. Income from immovable property.
1. Income from immovable property, including income from agricultural or forestry holdings, may be taxed in the Contracting State where such property is situated.
2. The term ‘real property’ shall have the meaning attributed to it by the law of the Contracting State in which the goods in question are situated. The term shall in any case include 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 and profits derived from the disposal of such property.
4. The provisions of paragraphs 1 and 3 also apply to income derived from the immovable property of an enterprise and from immovable property used for independent work.
Article 7. Business profits.
1. The profits of an undertaking in a Contracting State may be taxed only in that State unless the undertaking carries out its activity in the other Contracting State by means of a permanent establishment situated in that State. If the undertaking carries out its business in such a way, the profits of the undertaking may be taxed in the other State, but only to the extent that they can be attributed to this permanent establishment or obtained from sales in that other Contracting State of goods or goods of a nature identical or similar to those sold through the permanent establishment or other commercial transactions of a nature identical or similar to those carried out through the permanent establishment. The competent authorities of the Contracting States shall consult on the similarity of the goods sold or the commercial transactions carried out.
2. Without prejudice to paragraph 3, where an undertaking of one Contracting State carries out its activity in the other Contracting State by means of a permanent establishment situated therein, in each Contracting State the profits it could have derived from being a separate and separate undertaking carrying out the same or similar activities, under the same or similar conditions, shall be attributed to that establishment and shall deal entirely independently with the undertaking from which it is a permanent establishment.
3. For the purpose of determining the benefits of a permanent establishment, the deduction of expenses incurred for the realization of the purposes of the permanent establishment, including management and general administrative expenses, 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 profits attributable to permanent establishments on the basis of a distribution of the total profits of the enterprise among its various parties, the provisions of paragraph 2 shall not prevent that Contracting State from determining taxable profits in this 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 undertaking.
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 regulated separately in 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 earned by an undertaking of a Contracting State from operating ships or aircraft may only be taxed in that State.
2. Without prejudice to the provisions of paragraph 1, profits from sources located in a Contracting State obtained by an undertaking of the other Contracting State from the operation of ships or aircraft in international traffic may be taxed in the State mentioned above, but the tax thus required may not exceed the lesser of the following two amounts:
(a) 1.5 per 100 gross income from sources located in that State; and
(b) The lowest rate of Philippine tax required on such profits when obtained by an enterprise of a third State.
3. The provisions of paragraphs 1 and 2 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 undertaking of a Contracting State and of an undertaking of the other Contracting State,
and in either case the two undertakings are, in their commercial or financial relations, bound by accepted or imposed conditions which differ from those which would be agreed by independent undertakings, the profits which would have been obtained by one of the undertakings in the absence of these conditions, and which in fact have not occurred because of them, may be included in the profits of that undertaking and subject to taxation accordingly.
2. Where the profits for which an enterprise of one Contracting State has been taxed in that State are also included in the profits of an enterprise of the other Contracting State and are subject accordingly to taxation and the profits thus included are profits which would have been realized by the enterprise of the other State if the terms agreed between the two companies had been those agreed between two independent companies, the first State shall adjust the corresponding amount of the tax it has received on those profits. In determining this adjustment, account shall be taken of the other provisions of this Convention relating to the nature of the income, and for this purpose the competent authorities of the Contracting States shall be consulted if necessary.
3. A Contracting State shall not modify the profits of an enterprise in the circumstances referred to in paragraph 1 after the limitation periods laid down in its domestic law.
Article 10. Dividends.
1. Dividends paid by a company resident of one Contracting State to a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may 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) 10 per cent of the gross amount of dividends if the recipient is a company (excluding companies of persons) holding directly at least 10 per 100 of the voting shares of the company paying the dividends.
(b) 15 per 100 of the gross amount of dividends in all other cases.
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 shares, enjoyment bonds, parts of mines, parts of founders or other rights other than credit rights, which permit participation in the profits, as well as income from other social participations subject to the same tax regime as the income from shares under the tax law of the State in which the distribution company resides.
4. The provisions of paragraphs 1 and 2 do not apply if the recipient of the dividends, resident of one Contracting State, exercises in the other Contracting State, of which the company that pays the dividends is resident, a commercial or industrial activity through a permanent establishment located here or provides independent work through a fixed base located here, to which the share generated by the dividends is effectively linked. In such cases, the provisions of article 7 or article 14 apply, as appropriate.
5. Where a company resident of a Contracting State obtains profits or income from the other Contracting State, that other State may not require any tax on dividends paid by the company to persons resident in that State 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 company 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 be subject to taxation in the Contracting State from which they come and in accordance with the law of that State, but the tax thus required may not exceed:
(a) 10 per cent where such interest is paid:
(i) In connection with the sale or credit of industrial, commercial or scientific equipment; or
(ii) For issues of bonds, bonds or similar securities offered to the general public.
(b) 15 per 100 of the gross amount of such interest in other cases.
3. Without prejudice to the provisions of paragraph 2:
(a) Interest from a Contracting State and paid to a resident of the other Contracting State in respect of bonds, bonds or similar securities issued by the Government of the first Contracting State or a political subdivision or local entity thereof may only be taxed, provided that the beneficial owner is resident of the other Contracting State, in that other Contracting State.
(b) Interest from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State only when it is paid in connection with a loan or credit granted, guaranteed or guaranteed by:
(i) In the case of Spain, the Banco de España and the official Spanish credit institutions.
(ii) In the case of the Philippines, the Central Bank of the Philippines or credit institutions specified and agreed upon through the exchange of letters between the competent authorities of the Contracting States.
4. The term ‘interest’ used in this Article means income from claims of any kind with or without mortgage guarantees or a benefit-sharing clause of the debtor, and in particular income from public funds and bonds and bonds, including premiums and lots attached to these items. 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 recipient of the resident interest 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 work 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 where the debtor is the State itself, a political subdivision is a local entity, an institutional body of the State or a resident of that State. However, where the debtor of interest, whether resident or not of a Contracting State, has in a Contracting State a permanent establishment in respect of which the debt giving rise to the payment of the interest is incurred and bears the burden of the interest, the interest shall be considered as originating in the Contracting State in which the permanent establishment is situated.
7. Where, on account of the special relations between the debtor and the recipient of the interest or of those who do not and another maintain with third parties, the amount of interest paid, having regard to the claim for which it is paid, exceeds that agreed upon by the debtor and the recipient 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. Such fees may also be subject to taxation in the Contracting State from which they come and in accordance with the law of that State. However, if the recipient is the beneficial owner of the fees, the tax thus required may not exceed:
(a) 10 per cent of the gross amount of royalties, where the fees are paid by a company registered with the Philippine Investment Council acting in sectors of preferential interest.
(b) 20 per 100 for cinematographic films or television or radio tapes; and
(c) 15 per 100 of the gross amount of royalties in other cases.
3. The term ‘royalties’ used in this Article means the amounts of any kind paid for the use or granting of a copyright on a literary, artistic or scientific work, a patent, trademark or trade mark, drawing or model, plan, formula or secret procedure, as well as for the use or granting of use of industrial, commercial or scientific equipment, or for information relating to industrial, commercial or scientific experiences, and includes payments of any kind in connection with cinematographic films and recordings on film or videotapes for use on television.
4. The provisions of paragraphs 1 and 2 do not apply if the recipient of the royalties, resident of a Contracting State, exercises in the other Contracting State from which the royalties originate an industrial or commercial activity through a permanent establishment situated therein, or provides independent services by means of a fixed base situated therein, with which the right or ownership in respect of which the royalties are paid is effectively linked. In such cases, the provisions of article 7 or article 14 apply, as appropriate.
5. Where, by reason of the special relations between the debtor and the recipient of the royalties or of which both have with third parties, the amount of the fees paid, in view of the use, right or information for which they are paid, exceeds the amount which the debtor and the recipient 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. Gains from the disposal of immovable property, as defined in article 6, paragraph 2, may be taxed in the Contracting State in which such property is located.
2. Profits arising from the disposal of movable property forming part of the assets of a permanent establishment held by an undertaking of one Contracting State in the other Contracting State, or movable property belonging to a fixed base held by a resident of one Contracting State in the other Contracting State for the purpose of carrying out independent work, including gains arising from the disposal of that permanent establishment (only or with the enterprise as a whole) or from that fixed basis, may be taxed in that other State. However, profits from the disposal of ships and aircraft operated in international traffic and of movable property affected by the operation of such vessels or aircraft by an enterprise in a Contracting State may only be taxed in that State.
3. Profits arising from the disposal of shares of a company, whose assets consist mainly of immovable property situated in a Contracting State, may be subject to taxation by that State. Profits arising from the disposal of shares in a partnership or trust whose ownership consists mainly of immovable property situated in a Contracting State may be taxed in that State.
4. Profits arising 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 14. Independent jobs.
1. Income earned by a resident of a Contracting State through the provision of professional services or other independent activities of a similar nature may only be taxed in that State. However, such income may be taxed in the other Contracting State where:
(a) habitually have a fixed base in the other Contracting State for the conduct of its activities; in that case, the income may be taxed in that other Contracting State, but only to the extent that it is attributable to this fixed base; or
(b) Remain in total for the performance of its professional activities in the other Contracting State, for one or more periods, 120 days or more during the calendar year.
2. The term "professional services" includes independent scientific, literary, artistic, educational or pedagogical activities, as well as independent activities of Physicians, Lawyers, Engineers, Architects, Dentistry and Accountants.
Article 15. Dependent jobs.
1. Without prejudice to Articles 16 18, 19, 20 and 21, salaries, salaries and similar remuneration 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, remuneration obtained by a resident of a Contracting State on the basis of employment in the other Contracting State may only be taxed in the former State if:
(a) The recipient does not remain in total in the other State, for one or more periods more than one hundred and eighty-three days during the fiscal year concerned.
(b) Remuneration is paid for or on behalf of an employer who is not a resident of the other State; and
(c) Remuneration is not borne by a permanent establishment or a fixed basis which the employer has in the other State.
3. However, the preceding provisions of this Article, remunerations obtained on account of employment carried out on board a ship or aircraft operated in international traffic by an undertaking of a Contracting State, may be subject to taxation only in that State.
Article 16. Directors’ fees.
1. Participations, attendance allowances and other similar remunerations which a resident of a Contracting State obtains as a member of a Board of Directors or a supervisory body of a company resident of the other Contracting State may be taxed in that other State.
2. Remunerations which a person to whom paragraph 1 applies obtains from an enterprise for the exercise of ordinary functions of a managerial or technical nature may be imposed in accordance with the provisions of article 15.
Article 17. Entertainers and sportspersons.
1. By way of derogation from Articles 14 and 15, rents obtained by performing artists, such as actors in theatre, cinema, radio or television or musicians and by sportsmen in the exercise of their personal activity as such, may be subject to taxation in the Contracting State in which such activities are carried out.
2. The provisions of paragraph 1 do not apply to income from activities carried out in a Contracting State by performers and sportsmen, if the visit to that Contracting State is financed mainly by public funds of the other Contracting State, or its political subdivisions, local entities or institutional bodies, or by income obtained by performers and sportsmen by reason of the exercise of such activities for non-profit organizations, provided that no amount from such income is satisfied and otherwise available for the personal benefit of any owner, member or shareholder of that organization and provided that it is qualified as falling within this provision by the competent authorities of the other Contracting State.
3. Notwithstanding the provisions of Article 7, where the activities referred to in paragraph 1 of this Article are carried out in a Contracting State by a company of the other Contracting State, the profits derived from such activities by that company may be subject to taxation in the first Contracting State, except in the case where the company is financed mainly, in connection with the provision of such activities, from public funds of the other Contracting State or its political subdivisions, local entities or institutional bodies, as well as in the case of a non-profit organization within the meaning of paragraph 2.
4. By way of derogation from Articles 7, 14 and 15, where income derived from activities carried out by an artist or sportsman personally and as such is attributed not to the artist or sportsman himself, but to another person, such income may be taxed in the Contracting State in which the activities of the artist or sportsman are carried out.
Article 18. Pensions.
1. Without prejudice to article 19, paragraph 2, pensions and other similar remuneration on account of previous employment and annuities paid to a resident of a Contracting State may only be taxed in that State.
2. Without prejudice to paragraph 1, pensions paid by a Social Security Agency of a Contracting State may only be taxed in that State.
3. The term ‘pensions’ used in this article means periodic payments made on account of previous employment.
4. The term ‘annuality’ used in this Article means a prefixed amount paid periodically on a fixed date under an obligation, for life or for a specified or determinable period of time.
Article 19. Government service.
1. (a) Remuneration, 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 this Branch or entity, may only be subject to taxation in that State.
(b) However, such remuneration may be subject to taxation in the other Contracting State only if the services are provided in that other State and the natural person in a resident of that State who:
(i) possesses the nationality of this 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 constituted funds, to a natural person on account 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 only be taxed in the other Contracting State 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 authorities.
Article 20. Students.
1. The amounts received to cover the costs of maintenance, study or training of a student or a trainees 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.
2. Notwithstanding paragraph 1, remunerations which a student or a trainees 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 solely for the purpose of continuing his studies or training obtains from services provided in that State may not be subject to taxation in that State provided that such services are related to his education or training or that the remuneration for such services is necessary to supplement the resources available to him for its maintenance.
Article 21. Teachers and researchers.
1. A teacher or researcher resident of a Contracting State, who visits the other Contracting State for the purpose of teaching or conducting an investigation, is exempt from taxation in that other State for a period not exceeding two years in respect of remuneration earned on account of such activities.
2. This article does not apply to income derived from research activities if such activities are carried out not in the general interest but primarily for the particular benefit of a particular person or persons.
Article 22. Other income.
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. However, if these revenues come from sources located in the other Contracting State, they may also be taxed in accordance with the law of that other State.
Article 23. Elimination of double taxation.
1. Without prejudice to the provisions of Philippine law relating to the granting of a tax credit against Philippine tax for tax paid outside the Philippines, the Spanish tax payable under Spanish law and under this Agreement, directly or by withholding, in respect of income from sources located in Spain, shall be deducted, provided that a similar tax is required in the Philippines, from the tax payable in the Philippines in respect of such income. However, the deduction shall not exceed the part of the Philippine income tax, calculated before the deduction, corresponding to income taxed in Spain.
2. Without prejudice to the provisions of Spanish law relating to the granting of a tax credit against the Spanish tax for tax paid outside Spain, the Philippine tax to be paid under the laws of the Philippines and under this Agreement, directly or by withholding, in respect of income from sources located in the Philippines, shall be deducted, provided that a similar tax is required in Spain, from the Spanish tax payable in respect of these income. However, the deduction shall not exceed the part of the Spanish income tax, calculated before the deduction, corresponding to income taxed in the Philippines.
3. Where, in accordance with the provisions of this Convention, the income obtained by a resident of a Contracting State is exempt from taxation in that State, that State may, however, in order to calculate the amount of tax on the rest of the income of that resident, take account of the exempt income.
4. For the purposes of paragraph 2, the Philippine tax shall be deemed to be:
(a) For dividends referred to in Article 10(2)(a), 15 per 100 of the gross amount of dividends; for dividends referred to in Article 10(2)(b), 20 per 100 of the gross amount of dividends.
(b) In the case of interest referred to in article 11, paragraph 2 (a), (i), 15 per 100 of the gross amount of interest.
(c) In the case of the fees referred to in Article 12(2)(a), 15 per 100 of the gross amount of these fees and for the fees referred to in Article 12(2)(c), 20 per 100 of the gross amount of the fees.
Article 24. 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 persons who are not residents of any of the Contracting States.
2. Permanent establishments held by an undertaking of one Contracting State in the other Contracting State shall not be subject to taxation in that State in a less favourable manner than undertakings of that other State carrying out the same activities.
3. Unless the provisions of article 9, paragraph 1, of article 11, paragraph 7, or article 12, paragraph 5, 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.
4. Undertakings of a Contracting State whose capital is, in whole or in part, detained or controlled, directly or indirectly, by one or more residents of the other Contracting State shall not be 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.
5. This article cannot be interpreted as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, reliefs and tax reductions it grants to its own residents in view of their marital status or family burdens.
6. Notwithstanding the provisions of Article 2, the provisions of this Article apply to all taxes, whatever their nature or name.
Article 25. 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 which is not in conformity with the provisions of this Convention, irrespective of the remedies provided for by the domestic law of those States, he may submit his case to the competent authority of the Contracting State of which he is resident or, if article 24, paragraph 1, to that of the Contracting State of which he is a national. The case must be brought within two years of the first notification of the measure involving an imposition not in accordance with the provisions of the Convention.
2. The competent authority referred to in paragraph 1, if it finds the claim well founded and if it is not in a position to adopt an appropriate solution, shall endeavour to resolve the matter through an amicable agreement with the competent authority of the other Contracting State in order to avoid an imposition that does not comply with this Convention.
3. A Contracting State shall not, after the limitation periods laid down in its domestic laws, increase the tax base of a resident of one of the Contracting States including income that was taxed in the other Contracting State. This paragraph does not apply in the case of fraud, wilful misconduct or negligence.
4. 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 try to avoid double taxation in cases not covered by the Convention.
Article 26. 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 national law of the Contracting States relating to taxes covered by the Convention, to the extent that the taxation required by that Convention was not contrary to the Convention, in particular to prevent fraud or evasion of such taxes. The exchange of information is not limited by Article 1. Information received by a Contracting State shall be kept secret in the same manner as information obtained under the domestic law of that State. However, if the information is originally considered secret in the State providing the information, it shall be communicated only to the persons or authorities (including the courts and administrative bodies) responsible for the management or collection of the taxes covered by the Convention, the declaratory or executive procedures relating to these taxes or the resolution of the remedies in relation to these taxes. These persons or authorities will only use these reports for these purposes but may disclose the information in public court hearings or court judgements. The competent authorities shall, by mutual agreement, develop the conditions, methods and techniques in relation to the subjects covered by the exchange of information, including, where appropriate, the exchange of information in relation to tax evasion.
2. In no case may 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) to provide information which cannot be obtained on the basis of their own legislation or in the exercise of their normal administrative practice or that of the other Contracting State;
(c) provide information revealing a commercial, industrial or professional secret or a commercial procedure, or information whose communication is contrary to public policy.
Article 27. Diplomatic agents and consular officials.
The provisions of this Convention do not affect the tax privileges enjoyed by diplomatic or consular officials, in accordance with the general principles of international law or under special agreements.
Article 28. Entry into force.
1. This Convention shall be ratified in accordance with the constitutional procedures of each Contracting State and the instruments of ratification shall be exchanged as soon as possible.
2. The Convention shall enter into force on the date of exchange of instruments of ratification and its provisions shall apply:
(a) In respect of taxes withheld at source, amounts accrued from 1 January of the calendar year in which the Convention enters into force;
(b) In respect of other income taxes, income earned during the calendar year in which the Convention enters into force, or in respect of accounting years ending during that year.
Article 29. Termination.
This Convention shall remain in force until reported by one of the Contracting States. Any Contracting State may denounce the Convention by notifying the other Contracting State until 30 June of any calendar year five years after the exchange of instruments of ratification and in such case the Convention shall cease to apply:
(a) In respect of taxes withheld from the source, the amounts accrued until 31 December of the calendar year at which the complaint ended.
(b) With regard to other income taxes on income earned during the calendar year at which the complaint ended in respect of the accounting years beginning in the course of that year.
In faith, the undersigned, duly authorized to do so, have signed this Convention.
Done at Manila in a double copy, on 14 March 1989, in the English and Spanish languages, both texts being equally authentic.
For Spain,
Enrique Romeu Ramos,
For the Republic of the Philippines,
Vicente R. Jayme,
Ambassador Extraordinary and Plenipotentiary.
Embassy of Spain
Secretary of Finance
At the time of today's signing of the Convention between the Republic of the Philippines and Spain to Prevent Double Taxation and Tax Evasion in Income Tax, the undersigned have agreed on the following provisions that will form an integral part of the Convention.
Article 1
With reference to Article 5, a permanent establishment is not considered to exist if the services, including the supply of equipment goods, are provided in one Contracting State by companies of the other Contracting State, including consulting companies, in accordance with, or in application of, a Convention between the Contracting States on technical or scientific cooperation.
Article 2
With reference to Article 7, paragraph 3, no deduction shall be allowed for amounts paid or payable, except in the case of reimbursement of expenses actually incurred, by the permanent establishment to the head office of the enterprise of which it is a permanent establishment or to any of its other branches in respect of:
(a) Fees, fees or other similar payments for the use of patents or other rights;
(b) Commissions on the basis of specific services rendered or arrangements made; and
(c) Interest on loans to the permanent establishment, except in the case of a banking institution.
Similarly, in calculating the profits of a permanent establishment, except in the case of reimbursement of expenses actually incurred, to the head office of the undertaking or to any of its other branches, in the form of royalties, fees or other similar payments on the basis of the use of patents or other rights, or in the case of commissions for specific services rendered or for dealings made or, except in the case of a banking undertaking, in the case of interest on loans to the head office of the undertaking or to any of its other branches.
Article 3
Article 10, paragraph 2, shall not apply in the case of Spain, to income charged, whether distributed or not, to shareholders of the companies and entities referred to in article 19 of Law 61/1978 of 27 December, as long as these income is not subject to Spanish corporation tax. Such income may be taxed in Spain under its domestic law. However, no credit will be granted in the Philippines for taxes paid on such income.
Article 4
With reference to article 10, paragraph 5, in no case may the provisions of this Convention be interpreted as preventing the Republic of the Philippines from subjecting the profits, except those arising from the operation of ships or aircraft in international traffic, of a company resident in Spain attributable to a permanent establishment which it has in the Republic of the Philippines, to an additional tax on the income tax of a branch established in the Republic of the Philippines, provided that such additional tax does not exceed 10 per cent of the share of such profits transferred abroad.
Article 5
With reference to article 18, paragraph 1, pensions paid from Philippine corporate pension schemes, not qualified under Philippine law, may be taxed in the Philippines.
Article 6
Notwithstanding the provisions of article 24, the Philippines may limit to its nationals the benefit of tax incentives granted under:
a) B. P. Blg 391, also known as the Investment Incentives Policy Act 1983, and
(b) Any other provision adopted by the Philippines pursuant to its economic development programme to be determined by agreement between the competent authorities of the two Contracting States.
In the event that the Philippines extends the above-mentioned incentives to nationals of other States, such incentives shall also apply to nationals of Spain.
Article 7
With reference to Article 25, the competent authorities of the Contracting States may consult with a view to agreeing:
(a) The same attribution of benefits to a resident of a Contracting State and its permanent establishment located in the other Contracting State;
(b) The same allocation of income between a resident of a Contracting State and an associated undertaking, in accordance with Article 9.
Article 8
Without prejudice to the provisions of this Convention, the Philippines reserves the right to impose on its nationals resident in Spain, in respect of their income from sources outside the Philippines, in accordance with the provisions of section 21 (f) of the Philippine Income Tax Code. The Philippines grants as a deduction from gross income the total amount of the national income tax actually paid in Spain and Spain is not obliged to grant a tax credit for the tax paid in the Philippines as a result of this clause.
This paragraph shall cease to apply in respect of tax periods beginning after the last day of the calendar year in which a Convention concluded between the Philippines and a third State, in which the Philippines renounces its right to impose its nationals resident in that State, enters into force.
Article 9
1. This Protocol shall be considered as an integral part of the above Convention.
2. This Protocol shall enter into force together with the Convention on the date of exchange of instruments of ratification.
3. This Protocol shall take effect during the period of validity of the Convention.
In faith, the undersigned, duly authorized to do so, have signed this Protocol.
Done at Manila on 14 March 1989, in duplicate, in the English and Spanish languages, both texts being equally authentic.
For Spain,
Enrique Romeu Ramos,
For the Republic of the Philippines,
Vicente R. Jayme,
Ambassador Extraordinary and Plenipotentiary.
Embassy of Spain
Secretary of Finance
This Convention and the Protocol forming an integral part thereof entered into force on 12 September 1994, the date of the exchange of instruments of ratification, as provided for in Articles 28.1 and 9.2 respectively.
What is made public for general knowledge.
[ignore]Madrid, November 28, 1994.–The Technical Secretary General of the Ministry of Foreign Affairs, Antonio Bellver Manrique.