PROTOCOL AMENDING THE CONVENTION BETWEEN SPAIN AND DENMARK TO AVOID DOUBLE IMPOSITION ON RENT AND PATRIMONY IMPOSED ON 3 JULY 1972
The Government of the Kingdom of Spain and the Government of the Kingdom of Denmark, wishing to conclude a Protocol amending the Convention between Spain and Denmark to Prevent Double Taxation of Income and Wealth Taxes, signed at Copenhagen on 3 July 1972 (hereinafter referred to as the “Convention”), have agreed as follows:
1. Article 2 of the Convention is deleted and replaced by the following:
"Article 2. Taxes covered.
1. This Convention applies to income and property taxes payable by each of the Contracting States, their political subdivisions or their local entities, whatever the system of their levy.
2. Income and property taxes are those that tax all or any part of the income or property, including taxes on profits arising from the disposal of movable or immovable property, taxes on the amount of wages or salaries paid by enterprises, as well as taxes on capital gains.
3. The current taxes to which this Convention applies are, in particular:
(a) In Denmark:
(i) the National Income Tax (indkomsskatten til staten); (ii) the Municipal Income Tax (den kommunale Indkomstskat); (iii) the County Income Tax (den amtskommunale indkomstskat); and
(iv) Taxes levied under the Hydrocarbon Tax Act;
(hereinafter referred to as "Danish tax").
(b) In Spain:
(i) personal income tax; (ii) corporation tax; (iii) property tax; and (iv) local income and property taxes;
(hereinafter referred to as "Spanish tax").
4. The Convention shall also apply to taxes of an identical or similar nature which are established after the date of signature of the Convention and which are added to or replaced by existing taxes."
2. Article 3 of the Convention is deleted and replaced by the following:
"Article 3. General definitions.
1. For the purposes of this Convention, unless the context of the Convention is different:
(a) the words "one Contracting State" and "the other Contracting State" mean Spain or Denmark, depending on the context ; (b) The term “Denmark” means the Kingdom of Denmark including any area outside its territorial sea over which, in accordance with international law, it is or may be designated, under Danish law, as an area in which Denmark may exercise sovereign rights relating to the exploration and exploitation of natural resources in respect of the seabed, subsoil and superjacent waters, as well as in respect of other activities relating to the exploration and economic exploitation of the area; the term does not cover the Faroe Islands and Greenland; (c) the term "Spain" means the Spanish State and, used geographically, the territory of the Spanish State, including areas outside its territorial sea in which, under international law and under its domestic law, the Spanish State exercises or may exercise in the future jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources; (d) the term "person" includes natural persons, corporations and any other grouping of persons; (e) the term "company" means any legal person or any entity that is considered a legal person for tax purposes; (f) the terms "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; (g) the term “national” means:
(i) a natural person possessing the nationality of a Contracting State; (ii) a legal person, a personalist company or an association incorporated in accordance with the law in force in a Contracting State; (h) the term “international traffic” means any transport carried out by a ship or aircraft operated by an undertaking having its place of effective management in a Contracting State, except where the ship or aircraft is operated only between points situated in the other Contracting State; (i) the term “competent authority” means:
(i) in Spain, the Minister of Economy and Finance or his authorised representative; (ii) in Denmark, the Minister of Tax or his authorised representative.
2. For the purpose of the application of the Convention at any time by a Contracting State, any term or expression not defined therein shall have, unless a different interpretation is given in its context, the meaning attributed to it at that time by the law of that State concerning taxes which are the subject of the Convention, the meaning attributed by the tax law to which it would result from other branches of the law of that State prevails."
3. Article 9 of the Convention is deleted and replaced by the following:
"Article 9. Partner companies.
1. (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 terms accepted or imposed 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 been realized because of them, may be included in the profits of that undertaking and subject to taxation accordingly.
2. Where a Contracting State includes in the profits of an enterprise of that State - and consequently subjects to taxation - the profits on which an enterprise of the other Contracting State has been subject to taxation in that other State, and that other State recognizes that the profits thus included are profits that would have been realized by the enterprise of the State concerned in the first place if the terms agreed between the two companies had been those agreed between independent undertakings, that other State shall effect the adjustment that would result in the amount of the tax that has taxed those profits. In determining such adjustment, account shall be taken of the other provisions of this Convention and the competent authorities of the Contracting States shall be consulted where necessary."
4. Article 10 of the Convention is deleted and replaced by the following:
"Article 10. Dividends.
1. Dividends paid by a company resident of a Contracting State to a resident
of the other Contracting State may be subject to taxation in that other State.
2. (a) 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 actual beneficiary of the dividends is a resident of the other Contracting State, the tax thus required may not exceed 15 per cent of the gross amount of the dividends.
(b) Notwithstanding the provisions of subparagraph (a), such dividends shall be exempt from taxation in the Contracting State in which the company paying the dividends resides, in accordance with the provisions of the law applicable in that State transposing the EC Directive on the common system of taxation applicable to parent companies and subsidiaries of different Member States (90/435/EEC).
The competent authorities of the Contracting States shall, by mutual agreement, determine how these provisions are to be applied.
This paragraph does not affect the company's taxation of the profits from which dividends are paid.
3. The term “dividends” within the meaning of this article means the income from shares or other rights, except credit rights, which allow participation in profits, as well as the income from other social shares subject to the same tax regime as the income from shares under the law of the State of which the distribution company is resident.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the dividends, resident of one Contracting State, performs in the other Contracting State, of which the company paying the dividends is resident, a business activity through a permanent establishment located there, or provides in that other State independent personal services through a fixed base situated there, and the share generated by the dividends 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. Where a company resident of one Contracting State obtains profits or income from the other Contracting State, that other State may not require any tax on dividends agreed 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."
5. Article 14 of the Convention is deleted and replaced by the following:
"Article 14. Independent personal services.
1. Income obtained by a resident of a Contracting State from the provision of professional services or other activities of an independent nature may only be taxed in that State, unless the resident normally has a fixed basis in the other Contracting State for carrying out his 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 that fixed base.
2. The term "professional services" includes in particular independent scientific, literary, artistic, educational or pedagogical activities, as well as independent activities of doctors, lawyers, engineers, architects, dentists and accountants."
6. Article 17 of the Convention is deleted and replaced by the following:
"Article 17. Artists and athletes.
1. By way of derogation from Articles 14 and 15, any income which a resident of a Contracting State obtains from the exercise of his personal activity in the other Contracting State as an artist of the spectacle, as a theatre, cinema, radio or television actor, or as a musician, or as an athlete, may be subject to taxation in that other State.
2. Notwithstanding the provisions of Articles 7, 14 and 15, where the income derived from the 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 the provisions of paragraphs 1 and 2, income derived from the activities referred to in paragraph 1 and carried out under a cultural agreement or agreement between the Contracting States shall be exempt from taxation in the Contracting State in which the activities are carried out, if the visit to that State is financed, in whole or in substance, by public funds from the other Contracting State or from one of its political subdivisions or local authorities."
7. Article 19 of the Convention is deleted and replaced by the following:
"Article 19. Staff case.
1. (a) Salaries, wages and other similar salaries, excluding pensions, paid by a Contracting State or by 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 only be subject to taxation in that State.
(b) However, such salaries, wages and salaries 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) is a national of that State, or (ii) has not acquired the resident status of that State solely to provide 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 to that State;
Subdivision or entity may only be subject to taxation in that State.
(b) Such pensions may, however, be subject to taxation in the other Contracting State only if the natural person is a resident and a national of that State.
3. The provisions of Articles 15, 16, 17 and 18 apply to salaries, salaries and other similar remuneration, and to pensions paid for services rendered in the context of an entrepreneurial activity carried out by a Contracting State or by one of its political subdivisions or local authorities."
8. Article 22 of the Convention is deleted and replaced by the following:
"Article 22. Other rents.
1. The income of a resident of a Contracting State, whatever its source, not referred to in the previous articles of this Convention, may be taxed only in that State.
2. Paragraph 1 does not apply to income other than that derived from immovable property within the meaning of Article 6(2), where the beneficiary of such income, resident of a Contracting State, engages in business 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 for which the income is 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."
9. Article 24 of the Convention is deleted and replaced by the following:
"Article 24. Elimination of double taxation.
1. In Denmark:
(a) In accordance with the provisions of subparagraph (c), where a resident of Denmark obtains income which, in accordance with the provisions of this Convention, may be taxed in Spain, Denmark shall allow the deduction of the income tax of that resident, equal to the income tax paid in Spain.
(b) However, such deduction may not exceed the part of the income tax, calculated before the deduction, corresponding to income that may be taxed in Spain.
(c) Where a resident of Denmark obtains income which, in accordance with the provisions of this Convention, can only be taxed in Spain, Denmark may include such income in the tax base and shall grant as a deduction the part of income tax corresponding to income obtained in Spain.
2. In Spain:
In accordance with the provisions and without prejudice to the limitations imposed by Spanish law:
(a) Where a resident of Spain obtains income or possesses assets which, in accordance with the provisions of this Convention, may be taxed in Denmark, Spain shall permit:
(i) the deduction from that resident's income tax of an amount equal to the income tax paid in Denmark.
(ii) the deduction of the tax on the assets of that resident in the amount equal to the tax paid in Denmark on those assets.
However, such deduction may not exceed the part of income tax or property tax, calculated before deduction, corresponding to the income or assets that may be taxed in Denmark.
(b) Where a resident of Spain obtains income which, under the provisions of this Convention, is subject to taxation in Denmark, Spain shall, in accordance with its domestic law, allow the deduction of corporation tax actually paid by the company which distributes the dividends corresponding to the profits from which such dividends are paid, and the deduction of income tax referred to in Article 7.
(c) Where under any provision of this Agreement the income obtained by a resident of Spain or the property he holds is tax-exempt in Spain, Spain may, however, take into account the income or wealth exempted in calculating the tax on the rest of the income or property of that resident."
10. Article 25 of the Convention is deleted and replaced by the following:
"Article 25. Non-discrimination.
1. Nationals of one Contracting State shall not be subject in the other Contracting State to any tax or obligation relating thereto which is different or more burdensome than those to which nationals of that other State who are under the same conditions, in particular with regard to residence, are or may be subject. Notwithstanding Article 1, this provision shall also apply 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 State in a less favourable manner than undertakings of that other State carrying out the same activities. The provisions of this article shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, allowances and tax reductions it grants to its own residents in view of their marital status or family burdens.
3. Unless the provisions of Article 9(1) of Article 11(6) or Article 12(6) apply, interest, royalties and other expenses paid by an undertaking of a Contracting State to a resident of the other Contracting State shall be deductible
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. Similarly, the debts of an undertaking of a Contracting State contracted with a resident of the other Contracting State shall be deductible for the determination of the assets subject to taxation of that undertaking under the same conditions as if they had been contracted with a resident of the State referred to in the first instance.
4. Undertakings of a Contracting State whose capital is wholly or partly owned or controlled, directly or indirectly, 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 different or more burdensome than those to which other similar undertakings of the State referred to in the first instance are or may be subject.
5. By way of derogation from Article 2, the provisions of this Article apply to all taxes irrespective of their nature or name."
11. Article 29 of the Convention shall be deleted.
Entry into force.
1. Each Government of the Contracting States shall notify the other that it has fulfilled the constitutional requirements for the entry into force of this Protocol.
2. The Protocol shall enter into force on the date of the last notification referred to in paragraph 1 and its provisions shall apply to income and property taxes for the fiscal year beginning on or after 1 January of the calendar year following the entry into force of the Protocol.
3. The provisions of the Convention between Spain and Denmark on the avoidance of double taxation in respect of income and property taxes and the annexed Protocol, signed at Copenhagen on 3 July 1972, shall cease to apply in respect of all Spanish or Danish taxes which are the subject of this Protocol and its annexed Protocol, in accordance with paragraph 2.
4. This Protocol shall remain in force for as long as the Convention remains in force.
In faith, the signatories, duly authorized to do so, have signed this Protocol.
Done in duplicate at Copenhagen on 17 March 1999 in the English, Danish and Spanish languages, all texts being equally authentic. In case of divergence in interpretation the English text will prevail.-For the Government of the Kingdom of Spain, José Luis Pardos Pérez, Ambassador in Copenhagen.-For the Government of the Kingdom of Denmark, Peter Loft, Permanent Secretary of State, Ministry of Taxes.
Protocol Annex
At the time of signing the Protocol amending the Convention between Spain and Denmark on the avoidance of double taxation on income and property taxes and the annexed Protocol, signed at Copenhagen on 3 July 1972, the signatories have agreed on the following provisions which form an integral part of the Protocol:
I. With reference to Article 10(3).
The term “dividends” shall be understood to include profits arising from the liquidation of a company.
II. With reference to article 25.
The provisions of Article 25 shall be without prejudice to the application by each Contracting State of its domestic legislation relating to sub-capitalisation.
In faith, the signatories, duly authorized for this purpose, have signed this Protocol.
Done in duplicate at Copenhagen on 17 March 1999 in the English, Danish and Spanish languages, all texts being equally authentic. In case of divergence in interpretation the English text will prevail.-For the Government of the Kingdom of Spain, José Luis Pardos Pérez, Ambassador in Copenhagen.-For the Government of the Kingdom of Denmark, Peter Loft, Permanent Secretary of State, Ministry of Taxes.
This Protocol entered into force on 7 April 2000, the date of the last cross-notification between the Parties by reporting compliance with the respective constitutional requirements, as set out in its final clause.
What is made public for general knowledge.
Madrid, May 3, 2000.-The Technical Secretary General, Julio Núñez Montesinos.