JUAN CARLOS I
KING OF SPAIN
Since, on 17 January 1994, the Plenipotentiary of Spain signed in Seoul, together with the Plenipotentiary of the Republic of Korea, the Convention between the Kingdom of Spain and the Republic of Korea on the prevention of double taxation and the prevention of tax evasion in respect of income taxes and its annexed Protocol,
Having regard to and examined the twenty-nine articles of the Convention and the Protocol forming an integral part thereof,
Granted by the Cortes Generales the authorization provided for in article 94.1 of the Constitution,
I come to approve and ratify what is provided for in it, 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 8 November 1994.
JUAN CARLOS R.
The Minister for Foreign Affairs,
JAVIER SOLANA MADARIAGA
[heading] CONVENTION BETWEEN THE KINGDOM OF SPAIN AND THE REPUBLIC OF KOREA TO AVOID DOUBLE IMPOSITION AND PREVENT TAX EVASION ON RENT TAX
The Government of the Kingdom of Spain and the Government of the Republic of Korea, wishing to conclude a convention to prevent double taxation and to 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. The taxes to which this Convention applies are:
(a) In the case of Spain:
(i) Personal Income Tax.
(ii) Corporate Tax; and
(iii) Local tax on the increase in value of urban land.
(hereinafter referred to as ‘the Spanish tax’).
(b) In the case of Korea:
(i) Income Tax.
(ii) Corporate Tax; and
(iii) Inhabitants Tax.
(hereinafter referred to as ‘Korean tax’).
2. 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 any significant changes 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 term ‘Spain’ means the territory of the Spanish State, including any area outside its territorial sea in which, in accordance with international law and in application of its domestic law, the Spanish State exercises or may exercise in the future jurisdiction or rights of sovereignty over the marine soil and subsoil and the superjacent waters of its natural resources.
(b) The term ‘Korea’ means the territory of the Republic of Korea, including any area adjacent to the territorial sea of the Republic of Korea which, under international law, has been designated by the laws of the Republic of Korea, or is so in the future, as an area in which the sovereignty rights of the Republic of Korea over marine soil and subsoil and its natural resources may be exercised.
(c) The terms ‘one Contracting State’ and ‘the other Contracting State’ mean Spain or Korea, depending on the context.
(d) The term 'tax' means the Spanish tax or the Korean tax, depending on the context.
(e) The term ‘person’ includes natural persons, companies 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 'nationals' means:
(i) Natural persons possessing the nationality of a Contracting State.
(ii) Legal persons, companies of persons (‘partnerships’) and associations incorporated under the law 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 points located 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.
(ii) In the case of Korea, the Minister of Finance or his authorized representative.
2. For the application of the Convention by a Contracting State, any term not defined in the Convention shall have, unless its context indicates a different interpretation, the meaning attributed to it by the law of that Contracting State concerning the taxes which are the subject of the Convention.
Article 4. Residents.
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, seat of his head office or principal, seat of address or any other criterion of a similar nature. However, this term does not include persons who are subject to taxation in that State solely on income 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 he or she has permanent housing at his or her disposal in both States, 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 it is not possible to determine the State in which that person has the centre of his or her vital interests or if he or she does not have permanent housing at his or her disposal in any of the States, he or she shall be considered a resident of the 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 both States or is not a national of either State, the competent authorities of the 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 address 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 undertaking 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; and
(g) Construction, installation or assembly work for a period of more than 12 months.
3. By way of derogation from the provisions of this Article, the term ‘permanent establishment’ shall be deemed 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.
(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 carrying out any other auxiliary or preparatory activity for the enterprise.
(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 the whole activity of the fixed place of business retains its auxiliary or preparatory character.
4. By way of derogation from paragraphs 1 and 2, where a person, other than an agent enjoying an independent status, to which paragraph 5 shall apply, acts on behalf of an undertaking and habitually exercises in a Contracting State powers to conclude contracts on behalf of the undertaking, that undertaking shall be deemed to have a permanent establishment in that State in respect of all activities carried out by that person on behalf of the undertaking, unless the activities of that person are limited to those referred to in paragraph 3 and if they have been carried out through a fixed place of business, they have not determined that such place of business is a permanent establishment in accordance with the provisions of that paragraph.
5. An undertaking shall not be 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.
6. The fact that a company resident of a Contracting State controls or is controlled by a company resident of the other Contracting State, or that it carries out activities in that other State, whether by permanent establishment or otherwise, does not in itself make any of these companies permanent.
Article 6. Income from immovable property.
1. Income from immovable property, including income from agricultural or forestry holdings, situated in the other Contracting State may be taxed in that other State.
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. That term shall in any case cover 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 the right to variable or fixed payments for the holding, or the granting of the holding, of mineral deposits, sources and other natural resources apply; ships and aircraft shall not be 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 shall also apply to income derived from the immovable property of an undertaking and from immovable property used for the provision of independent personal services.
Article 7. Business profits.
1. The profits of an undertaking in a Contracting State may be taxed only by that State, unless the undertaking carries out its business in the other Contracting State by means of a permanent establishment situated therein. If the undertaking does so, the profits of the undertaking may be taxed in the other State, but only to the extent that they can be attributed to that permanent establishment.
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 which the permanent establishment could have obtained 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 permanent establishment and shall deal entirely independently with the undertaking from which it is a permanent establishment.
3. For the purpose of determining the benefit of the permanent establishment, the deduction of expenses incurred for the 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. No benefit shall be attributed to a permanent establishment merely because it buys goods or goods for the undertaking.
5. 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.
6. 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. The profits of an enterprise in a Contracting State derived from the operation of ships or aircraft in international traffic may only be taxed in that State.
2. The provisions of paragraph 1 shall also apply to profits from participation in a pool, on a joint holding, or on an international holding body.
Article 9. Associated enterprises.
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 directly or indirectly participate in the direction, control or capital of an undertaking of one 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 agreed by independent undertakings, the profits which would have been obtained by one of the undertakings in the absence of such 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.
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 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 its beneficial owner, the tax thus required may not exceed:
(a) 10 per cent of the gross amount of dividends if the beneficial owner is a company holding directly at least 25 per cent of the capital of the company paying the dividends;
(b) 15 per 100 of the gross amount of dividends in other cases.
This paragraph shall 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 or enjoyment bonds, parts of mines, parts of founders or other rights, other than credit rights, which permit participation in profits, as well as income from other social shares subject to the same tax regime as the income from shares under the law of the State in which the distribution company resides.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the dividends, resident in one Contracting State, performs in the other Contracting State of which the company paying the dividends is resident, an industrial or commercial activity through a permanent establishment located in that other State, or provides independent personal services through a fixed base situated in that other State and the share generated by the dividends is effectively linked to that permanent establishment or fixed base. In such cases, the provisions of article 7 or article 14, as appropriate, apply.
5. Where a company resident in one Contracting State obtains profits or income from the other Contracting State, that other State may not require any tax on dividends paid by the company, except to the extent that such dividends are paid to a resident of that other State or the share generated by the dividends is effectively linked to a permanent establishment 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, such interest may also be taxed in the Contracting State from which it comes, and in accordance with the law of that State, but if the recipient of the interest is its beneficial owner, the tax thus required may not exceed 10 per cent of the gross amount of interest.
3. Notwithstanding the provisions of paragraph 2:
(a) Interests accruing from a Contracting State and obtained by the Government of the other Contracting State, including its political subdivisions and local entities, by the Central Bank of that other Contracting State or any financial agency of that Government determined by common agreement of the competent authorities of the Contracting States, or by any resident of the other Contracting State with respect to secured or indirect credits financed by the Government of that other Contracting State, including its political subdivisions and local entities, the Central Bank of that other Contracting State or any financial agency determined by common agreement of the competent authorities of the Contracting States, shall be exempt from taxation in the Contracting State referred to first.
(b) Interest paid in connection with the sale on credit of industrial, commercial or scientific equipment or the sale on credit of goods by one undertaking to another undertaking may be taxed only in the Contracting State of which the beneficial owner of the interest is resident.
4. The term ‘interest’ used in this Article means the income from claims of any kind, with or without mortgage guarantee or benefit-sharing clause of the debtor, and in particular income from public funds and bonds or bonds, including premiums and lots attached to such securities, bonds or bonds, as well as any other income subject to the same regime as the income from capital provided by the laws of the Contracting State from which they arise.
5. The provisions of paragraphs 1, 2 and 3 shall not apply if the beneficial owner of the interest, resident of one Contracting State, engages in a commercial or industrial activity in the other Contracting State from which the interest originates through a permanent establishment situated in that other State or provides independent personal services on a fixed basis situated in that other State, and the credit generated by the interest is effectively linked to that permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14 shall apply, as appropriate.
6. Interest shall be considered as originating in 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 interest, whether or not resident of a Contracting State, has a permanent establishment or a fixed basis in a Contracting State in respect of which the debt giving rise to the payment of the interest and bearing the burden of the interest has been incurred, it 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 of the interest between them and third parties, the amount of interest, having regard to the claim for which it is paid, exceeds that agreed between the debtor and the beneficial owner 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 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, such fees may 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 fees is its beneficial owner, the tax thus required may not exceed 10 per cent of the gross amount of the fees.
3. The term 'royalties' used in this Article means the amounts of any kind paid for the use, or the granting of use, of a copyright on a literary, artistic or scientific work, including cinematographic films and radio or television films or tapes, of a patent, trademark or trade mark, design, plan, formula or secret procedure, or for the use or granting of use of industrial, commercial or scientific equipment, or for information relating to industrial, commercial or scientific experience.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the royalties, resident of one Contracting State, carries out 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 independent personal services through a fixed base located in that other State, and the right or property for which the royalties are paid is effectively linked to that permanent establishment or fixed base. In such a case, the provisions of article 7 or article 14, as appropriate, apply.
5. The fees shall be deemed to come from a Contracting State, where the debtor is the State itself or one of its political subdivisions or local entities, or a resident of that State. However, where the debtor of the royalties, whether or not resident in a Contracting State, has in a Contracting State a permanent establishment or a fixed basis in respect of which the obligation to pay the royalties has been incurred and which bear the burden thereof, the royalties shall be deemed to have come from the State where the permanent establishment or fixed base is situated.
6. Where, by reason of the special relations between the debtor and the beneficial owner of the royalties or of which both have with third parties, the amount of the royalties, having regard to the benefit for which they are paid, exceeds that for which the debtor and the beneficial owner would have agreed in the absence of such relationships, the provisions of this article shall 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.
2. Profits arising from the disposal of shares, shares or other rights in a corporation or other legal person whose assets consist, directly or indirectly, mainly in immovable property situated in a Contracting State may be taxed in the Contracting State where the immovable property is situated.
3. Profits arising from the disposal of shares or other rights, other than those referred to in paragraph 2 of this Article, in a company or other legal person resident in a Contracting State, may be taxed in that Contracting State if the recipient of the proceeds has held a direct or indirect shareholding of at least 25 per cent of the capital of that company or legal person during the period of the twelve months preceding the disposal. However, the tax thus required may not exceed 10 per cent of the profits referred to in this paragraph.
4. Profits, other than those referred to in paragraphs 2 and 3, 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 basis held by a resident of one Contracting State in the other Contracting State for the provision of independent personal services, including gains resulting from the disposal of that permanent establishment (only or with the enterprise as a whole) or from that fixed basis, may be subject to taxation in that other Contracting State.
5. Profits arising from the alienation 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 of which the enterprise is a resident.
6. Profits arising from the disposal of goods other than those referred to in paragraphs 1, 2, 3, 4 and 5 of this Article may be taxed only in the Contracting State of which the transferor is resident.
Article 14. Independent personal services.
1. Income earned 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 that resident normally has a fixed basis in the other Contracting State for the performance of his or her activities. 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 it.
2. The term “professional services” includes, in particular, independent scientific, literary, artistic, educational or pedagogical activities, as well as independent activities of Physicians, Lawyers, Engineers, Architects, Dentistry and Accountants.
Article 15. Dependent personal services.
1. Without prejudice to Articles 16, 18, 19, 20 and 21, similar salaries, salaries and salaries obtained by a resident of a Contracting State on account of employment may only be subject to taxation in that State unless the employment is exercised in the other Contracting State. If employment is exercised here, such remuneration may be taxed in that other State.
2. By way of derogation from 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 State referred to above in the first place 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 in any twelve-month period beginning or ending in 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. Notwithstanding the above provisions of this article, remunerations earned by employment on board a ship or aircraft operated in international traffic by an undertaking of a Contracting State may be subject to taxation in that State.
Article 16. Directors’ fees.
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.
Article 17. Entertainers and sportspersons.
1. By way of derogation from Articles 14 and 15, income earned by a resident of a Contracting State in the exercise of his or her personal activity in the other Contracting State as a performer, theatre, film, radio or television actor, musician or sportsman, may be taxed in that other State.
2. Notwithstanding the provisions of Articles 7, 14 and 15, where income derived from activities carried out by an artist or athlete personally and in that capacity 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.
3. Notwithstanding paragraphs 1 and 2 of this Article, income derived from the activities referred to in paragraph 1 carried out in accordance with a cultural exchange programme agreed by the Governments of both Contracting States shall be exempt from taxation in the Contracting State in which the activities are carried out.
Article 18. Pensions.
Without prejudice to Article 19(2), pensions and similar remuneration paid to a resident of a Contracting State on account of previous employment may only be taxed in that State.
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 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 that State and the natural person is a resident of that State who:
(i) possesses the nationality of that other State; or
(ii) It has not acquired the resident status of that State solely for the purpose of providing the services.
2. (a) Pensions paid by a Contracting State or one of its political subdivisions or local entities, either directly or from constituted funds, to a natural person for services rendered to that State or subdivision or entity, may be subject to taxation only 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 shall apply to remuneration and pensions paid for services rendered in the context of an industrial or commercial activity carried out by a Contracting State or one of its political subdivisions or local authorities.
Article 20. Students and trainees.
1. (a) A natural person who is a resident of a Contracting State at the beginning of his visit to the other Contracting State and who is temporarily in that other Contracting State for the main purpose of:
(i) Studying at a university or other recognized educational institution of that other Contracting State; or
(ii) To obtain the practical training necessary for the exercise of a professional profession or specialty; or
(iii) Conducting studies or research as a beneficiary of a scholarship, stock exchange or award from a governmental, religious, charitable, scientific, literary or educational organization;
It shall be exempt from taxation in that other Contracting State in respect of the amounts referred to in item (b) of this subparagraph for a period not exceeding five years from the date of its arrival in that other Contracting State.
(b) The amounts referred to in subparagraph (a) of this subparagraph are:
(i) Amounts received from abroad, in terms other than the provision of personal services, for maintenance, education, studies, research or practical training.
(ii) Fellowship, stock exchange or award; and
(iii) Income derived from personal services rendered in that other Contracting State not exceeding a total of PTA 1,000,000, or its equivalent in Korean currency, during the tax period.
2. A natural person who is a resident of a Contracting State at the beginning of his visit to the other Contracting State and who is temporarily in that other Contracting State as employed or hired by a resident of the Contracting State mentioned first, for the main purpose of:
(a) To acquire technical, professional or business experience from a person other than that resident of the Contracting State referred to first; or
(b) Studying at a University or other recognized educational institution of that other Contracting State;
It shall be exempt from taxation in that other Contracting State for a period of twelve consecutive months in respect of income derived from personal services not exceeding a total of 1,000,000 pesetas or their equivalent in Korean currency.
3. This Article shall not apply to income derived from the investigation if such research is not carried out in the public interest, but mainly for the particular benefit of a particular person or persons.
Article 21. Professors and Teachers.
A natural person who is or has been a resident of a Contracting State immediately before moving to the other Contracting State and who, at the invitation of a university, college, school or other similar educational institution, recognized as non-profit by the Government of that other State, remains in that other State for a period not exceeding two years from the date of his first arrival in that other State, for the sole purpose of carrying out education or research, or both, in such an educational institution, shall be exempt from taxation in that other State with respect to remunerations received on the basis of such education or research.
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 shall not apply to income, excluding income derived from property defined as immovable in Article 6(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 situated in that other State, or provides independent personal services through a fixed base situated in that other State, and the right or ownership for which the income is paid is effectively linked to that permanent establishment or fixed base. In such cases, the provisions of Article 7 or Article 14 shall apply, as appropriate.
Article 23. Elimination of double taxation.
1. In the case of a resident of Korea, double taxation shall be avoided as follows:
Without prejudice to the provisions of Korean tax law relating to the recognition of a tax credit against Korean tax on the basis of the payment of taxes in a country other than Korea (which do not contradict the general principle established herein), the tax to be paid in Spain (excluding, in the case of dividends, the tax payable in respect of profits from which dividends are paid) according to Spanish law and in accordance with this Agreement, either directly or by deduction, on income from Spanish sources, shall be deductible from Korean tax on those income. However, the credit may not exceed the portion of the Korean tax corresponding to the proportion of the Spanish source income to the total income subject to taxation in Korea.
2. In the case of a resident of Spain, double taxation shall be avoided, in accordance with the applicable provisions contained in Spanish legislation, as follows:
(a) Where a resident of Spain obtains income which, under the provisions of this Agreement, may be taxed in Korea, Spain shall allow the deduction of the income tax of that resident from an amount equal to the tax actually paid in Korea.
However, such deduction may not exceed the part of the income tax, calculated before the deduction, corresponding to the income that may be taxed in Korea.
(b) In the case of dividends paid by a company resident in Korea to a company resident in Spain and directly withholding at least 25 per cent of the capital of the company paying the dividends, the tax actually paid by the company referred to first in respect of the profits from which the dividends are paid shall be taken into account in determining the deduction, in addition to the amount deductible under (a) of this subparagraph, in the amount corresponding to such dividends, provided that the amount is included, for this purpose, in the taxable base of the company receiving them.
Such deduction, together with the deduction applicable in respect of dividends under (a) of this subparagraph, may not exceed the part of the income tax, calculated prior to the deduction, attributable to income subject to taxation in Korea.
In order to apply the provisions of this heading, the participation in the paying company of dividends shall be maintained continuously during the two years preceding the day on which the dividends are paid.
(c) Where under any provision of this Agreement the income obtained by a resident of Spain is exempt from taxation in Spain, Spain may, however, take into account the income exempted for the calculation of the tax on the remaining income of that resident.
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 circumstances are or may be subject. Notwithstanding article 1, this provision also applies to persons who are not residents of one or any of the Contracting States.
2. Permanent establishments held by an undertaking of one Contracting State in the other Contracting State shall not be subject to taxation in that other 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, reliefs and tax reductions it grants to its own residents in view of their marital status or family burdens.
3. Unless the provisions of Article 9(7) or Article 12(6) apply, the interest, royalties or other expenses paid by an undertaking of a Contracting State to a resident of the other Contracting State shall be deductible, in order to determine the profits subject to taxation of that undertaking, under the same conditions as if they had been paid to a resident of the State referred to first.
4. Undertakings 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, shall not be subject in the State referred to above to any tax or obligation relating thereto which is not or is more burdensome than those to which other similar undertakings of the State referred to above are or may be subject.
5. 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 involve or may entail for him an imposition which is not in conformity with the provisions of this Convention, irrespective of the remedies provided for by the domestic law of those States, he may submit his case to the competent authority of the Contracting State of which he is resident or, if Article 24 (1) applies, to that of the Contracting State of which he is a national. The case shall be brought within three years of the first notification of the measure involving an imposition not in accordance with the provisions of the Convention.
2. The competent authority shall, if it finds the complaint well founded and if it is not in a position to adopt a satisfactory solution, make every effort to resolve the matter through an amicable agreement with the competent authority of the other Contracting State in order to avoid an imposition not in conformity with the Convention.
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 try to avoid double taxation in cases not provided for by the Convention and to avoid abuse of the Convention.
4. The competent authorities of the Contracting States may communicate directly with each other in order to reach an agreement as referred to in the preceding paragraphs. Where it is considered that such an agreement may be facilitated by personal contacts, the exchange of views may take place within a Commission composed of representatives of the competent authorities of the Contracting States.
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 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 thereto. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public hearings of the courts or in court judgements.
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 the communication of which 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 agents 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, 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 instruments of ratification, and its provisions shall apply:
(a) as regards taxes levied at source, amounts paid to non-residents from 1 January of the calendar year following the exchange of instruments of ratification; and
(b) as regards the remaining taxes, the tax periods beginning from 1 January of the calendar year following the exchange of instruments of ratification.
Article 29. Termination.
This Convention shall remain in force indefinitely, but any Contracting State may notify the other Contracting State in writing by diplomatic means until 30 June of any calendar year from the fifth year following the date of the exchange of instruments of ratification, and in such case the Convention shall cease to apply:
(a) as regards taxes levied at source, amounts paid to non-residents from 1 January of the calendar year following that of notification;
(b) as regards the other taxes, the tax periods beginning on or after 1 January of the calendar year following that of the notification.
In faith, the signatories, duly authorized for this purpose by their respective Governments, have signed this Convention.
Done in duplicate at Seoul on 17 January 1994 in the English, Korean and Spanish languages, all texts being equally authentic. In the event of divergence in interpretation, the English text shall prevail.
For the Government of the Kingdom of Spain,
For the Government of the Republic of Korea,
JAVIER SOLANA MADRARIAGA,
HAVE SUNG-JOO,
Minister for Foreign Affairs
Minister for Foreign Affairs
[heading] PROTOCOL
At the time of signing the Agreement between the Kingdom of Spain and the Republic of Korea to Prevent Double Taxation and Tax Evasion in Income Tax, the signatories have agreed on the following provisions which form an integral part of the Convention:
1. With reference to Article 10 (Dividends):
(a) The term ‘dividends’ shall be understood to include the liquidation profits of a company resident in a Contracting State.
(b) Notwithstanding Article 10(2)(a), Article 10(2)(b) shall apply in all cases to dividends paid by Spanish investment institutions subject to Spanish taxation pursuant to Article 34 or Article 35 of Law 46 of 26 December 1984.
2. With reference to article 19 (Public functions):
The provisions of Article 19(1), (2) and (3) shall also apply to remuneration or pensions paid by government agencies carrying out governmental functions determined by the competent authorities of the Contracting States at the request of those agencies. In the case of Korea, the Bank of Korea and the Korea Trade Promotion Corporation will be understood to be included among government agencies.
In faith, the signatories, duly authorized for this purpose by their respective Governments, have signed this Protocol.
Done in duplicate at Seoul on 17 January 1994 in the English, Korean and Spanish languages, all texts being equally authentic. In the event of divergences in interpretation, the English text shall prevail.
For the Government of the Kingdom of Spain,
For the Government of the Republic of Korea,
JAVIER SOLANA MADRARIAGA,
HAVE SUNG-JOO,
Minister for Foreign Affairs
Minister for Foreign Affairs
This Convention entered into force on 21 November 1994, the date of the exchange of instruments of ratification, as provided for in its Article 28.2.
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.