CONVENTION BETWEEN THE KINGDOM OF SPAIN AND THE REPUBLIC OF CUBA TO AVOID DOUBLE IMPOSITION AND PREVENT TAX EVASION ON RENT AND PATRIMONY IMPOSSES
The Government of the Kingdom of Spain and the Government of the Republic of Cuba, wishing to conclude a convention to prevent double taxation and to prevent tax evasion in respect of income and property taxes, have agreed as follows:
CHAPTER I
Scope of the Convention
Article 1. Personal scope.
This Convention applies to persons resident in one or both Contracting States.
Article 2. Taxes covered.
1. This Convention applies to income and property taxes payable by each Contracting State, its political subdivisions or its local authorities, whatever the system of its levy.
2. Income and property taxes are those that tax all or any part of the income or property, including taxes on profits resulting from the disposal of movable or immovable property, taxes on the amount of wages or salaries paid by enterprises, as well as taxes on capital gains.
3. The current taxes to which this Convention applies are, in particular:
(a) In Cuba:
(i) Tax on Utilities;
(ii) Personal Income Tax;
(iii) The Tax on the Ownership or Possession of Certain Goods; and
(iv) Land Transport Tax;
(hereinafter referred to as ‘Cuban 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 ‘the Spanish tax’).
4. The Convention shall also apply to taxes of an identical or similar nature which are established after the date of signature of the Convention and which are added to or replaced by existing taxes. The competent authorities of the Contracting States shall communicate to each other, at the end of each year, any relevant amendments to their respective tax laws.
CHAPTER II
Definitions
Article 3. General definitions.
1. For the purposes of this Convention, unless the context of the Convention is different:
(a) The term “Cuba” refers to the national territory consisting of the Island of Cuba, the Island of Youth, the other adjacent islands and keys, the inland waters and the territorial sea in the extent established by law and the airspace over which the Cuban State exercises its sovereignty or sovereign rights and jurisdiction under its domestic law and in accordance with international law.
(b) The term ‘Spain’ means the Spanish State and, used geographically, designates the territory of the Spanish State, including inland waters, as well as the territorial sea and areas outside it where, under international law and under its domestic law, the Spanish State may exercise jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources.
(c) The terms ‘one Contracting State’ and ‘the other Contracting State’ mean Cuba or Spain, depending on the context.
(d) The term ‘person’ includes natural or 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) As far as Cuba is concerned, any natural person who possesses Cuban citizenship in accordance with its laws and is a permanent resident in the national territory; as far as Spain is concerned, any natural person who possesses Spanish nationality.
(ii) Any legal person, company of persons or association constituted under the law in force in a Contracting State.
(h) The term 'international traffic' means any transport by a ship or aircraft operated by an undertaking whose effective headquarters are located in one Contracting State, except where the ship or aircraft is operated only between points located in the other Contracting State.
(i) ‘competent authority’ means:
(i) In the case of Cuba, the Minister of Finance and Prices or his authorized representative; and
(ii) in the case of Spain, the Minister of Economy and Finance or his authorized representative.
2. For the application of the Convention by a Contracting State, at any given time, any expression or term not defined in the Convention 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 the 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.
Article 4. Resident.
1. For the purposes of this Convention, the term ‘resident of a Contracting State’ means any person who, under the law of that State, is subject to taxation in that State by reason of his domicile, residence, 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 the income they obtain from sources located in that State, or on the property situated therein.
2. Where under the provisions of paragraph 1 a natural or natural person is resident in both Contracting States, his situation shall be resolved as follows:
(a) Such person shall be considered a resident of the State in which he or she has permanent housing at his or her disposal; if he or she has permanent housing at his or her disposal in both States, he or she shall be considered a resident of the State with which he or she has closer personal and economic relations (centre of vital interests);
(b) if the State in which the person has the centre of his or her vital interests cannot be determined, or if he or she does not have permanent housing at his or her disposal in any of the States, he or she shall be considered a resident of the Contracting State in which he or she habitually lives;
(c) If he habitually lives in both States or does not live in either State, he shall be considered a resident of the State of which he is a national;
(d) if the above criteria do not permit the determination of the Contracting State in which the person is resident, 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 who is not a natural or natural person is a resident of both Contracting States, he or she shall be considered a resident of the State in which his or her place of effective management is located.
Article 5. Permanent establishment.
1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of business through which an 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 place of extraction of natural resources.
3. A construction, installation or assembly work only constitutes a permanent establishment if its duration exceeds twelve months.
4. The term ‘permanent establishment’ also includes the provision of services by a company, including the services of consultants, through its employees or other personnel engaged by the company for that purpose, but only if these activities continue (in relation to the same project or related project) in the country for a period exceeding twelve months.
5. Notwithstanding the provisions of this Article, it is considered that the term ‘permanent establishment’ does not include:
(a) The use of facilities for the sole purpose of storing, displaying or delivering goods or goods belonging to the enterprise;
(b) the maintenance of a warehouse of goods or goods belonging to the undertaking 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 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 undertaking;
(e) the maintenance of a fixed place of business for the sole purpose of carrying out any other auxiliary or preparatory activity for the undertaking;
(f) the maintenance of a fixed place of business for the sole purpose of carrying out any combination of the activities referred to in subparagraphs (a) to (e), provided that the whole activity of the fixed place of business resulting from that combination retains its auxiliary or preparatory character.
6. By way of derogation from paragraphs 1 and 2, where a person, other than an independent agent to whom paragraph 7 shall apply, acts on behalf of an undertaking and maintains and exercises habitual powers in a Contracting State 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 4 and if they were carried out through a fixed place of business, they would not have determined that place as a permanent establishment in accordance with the provisions of that paragraph.
7. An enterprise is not considered to have a permanent establishment in a Contracting State merely because it carries out its activities in that State through a broker, a general commissioner or any other independent agent, provided that such persons act within the ordinary framework of their activity.
8. The fact that a company resident of a Contracting State controls or is controlled by a company resident of the other Contracting State, or that it engages in business activities in that other State (whether by permanent establishment or otherwise), does not in itself make any such company permanent establishment of the other State.
CHAPTER III
Income taxation
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 Contracting State.
2. The term ‘real property’ shall have the meaning attributed to it by the law of the Contracting State in which the property is situated. In any event, that term includes assets attached to immovable property, livestock and equipment used on farms and forestry, 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 in exchange for the exploitation or concession of the exploitation of mineral deposits, sources and other natural resources apply; ships and aircraft are not considered immovable property.
3. The provisions of paragraph 1 apply to income derived from the direct use, lease or any other form of exploitation of immovable property.
4. The provisions of paragraphs 1 and 3 also apply to income derived from the immovable property of an 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 in that State, unless the undertaking carries out its business in the other Contracting State through a permanent establishment situated in that State. If the company does so, the profits of the company may be taxed in the other State, but only to the extent that they can be attributed to that permanent establishment.
2. Without prejudice to paragraph 3, where an undertaking of a Contracting State carries out its business in the other Contracting State by means of a permanent establishment situated therein, in each Contracting State, the profits which that 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 shall be permitted, including management and general administrative expenses for the same purposes, 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 a permanent establishment 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 that way; 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 covered separately by other articles of this Convention, the provisions of those articles shall not be affected by those of this Article.
Article 8. Shipping and air transport.
1. Profits from operating ships or aircraft in international traffic may be taxed only in the Contracting State in which the effective head office of the company is located.
2. If the place of effective management of a shipping undertaking is on board a ship, it shall be deemed to be situated in the Contracting State where the base port of the ship is located, or if there is no such base port, in the Contracting State of which the person operating the ship is resident.
3. The provisions of paragraph 1 also apply to profits from participation in a consortium or 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 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.
2. Where a Contracting State includes in the profits of an enterprise of that State and consequently imposes on it the profits on which an enterprise of the other Contracting State has been taxed in that other State, and the profits thus included are profits which would have been realized by the enterprise of the State mentioned first if the terms agreed between the two companies had been those agreed between two independent companies, that other 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, the competent authorities of the Contracting States being consulted if necessary.
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 laws of that State, but if the recipient of the dividends is the beneficial owner, the tax thus required may not exceed:
(a) 5 per 100 of the gross amount of dividends if the beneficial owner is a company (excluding companies of persons) holding directly at least 25 per 100 of the capital of the company that pays the dividends;
(b) 15 per 100 of the gross amount of dividends in all other cases.
The competent authorities of the Contracting States shall, by mutual agreement, determine how these limits are to be applied.
This paragraph does not affect the company's taxation of the 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, except credit rights, which permit participation in profits, as well as income from other social participations 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 of one Contracting State, performs in the other Contracting State, from which the company paying the dividends is resident, a business activity through a permanent establishment located in that other State, 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 cases, the provisions of Article 7 or Article 14 shall 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, 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 located 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 only in that other State.
2. However, such interests may also be subject to taxation in the Contracting State from which they come, and in accordance with the law of that State, but if the recipient of the interest is its effective beneficiary, the tax thus required may not exceed 10 per cent of the gross amount of interest.
The competent authorities of the Contracting States shall, by mutual agreement, determine how this limit is to be applied.
3. Notwithstanding the provisions of paragraph 2, the interest referred to in paragraph 1 may be taxed in the State of residence of the beneficial owner only if the interest is paid:
(a) By the other contracting State, one of its political subdivisions or a local entity;
(b) by an undertaking of a Contracting State to an undertaking of the other Contracting State in connection with the sale on credit of goods or of commercial, industrial or scientific equipment;
(c) for long-term loans (five years or more) granted by a credit institution or financial institution resident in the other Contracting State.
4. The term ‘interest’ used in this Article means income from claims of any kind, with or without a mortgage guarantee or a benefit-sharing clause of the debtor, and in particular income from public funds and income from bonds and bonds, including premiums and lots attached to such securities, as well as any other income subject to the same regime as income from capital provided by the law of the Contracting State from which the income derives. Penalizations for late payment are not considered interest for the purposes of this article.
5. The provisions of paragraphs 1, 2 and 3 do not apply if the beneficial owner of the interest, resident of one Contracting State, carries out in the other Contracting State, from which the interest is derived, a business activity through a permanent establishment located there or provides independent personal services through a fixed base situated there, and the credit generated by the interest 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.
6. Interests are considered 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 interest, whether or not resident of a Contracting State, has in a Contracting State a permanent establishment or a fixed basis in respect of which the debt giving rise to the payment of the interest and bearing the burden of the interest has been incurred, the interest shall be deemed to have come from the Contracting State where the permanent establishment or fixed base is situated.
7. Where, on account of the special relations between the debtor and the beneficial owner of the interest or the interest between them and third parties, the amount of interest, taking into account the claim for which it is paid, exceeds that agreed by the debtor and the creditor in the absence of such relations, the provisions of this article shall apply only to the latter amount. In such a 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. Royalties or royalties from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such royalties or royalties may also be subject to taxation in the Contracting State from which they come and in accordance with the law of that State, but if the recipient of the royalties or royalties is its beneficial owner, the tax thus required may not exceed 5 per 100 of the gross amount of the royalties or royalties.
3. Notwithstanding the provisions of paragraph 2, royalties or royalties paid under copyright and other similar remuneration for the production of a literary, dramatic, musical or artistic work other than royalties or royalties relating to cinematographic films, recorded works on films, magnetoscopic tapes intended for television and to discs or tape from a Contracting State and paid to a resident of the other Contracting State subject to taxation on the basis of such royalties, and provided that the recipient of such royalties or royalties is its beneficial owner, may only be subject to taxation in that other State.
4. The term ‘royalties or royalties’ used in this Article means the amounts of any kind paid for the use or granting of copyright in literary, artistic or scientific works, including cinematographic films and radio and television films or tapes, for the use or granting of the use of patents, trademarks, designs, drawings, formulas or secret procedures, as well as for the use or granting of industrial, commercial or scientific equipment, and for information relating to industrial, commercial or scientific experience.
5. The provisions of paragraphs 1, 2 and 3 do not apply if the beneficial owner of the royalties or royalties, resident of one Contracting State, carries out in the other Contracting State, from which the royalties or royalties come, a business activity through a permanent establishment located there or provides independent personal services by means of a fixed base situated there, and the right or for which the royalties or royalties are 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.
6. Royalties or royalties 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 or royalties, whether or not resident of a Contracting State, has in one of the Contracting States a permanent establishment or a fixed basis in respect of which the obligation to pay the royalties or royalties has been incurred and which bear the burden thereof, the royalties or royalties shall be deemed to have come from the State where the permanent establishment or fixed base is situated.
7. Where, by reason of the special relations between the debtor and the beneficial owner of the royalties or royalties or of which both have with third parties, the amount of the royalties or royalties, having regard to the benefit for which they are paid, exceeds that for which the debtor and beneficial owner would have agreed in the absence of such relationships, the provisions of this article apply only to the latter amount. In such a 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. Gains 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 arising from the disposal of that permanent establishment (alone or with the enterprise as a whole) or from that fixed basis, may be taxed in that other State.
3. Profits arising from the alienation of ships or aircraft operated in international traffic, or from movable property affected by the operation of such vessels or aircraft, may be taxed only in the Contracting State where the effective head office of the undertaking is located.
4. Profits arising from the disposal of assets other than those referred to in the preceding paragraphs of this Article may be taxed only in the Contracting State in which the transferor resides.
Article 14. Independent personal services.
1. Incomes that a resident of a Contracting State obtains from 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 conduct of his or her activities. If it has such a fixed base, such 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, accountants or accountants.
Article 15. Dependent personal services.
1. Without prejudice to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages 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 takes place in the other Contracting State. If the employment is carried out in that other State, the remuneration received in that regard may be subject to taxation in that other State.
2. By way of derogation from paragraph 1, remunerations obtained by a resident of a Contracting State on account of employment in the other Contracting State may be taxed only in the State referred to above, if:
(a) The recipient does not remain in total in the other State, for one or more periods, for more than one hundred and eighty-three days in any twelve-month period; (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 foregoing provisions of this Article, remunerations earned on account of employment on board a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the undertaking is situated.
Article 16. Directors’ fees.
Participations, attendance allowances and other similar remunerations obtained by a resident of a Contracting State as a member of a board of directors or supervisory or supervisory board of a company resident of the other Contracting State may be taxed in that other State.
Article 17. Entertainers and sportspersons.
1. Notwithstanding the provisions of Articles 14 and 15, any income which a resident of a Contracting State obtains from the exercise of his personal activity in the other Contracting State as an artist of the spectacle, such as a theatre, cinema, radio or television actor, or 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 of the spectacle or sportsman personally and in that capacity is attributed, not to the artist of the spectacle or sportsman himself, but to another person, such income may be taxed in the Contracting State in which the activities of the artist of the spectacle or of the athlete are carried out.
3. The provisions of paragraphs 1 and 2 do not apply if the activities carried out in one Contracting State are financed mainly by public funds of the other Contracting State or one of its political subdivisions or local authorities. In such a case, income derived from such activities may only be taxed in that other State.
Article 18. Pensions.
Without prejudice to Article 19(2), pensions and other similar remuneration paid to a resident of a Contracting State on account of previous employment may only be taxed in that State.
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 or 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 remuneration may be subject to taxation in the other Contracting State only if the services are provided in that State and the natural or 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 only for the purpose of providing services.
2. (a) Pensions paid by a Contracting State or by one of its political subdivisions or local entities, either directly or from funds constituted, to a natural or 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 pensions may be subject to taxation in the other Contracting State only if the natural or natural person is a resident and national of that State.
3. Articles 15, 16 and 18 apply to remuneration and pensions paid for services rendered in the context of an enterprise of a Contracting State or one of its political subdivisions or local authorities.
Article 20. Students.
The amounts received to cover the costs of maintenance, study or training of a student or a person in training who is, or was immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the State mentioned above in the first place for the sole purpose of continuing his studies or training, may not be subject to taxation in that State provided that they come from sources outside that State.
Article 21. Teachers.
1. A natural or 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 non-profit school, university or other similar higher education institution, remains in that other State for a period not exceeding two years from the date of his first arrival in that State, for the sole purpose of carrying out education or research, or both, in such educational institutions, shall be exempt from taxation in that other State in respect of remuneration received on the basis of such education or research.
2. The provisions of paragraph 1 of this Article shall not apply to remuneration for research work if such work is not carried out in the general interest, but mainly for the private benefit of a particular person or persons.
Article 22. Other income.
1. The income of a resident of a Contracting State, whatever its source, which is of a nature, or comes from sources, not referred to in other 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, carries out an entrepreneurial 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 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.
CHAPTER IV
Imposition of assets
Article 23. Capital.
1. Property constituted by immovable property covered by Article 6 owned by a resident of one Contracting State and situated in the other Contracting State may be taxed in that other State.
2. Property consisting 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 of movable property belonging to a fixed basis which a resident of one Contracting State has in the other Contracting State for the provision of independent personal services, may be subject to taxation in that other State.
3. Assets made up of ships or aircraft operated in international traffic, as well as movable property affected by the operation of such vessels or aircraft, may be taxed only in the Contracting State in which the place of effective management of the undertaking is situated.
4. All other assets of a resident of a Contracting State may be subject to taxation only in that State.
CHAPTER V
Methods for elimination of double taxation
Article 24. Elimination of double taxation.
1. In the case of a resident of Cuba, double taxation shall be avoided, in accordance with the applicable provisions of Cuban law, as follows:
Where a resident of Cuba obtains income or possesses assets which, under the provisions of this Agreement, may be taxed in Spain, Cuba shall allow the deduction of income tax or property tax of that resident from an amount equal to the tax actually paid in Spain.
However, such deduction may not exceed the part of the income or property tax, calculated before the deduction, corresponding to the income or assets that may be taxed in Spain.
2. In the case of a resident of Spain, double taxation shall be avoided, in accordance with the applicable provisions of Spanish law, as follows:
(a) Where a resident of Spain obtains income or possesses assets that, under the provisions of this Convention, may be taxed in Cuba, Spain shall allow the deduction of income tax or property tax of that resident from an amount equal to the tax actually paid in Cuba.
However, such deduction may not exceed the part of the income or property tax, calculated before the deduction, corresponding to the income or assets that may be taxed in Cuba.
(b) In the case of dividends paid by a company resident in Cuba to a company resident in Spain that owns directly at least 25 per cent of the capital of the company paying the dividends, or the percentage established by Spanish domestic legislation, if less, for the determination of the deduction, in addition to the amount deductible under point (a) of this paragraph, account shall be taken of the tax actually paid by the company mentioned above in respect of the profits from which the dividends are paid, in the amount corresponding to such dividends, provided that such amount is included, for this purpose, in the taxable base of the company receiving them.
Such deduction, together with the deduction applicable to dividends pursuant to point (a) of this paragraph, may not exceed the part of the income tax, calculated before deduction, corresponding to the income subject to taxation in the Contracting State of the company paying dividends.
In order to apply the provisions of this subparagraph, the shareholding in the paying company of dividends shall be maintained continuously during the year preceding the day on which the dividends to be distributed are due.
3. Where, in accordance with any provision of this Convention, the income obtained by a resident of a Contracting State or the property held by him is exempt from taxation in that State, that State may, however, take into account the income or wealth exempted for the purpose of calculating the amount of the tax on the rest of the income or property of that resident.
4. Where a resident of Spain obtains income from those referred to in articles 7, 10, 11 and 12 of this Agreement which, in accordance with the provisions of this Agreement, may be subject to taxation in Cuba, Spain shall allow the deduction of the tax quota, as a tax credit, from the amount that should have been paid in Cuba for a similar tax period in the same fiscal period if no exemptions, bonuses, deductions or other forms of relief or reduction have been granted for a certain period in accordance with Cuban legislation in force in the field of taxation for the promotion of foreign investment and for the purposes of economic development.
CHAPTER VI
Special provisions
Article 25. Non-discrimination.
1. Nationals of one Contracting State shall not be subject in the other Contracting State to any taxes or obligations relating thereto which are not or are more burdensome than those to which nationals of that other State who are under the same conditions, in particular with regard to residence, are or may be subject.
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. This provision may not be interpreted as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, reliefs or 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(7) or Article 12(6) apply, interest, royalties or 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 first.
4. Undertakings of a Contracting State whose capital is, in whole or in part, held 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 not or is more burdensome than those to which other similar undertakings of the State referred to in the first instance are or may be subject.
5. Notwithstanding the provisions of Article 2, the provisions of this Article shall apply to all taxes, whatever their nature or name.
Article 26. Mutual agreement procedure.
1. Where a person considers that the measures taken by one or both Contracting States imply or may entail for him an imposition 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 25(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. The agreement applies irrespective of the time limits laid down by the national law of the Contracting States.
3. The competent authorities of the Contracting States shall endeavour to resolve difficulties or to dispel doubts arising from the interpretation or application of the Convention by means of an amicable agreement. They may also agree to try to avoid double taxation in cases not covered by the Convention.
4. The competent authorities of the Contracting States may communicate directly in order to reach agreement within the meaning of the preceding paragraphs of this Article. Where it is considered that such an agreement may be facilitated by personal contacts, the exchange of views may take place within a committee composed of representatives of the competent authorities of the Contracting States.
Article 27. Exchange of information.
1. The competent authorities of the Contracting States shall exchange the information necessary to implement the provisions of this Convention, or of the 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 shall not be 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 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) To 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 trade, industrial or professional secrets, or commercial procedures or information whose communication is contrary to public policy.
Article 28. Diplomatic agents and consular officials.
The provisions of this Convention do not affect the tax privileges enjoyed by diplomatic agents or consular officials in accordance with the general principles of international law or under special agreements.
CHAPTER VII
Final provisions
Article 29. Entry into force.
1. The Governments of the Contracting States shall notify each other that the respective constitutional formalities for the entry into force of this Convention have been fulfilled.
2. This Convention shall enter into force on thirty (30) calendar days after the date of the last of the notifications referred to in paragraph 1 and its provisions shall apply to taxes due from 1 January of the calendar year following the entry into force of the Convention.
Article 30. Termination.
The Convention shall remain in force until it is denounced by one of the Contracting States.
Any Contracting State may denounce the Convention by diplomatic means, notifying it in writing at least six months before the end of any calendar year, after five years from the date of its entry into force. In such a case, the Convention shall cease to have effect in respect of taxes payable from 1 January of the calendar year following the year in which the denunciation is communicated.
In faith, the signatories, duly authorized for this purpose by their respective Governments, have signed this Convention.
Done in duplicate in Madrid on 3 February 1999, in the Spanish language, both texts being equally authentic.
BY THE GOVERNMENT
THE KINGDOM OF SPAIN,
‘a.r.’
BY THE GOVERNMENT
OF THE REPUBLIC OF CUBA,
‘a.r.’
Rodrigo de Rato y Figaredo
Vice-President 2nd and Minister
of Economics and Finance
Carlos Lage Dávila
Vice-President of the Council
State
PROTOCOL
At the time of signing the Convention between the Kingdom of Spain and the Republic of Cuba to Prevent Double Taxation and Tax Evasion in Income and Property Taxes, the signatories have agreed on the following provisions which form an integral part of the Convention:
1. In relation to the provisions of this Convention:
(a) In the case of Cuba, the term “political subdivisions or local entities” shall be understood to mean the provinces and municipalities, as defined in the Cuban Constitution adopted on 24 February 1976 and amended on 12 July 1992, as well as other divisions that may be established by law.
(b) In the case of Spain, the term ‘political sub-divisions’ shall be understood to refer to ‘autonomous communities’; and the term ‘local entities’ refers to ‘local entities’, as defined in the Spanish Constitution of 27 December 1978 and the applicable legislation.
2. With regard to article 4, paragraph 1, in the case of Cuba, for natural persons, the term "resident of Cuba" shall be understood to mean any natural person who possesses Cuban citizenship in accordance with its laws and is a permanent resident in the national territory.
3. In relation to Article 10(3), the term ‘dividends’ shall be understood to include the liquidation profits of a company.
4. By way of derogation from Article 12(2), royalties or royalties paid for the transfer of use of containers or bareboat ships or aircraft operated in international traffic may only be taxed in the State of residence of the beneficial owner.
5. With regard to article 24, paragraph 4, the term “Cuban legislation” refers to:
The fifth final provision (a) of the Tax System Act No. 73 of 4 August 1994; Articles 38, 39 and 43 and the first transitional provision of Act No. 77, Foreign Investment Act of 5 September 1995; Articles 35 (1-2), 36 and 37 (1-2) of Decree-Law No. 165 of the Free Trade Zones and Industrial Parks of 3 June 1996.
The competent authorities of the Contracting States may, by mutual agreement, provide that any amendments made to Cuban legislation, referred to above, fall within the scope of Article 24(4) of this Convention, provided that they are similar in nature to that provided for in the aforementioned Cuban legislation and do not prejudice the general principle set out in Article 24(4).
If Cuba subsequently concludes a Convention with a third State, incorporating a clause similar to that provided for in article 24, paragraph 4, which includes a time limit of application or which contains conditions less favourable to Cuba (including the non-existence of such a clause), it shall immediately inform the Kingdom of Spain in writing through diplomatic channels and shall enter into negotiations with it, in order to provide for the same treatment for the Kingdom of Spain as that which has been provided for that third State.
6. In relation to Article 25, the provisions of the Convention shall be understood as not impeding the application by a Contracting State of its domestic rules on undercapitalisation or excessive indebtedness.
7. With regard to Article 27 (1), the information obtained may not be used for any other purpose, unless expressly authorized by the competent authority of the contracting State providing it.
The information may be used only in the territories of the Contracting States. If it is necessary to use the information during public hearings, in courts or in court judgements, the competent authorities of the Contracting State which sent it shall be informed of this fact, if the competent authority of the Contracting State which requested it is aware of this fact.
8. The tax reductions or exemptions provided for in the Convention in respect of dividends, interest, royalties and capital gains shall not apply where such income is obtained in one Contracting State by a company resident in the other Contracting State in whose capital they participate, directly or indirectly, in more than 50 per 100 non-resident members of that other State. The provisions of this number shall not apply where such company engages in substantive commercial or industrial activities other than the simple management of securities or other assets in the Contracting State of which it is resident.
9. Without prejudice to paragraph 8, in relation to the provisions of this Convention, the competent authorities of the Contracting States may, by mutual agreement, not grant the benefits provided for in this Convention, including those provided for in article 24, paragraph 4, to a particular person or transaction where those authorities consider that in certain circumstances the purpose of that person or transaction is primarily to derive benefits from the provisions of this Convention.
In faith, the signatories, duly authorized for this purpose by their respective Governments, have signed this Protocol.
Done in duplicate in Madrid on 3 February 1999, in the Spanish language, both texts being equally authentic.
THE KINGDOM OF SPAIN,
‘a.r.’
BY THE GOVERNMENT
OF THE REPUBLIC OF CUBA,
‘a.r.’
Rodrigo de Rato y Figaredo
Vice-President 2nd and Minister
of Economics and Finance
Carlos Lage Dávila
Vice-President of the Council
State
NOTE SIGNED
His Excellency the Minister,
I have the honour to address V. E. to refer to the Convention between the Kingdom of Spain and the Republic of Cuba to Prevent Double Taxation and Tax Evasion in Tax on Income and on Heritage, signed "ad referendum" in Madrid on 3 February 1999.
In connection with the said Convention, and after its signature, two omissions have been observed in the text, which have been the subject of discussions between the Spanish and Cuban tax authorities, and a pre-agreement has been reached between them to resolve these omissions.
To this end, I have the honour to propose to the Republic of Cuba, on behalf of the Kingdom of Spain, the following two points for incorporation into the text of the Convention, forming an integral part of it:
(1) In Article 2(3)(b) of the Convention, which contains the Spanish tax statement to which it applies, the following new tax is added:
‘V) Non-Resident Income Tax;’
2. a new point 10 is added to the Protocol as follows:
‘With regard to Article 27, where a resident of Spain obtains income which, in accordance with Article 24(4), may benefit in Spain from the deduction scheme provided for therein, Cuba shall periodically inform the Spanish competent authority of this fact, in order to ascertain the person or entity entitled to its application and the income concerned. That periodicity may be quarterly, semi-annually or annually, at the choice of the Cuban tax authorities.’
Yes, V. E. agrees, this signed note and that V. E. Please send me in response to this will form an integral part of the Reference Convention and will enter into force at the same time as this Convention.
I take this opportunity to reiterate V. E. the testimony of my highest consideration.
Havana, November 9, 1999.-The Ambassador of Spain, a. r., Eduardo Junco Bonet.
His Excellency the Minister for Foreign Affairs. Havana.
Havana, 30 December 1999.
H.E. Sir. Ambassador,
I am pleased to refer to your careful note signed No. 472 dated 9 November 1999, which I transcribe as follows:
‘Excuse me, Minister:
I have the honour to address V. E. to refer to the Convention between the Kingdom of Spain and the Republic of Cuba to Prevent Double Taxation and Tax Evasion in Tax on Income and on Heritage, signed "ad referendum" in Madrid on 3 February 1999.
In connection with the said Convention, and after its signature, two omissions have been observed in the text, which have been the subject of discussions between the Spanish and Cuban tax authorities, and a pre-agreement has been reached between them to resolve these omissions.
To this end, I have the honour to propose to the Republic of Cuba, on behalf of the Kingdom of Spain, the following two points for incorporation into the text of the Convention, forming an integral part of it:
H.E. Sir. Eduardo Junco Bonet Ambassador of Spain to Cuba Havana.
(1) In Article 2(3)(b) of the Convention, which contains the Spanish tax statement to which it applies, the following new tax is added:
‘V) non-resident income tax;’
2. a new point 10 is added to the Protocol as follows:
‘With regard to Article 27, where a resident of Spain obtains income which, in accordance with Article 24(4), may benefit in Spain from the deduction scheme provided for therein, Cuba shall periodically inform the Spanish competent authority of this fact, in order to ascertain the person or entity entitled to its application and the income concerned. This periodicity may be quarterly, semi-annually or annually, at the choice of the Cuban Fiscal Authorities.
Yes, V. E. agrees, this signed note and that V. E. kindly send me in response to this will form an integral part of the Reference Convention and will enter into force at the same time as this Convention.
I take this opportunity to reiterate V. E. the testimony of my highest consideration."
In that regard, I have the honour to express to you the agreement of the Government of the Republic of Cuba with the above-described proposal, which, together with this proposal, will form an integral part of the above-mentioned Convention and will enter into force at the same time as this Convention.
The occasion is propitious to renew to him the testimony of my highest consideration.-Felipe Pérez Roque."
These Conventions and Exchange of Letters enter into force on 31 December 2000, 30 days after the date of the last cross-notification between the Parties by reporting compliance with the respective constitutional formalities, as provided for in Article 29 of the Convention and in the text of the Notes.
What is made public for general knowledge.
Madrid, December 22, 2000. – Technical Secretary General Julio Núñez Montesinos.