CONVENTION BETWEEN THE KINGDOM OF SPAIN AND THE REPUBLIC OF CHILE TO AVOID DOUBLE IMPOSITION AND PREVENT TAX EVASION ON RENT AND PATRIMONY TAX
The Kingdom of Spain and the Republic of Chile, 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. Persons covered.
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, irrespective of the system of levying.
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 Spain:
(i) Personal Income Tax;
(ii) corporation tax;
(iii) Non-Resident Income Tax;
(iv) Property Tax;
(b) in Chile:
The taxes set out in the Income Tax Act.
4. The Convention shall also apply to taxes of an identical or substantially analogous nature and property taxes 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 substantial changes made to their respective tax laws at the end of each year.
CHAPTER II
Definitions
Article 3. General definitions.
1. For the purposes of this Convention, unless the context of the Convention is different:
(a) 'Spain' means the territory of the Kingdom of Spain, including areas outside its territorial sea in which, under international law and under its domestic law, the Kingdom of Spain exercises jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources;
(b) the term ‘Chile’ means the territory of the Republic of Chile, including areas outside its territorial sea in which, under international law and under its domestic law, the Republic of Chile exercises jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources;
(c) the words ‘one Contracting State’ and ‘the other Contracting State’ mean Spain or Chile, depending on the context;
(d) the term ‘person’ includes natural or natural persons, companies and any other grouping of persons;
(e) the term 'company' means any legal person or any entity which 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 ‘activity’, relating to an undertaking, and the term ‘business’ include the provision of professional services, as well as any other activity of an independent nature;
(h) 'international traffic' means any transport by a ship or aircraft operated by an undertaking of a Contracting State, except where such transport takes place exclusively between points situated in the other Contracting State;
(i) the expression ‘competent authority’ means:
(i) in Spain, the Minister of Finance or his authorized representative;
(ii) in Chile, the Minister of Finance or his authorized representative;
(j) the term 'national' means:
(i) A natural or natural person possessing the nationality of a Contracting State;
(ii) a legal person or association incorporated under the law in force in a Contracting State.
2. For the application of the Convention by a Contracting State, at any given time, any term or expression 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, seat of address, place of incorporation or any other criterion of a similar nature, and also includes the State itself and any political subdivision or local entity. 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 or her situation shall be resolved as follows:
(a) Such person shall be considered a resident only of the State where he or she has permanent housing at his or her disposal; if he or she has permanent housing at his or her disposal in both States, he or she shall be considered a resident only 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 only of the State in which he or she habitually lives;
(c) If he habitually lives in both States or does not live in either State, he or she shall be considered a resident only of the State of which he or she is a national;
(d) if he or she is a national of either State or is not a national of either State, the competent authorities of the Contracting States shall settle the case through mutual agreement procedure.
3. Where under the provisions of paragraph 1 a person, other than a natural or natural person, is a resident of both Contracting States, Contracting States shall endeavour, through mutual agreement procedure, to resolve the case. In the absence of an agreement between the competent authorities of the Contracting States, that person shall not be entitled to any of the tax benefits or exemptions provided for by this Convention.
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; and
(f) Mines, oil or gas wells, quarries or any other place in connection with the exploration or exploitation of natural resources.
3. The expression ‘permanent establishment’ also includes:
(a) a construction, installation or assembly work or project and related monitoring activities, but only where such work, construction project or activity lasts longer than six months;
(b) the provision of services by an enterprise, including consulting services, through employees or other natural or natural persons entrusted by the enterprise for that purpose in the event that such activities continue in a Contracting State for a period or periods totalling more than 183 days, within a period of any twelve months;
(c) the provision of professional services or other activities of an independent nature in a Contracting State by a natural person, if that person remains in that Contracting State for a total period or periods exceeding 183 days, for any period of twelve months.
For the purpose of calculating the time limits referred to in this paragraph, the activities carried out by an undertaking associated with another undertaking within the meaning of Article 9 shall be added to the period during which the activities are carried out by the undertaking with which it is associated, if the activities of the two undertakings are identical or substantially similar.
4. Notwithstanding the previous 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 buying goods or goods, or collecting information, for the enterprise;
(e) the maintenance of a fixed place of business for the sole purpose of advertising, providing information or carrying out scientific research for the undertaking, and any other similar activity having a preparatory or auxiliary character.
5. Notwithstanding paragraphs 1 and 2 where a person, other than an independent agent to which paragraph 6 applies, acts on behalf of an undertaking and has and exercises habitually 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 any of the activities carried out by that person for the undertaking, unless the activities of that person are limited to those referred to in paragraph 4 and if carried out through a fixed place of business, that fixed place of business would not have been regarded as a permanent establishment in accordance with the provisions of that paragraph.
6. An enterprise is not considered to have a permanent establishment in a Contracting State on the sole ground that 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, and that in their commercial or financial relations with such undertakings no accepted or imposed conditions other than those generally agreed upon by independent agents are agreed or imposed.
7. 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 by itself render any of these companies permanent establishment of the other State.
CHAPTER III
Income taxation
Article 6. Real estate income.
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. For the purposes of this Convention, 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, the term includes property attached to immovable property, livestock and equipment used on agricultural and forestry holdings, the rights to which the general or private law provisions relating to real estate apply, the use of immovable property and the right to variable or fixed payments for the exploitation or concession of the exploitation of mineral deposits, sources and other natural resources. Ships and aircraft shall not be considered as immovable property.
3. The provisions of paragraph 1 apply to income derived from the direct use, lease or shareholding, as well as from any other form of exploitation of immovable property.
4. The provisions of paragraphs 1 and 3 also apply to income derived from the real estate of an enterprise.
Article 7. Business profits.
1. The profits of an enterprise of one Contracting State may be taxed only in that State, unless the enterprise carries out its business in the other Contracting State through a permanent establishment located therein. If the undertaking carries out or has carried out its business in such a way, the profits of the undertaking may be taxed in the other State, but only to the extent that they can be attributed to that permanent establishment.
2. Subject to paragraph 3, where an enterprise of one Contracting State carries out its business in the other Contracting State through a permanent establishment situated therein, in each Contracting State, the profits it would have obtained from being a separate and separate undertaking carrying out the same or similar activities under the same or similar conditions shall be attributed to that permanent establishment and dealt entirely independently with the enterprise of 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 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. 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 benefit attributable to the permanent establishment shall be determined each year by the same method, unless there are valid and sufficient grounds for proceeding otherwise.
6. Where the benefit includes 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. The profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic can only be taxed in that State.
2. For the purposes of this article:
(a) The term ‘benefits’ includes, in particular:
(i) gross revenue derived directly from the operation of ships or aircraft in international traffic; and
(ii) interest on quantities generated directly from the operation of ships or aircraft in international traffic, provided that such interest is inherent in the operation.
(b) The term ‘ship or aircraft operation’ by an undertaking also includes:
(i) Chartering or leasing of bareboat craft or aircraft;
(ii) leasing of containers and related equipment.
Provided that such freight or lease is ancillary to the operation, by that undertaking, of ships or aircraft in international traffic.
3. The provisions of paragraph 1 also apply to profits arising from participation in a pool, in a joint venture or in an international operating agency.
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 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 to be agreed by independent undertakings, the income which would have been obtained by one of the undertakings in the absence of such conditions, and which in fact has not been made because of them, may be included in the profits of that undertaking and may be taxed accordingly.
2. Where a Contracting State includes in the income of an enterprise of that State and consequently imposes the income on which an enterprise of the other State has been taxed in that other Contracting State, and the income thus included is an income which would have been made by the enterprise of the State mentioned first if the terms agreed between the two companies had been those agreed between independent companies, that other State shall, if it agrees, adjust the amount of the tax that has taxed that income. 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 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. 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. However, if the actual beneficiary of the dividends is a resident of the other Contracting State, the tax thus required may not exceed:
(a) 5 per cent of the gross amount of dividends if the beneficial owner is a company that directly or indirectly owns at least 20 per cent of the company's capital that pays the dividends;
(b) 10 per cent of the gross amount of dividends in all other cases.
This paragraph does not affect the company's taxation of profits from which dividends are paid.
The provisions of this paragraph shall not limit the application of the additional tax payable in Chile to the extent that the first-class tax is deductible against the additional tax.
3. The term ‘dividends’ within the meaning of this Article means the returns on shares or other rights, except credit rights, which permit participation in profits, as well as the returns on other social shares or rights subject to the same tax regime as the returns on shares by 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, carries out in the other Contracting State, of which the corporation paying the dividends is resident, a business activity through a permanent establishment located there, and the share generated by the dividends is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 apply.
5. Where a company resident of one Contracting State obtains profits or income from the other Contracting State, that other State may not levy 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 located in that other State, or subject the undistributed profits of the company to a tax on them, even if the dividends paid or profits not distributed consist, in whole or in part, of profits or income from that other State.
6. The provisions of this Agreement shall not affect the taxation in Chile of a resident of Spain in respect of profits attributable to a permanent establishment located in Chile, both in respect of the first-class tax and in respect of the additional tax, provided that the first-class tax is deductible against the additional tax.
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 beneficial owner is a resident of the other Contracting State, the tax thus required may not exceed:
(a) 5 per cent of the gross amount of interest derived from:
(i) Loans from banks and insurance companies;
(ii) Bonds and securities that are regular and substantially traded on a recognized stock exchange;
(iii) The sale on credit granted to the buyer of machinery and equipment by the beneficial owner who is the seller of the machinery and equipment;
(b) 15 per cent of the gross amount of interest in all other cases.
3. The term ‘interest’ within the meaning of this Article means the return on credit of any kind, with or without mortgage guarantee, in particular the return on public securities and the return on bonds or bonds, as well as any other income subject to the same tax regime as the return on capital provided by the legislation of the State from which the income originates. However, the term ‘interest’ does not include income covered by Article 10.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the interest, resident of one Contracting State, undertakes in the other Contracting State, from which the interest derives, a business activity through a permanent establishment located in that other State, and the credit generated by the interest is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 shall apply.
5. Interest is considered to come from a Contracting State when the debtor is resident in that State. However, where the debtor of interest, whether or not resident of a Contracting State, has a permanent establishment in a Contracting State in respect of which the debt giving rise to the payment of interest is incurred and the burden of interest borne by the permanent establishment, interest shall be deemed to have come from the Contracting State where the permanent establishment is located.
6. Where, for reasons of special relations between the debtor and the beneficial owner, or between them and third parties, the amount of interest exceeds, for any reason, that agreed between 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 amount may be subject to taxation in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 12. Royalties.
1. 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, these 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 beneficial owner is a resident of the other Contracting State, the tax thus required may not exceed:
(a) 5 per cent of the gross amount of such royalties or royalties paid for the use or right to use industrial, commercial or scientific equipment;
(b) 10 per cent of the gross amount of such royalties or royalties in all other cases.
3. The terms ‘royalties’ or ‘gifts’ used in this article mean the quantities of any kind paid for the use, or right to use, of copyrights on literary, artistic or scientific works, including film or film, tapes and other means of reproduction of the image and sound, patents, trademarks or trade marks, designs, plans, formulas or secret procedures or other intangible property, for information relating to industrial, commercial or scientific experiences or for the use or right to use, industrial, commercial or scientific equipment.
4. The provisions of paragraphs 1 and 2 of this article 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 in that other State, and the right or for which the royalties or royalties are paid is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 shall apply.
5. Royalties or royalties shall be deemed to come from a Contracting State where the debtor is a resident of that State. However, where the person who pays the royalties or royalties, whether or not he or she is a resident of a Contracting State, has in a Contracting State an establishment in respect of which the obligation to pay the royalties or royalties has been incurred and which bears the burden thereof, such royalties or royalties shall be deemed to have come from the Contracting State in which the permanent establishment is situated.
6. Where, by reason of the special relations between the debtor and the beneficial owner, or of which both have with third parties, the amount of the royalties or royalties, in view of the use, right or information 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 shall apply only to the latter amount. In such a case, the excess amount may be subject to taxation in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 13. Capital gains.
1. The 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 subject to taxation in the latter State.
2. Gains from the disposal of movable property forming part of the assets of a permanent establishment held by an enterprise of one Contracting State in the other Contracting State, including gains from the disposal of that permanent establishment (only or with the enterprise of which it is a part), may be taxed in that other Contracting 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 subject to taxation only in the Contracting State where the alienator resides.
4. Profits that a resident of a Contracting State obtains from the disposition of shares or other rights representing the capital of a company resident of the other Contracting State may be taxed in that other Contracting State if:
(a) They come from the disposal of shares whose value is derived directly or indirectly from more than 50 per cent of immovable property located in the other Contracting State; or
(b) the recipient of the gain has held, at any time within the twelve-month period preceding the alienation, directly or indirectly, shares or other rights consisting of 20 per cent or more of the capital of that company.
Any other gain obtained by a resident of a Contracting State for the disposal of shares or other rights representing the capital of a corporation resident in the other Contracting State may also be taxed in that other Contracting State, but the tax thus required may not exceed 16 per cent of the amount of the gain.
Notwithstanding any other provision of this paragraph, capital gains earned by a pension fund that is resident in a Contracting State arising from the disposition of shares or other rights representing the capital of a corporation that is resident in the other Contracting State shall be taxed only in the Contracting State mentioned first.
5. Profits arising from the disposal of any property other than those referred to in the preceding paragraphs of this article may be subject to taxation only in the Contracting State in which the alienator resides.
Article 14. Income from dependent work.
1. Without prejudice to articles 15, 17 and 18, salaries, wages and other remuneration obtained by a resident of a Contracting State on account of employment may be imposed in that State only unless the employment is exercised in the other Contracting State. If the employment is thus exercised, the remuneration derived therefrom may be subject to taxation in that other State.
2. Notwithstanding the provisions of paragraph 1, remunerations obtained by a resident of a Contracting State on the basis of employment in the other Contracting State may be subject to taxation only in the State referred to in the first instance if:
(a) The recipient remains in the other State for a period or periods of not more than 183 days together in any twelve-month period beginning or ending in the fiscal year concerned; and
(b) remuneration is paid by or on behalf of a person as an employer who is not a resident of the other State; and
(c) Remuneration is not borne by a permanent establishment held by that employer in the other State.
3. Notwithstanding the preceding provisions of this article, remunerations earned on account of 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 15. Directors’ fees.
Shareholdings and other similar remunerations which a resident of a Contracting State obtains as a member of a Board of Directors of a company resident of the other Contracting State may be taxed in that other State.
Article 16. Entertainers and sportspersons.
1. Notwithstanding the provisions of articles 7 and 14, any income which a resident of a Contracting State obtains from the exercise of his personal activities in the other Contracting State as an artist of the spectacle, such as theatre, cinema, radio or television, or musician, or as an athlete, may be subject to taxation in that other State.
2. Notwithstanding the provisions of Articles 7 and 14, where the income derived from the personal activities of the performers or sportsmen, in that capacity, is not received by the performer himself or by a third party, such income may be taxed in the Contracting State in which the activities of the performer or sportsperson are carried out.
Article 17. Pensions and food.
1. Pensions paid to a resident of the other Contracting State may be taxed only in that State.
2. Maintenance and other maintenance payments paid to a resident of a Contracting State shall be subject to taxation only in that State. However, maintenance and other maintenance payments paid by a resident of one Contracting State to a resident of the other Contracting State, if not deductible for the payer, shall not be subject to taxation in the Contracting State of the person receiving the income.
Article 18. Government service.
1. (a) Salaries, wages and other remunerations, excluding pensions, paid by a Contracting State or by 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 salaries, salaries and other 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. Articles 14, 15 and 16 apply to salaries, salaries and other remunerations paid for services rendered in the context of an enterprise carried out by a Contracting State or by one of its political subdivisions or local authorities.
Article 19. Students.
The amounts received to cover the costs of maintenance, study or practical training by a student, apprentice or a person in practice who is, or was, immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the State mentioned first for the sole purpose of continuing his studies or practical training, may not be subject to taxation in that State provided that they come from sources outside that State.
Article 20. Other income.
1. The income of a resident of a Contracting State, whatever its source, not referred to in the previous articles of this Convention, may be taxed only in that State.
2. Paragraph 1 does not apply to income, other than income derived from immovable property as defined in article 6, paragraph 2, where the recipient of such income, resident of one Contracting State, carries out in the other Contracting State a business activity through a permanent establishment situated in that other State, and the right or for which the income is paid is effectively linked to such a permanent establishment. In such a case, the provisions of Article 7 apply.
3. Notwithstanding paragraphs 1 and 2, the income of a resident of one Contracting State, not mentioned in the previous articles of this Convention and from the other Contracting State, may also be taxed in that other State.
CHAPTER IV
Imposition of assets
Article 21. Capital.
1. Property consisting of immovable property, which has a resident of one Contracting State and is situated in the other Contracting State, may be subject to taxation in that other State.
2. Property consisting of movable property forming part of the assets of a permanent establishment held by an enterprise of one Contracting State in the other Contracting State may be taxed in that other Contracting State.
3. Property constituted by ships or aircraft operated in international traffic, as well as movable property affected by the operation of such ships or aircraft, may be taxed only in the Contracting State of which the undertaking operating such vessels or aircraft is resident.
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 22. Elimination of double taxation.
1. In Spain, double taxation will be avoided as follows:
(a) Where a resident of Spain obtains income or possesses assets which, in accordance with the provisions of this Convention, may be taxed in Chile, Spain shall, in accordance with the applicable provisions of Spanish law, permit:
(i) The deduction of the income tax actually paid by that resident in an amount equal to the income tax paid in Chile, if any, net of the First Category Tax;
(ii) the deduction of the property tax of that resident in the amount equal to the tax paid in Chile on those assets;
(iii) the deduction of income tax actually paid by a company which distributes dividends corresponding to the profits from which such dividends are paid (First Category Tax).
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 Chile.
(b) 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.
2. In Chile, double taxation will be avoided as follows:
(a) Persons resident in Chile who obtain income that, in accordance with the provisions of this Agreement, may be taxed in Spain, may prove against Chilean taxes corresponding to such income the taxes applied in Spain, in accordance with the applicable provisions of Chilean law. This paragraph shall apply to all income covered by this Agreement.
(b) Where, in accordance with any provision of this Convention, income obtained by a resident of Chile or the property held by him or her is exempt from taxation in Chile, Chile may, however, take into account the income or wealth exempted for the purpose of calculating the amount of the tax on the other income or property of that resident.
CHAPTER VI
Special provisions
Article 23. Non-discrimination.
1. Nationals of one Contracting State shall not be subject in the other Contracting State to any imposition or obligation relating thereto which is not or is 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 enterprise of one Contracting State in the other Contracting State shall not be subject to a less favourable taxation in that State 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 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, paragraph 1, of article 11, paragraph 6, or article 12, paragraph 6, apply, interest, royalties or other expenses paid by an enterprise of one Contracting State to a resident of the other Contracting State shall be deductible to determine the profits subject to taxation of that enterprise under the same conditions as if they had been paid to a resident of the State referred to first. Similarly, the debts of an enterprise of one Contracting State to a resident of the other Contracting State shall be deductible for the determination of the assets subject to taxation of that enterprise under the same conditions as if they had been contracted with a resident of the State referred to first.
4. Companies which are residents of a Contracting State and whose capital is, in whole or in part, 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 taxation or obligation relating thereto which is not required or more burdensome than those to which similar companies of the State referred to in the first instance are or may be subject.
5. In this Article, the term taxation refers to the taxes which are the subject of this Convention.
Article 24. Mutual agreement procedure.
1. Where a person considers that the measures taken by one or both Contracting States imply or may entail an imposition for him that is not in conformity with the provisions of this Convention, irrespective of the remedies provided for by the domestic law of those States, he may submit his case to the competent authority of the Contracting State of which he is resident or, if article 23, paragraph 1, to that of the Contracting State of which he is a national. The case must arise 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 itself able to reach 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 this Convention.
3. The competent authorities of the Contracting States shall endeavour to resolve any difficulties or doubts arising from the interpretation or application of the Convention by means of an amicable agreement.
4. The competent authorities of the Contracting States may communicate directly in order to reach agreement within the meaning of the preceding paragraphs. In order to reach agreement within the meaning of the preceding paragraphs, the competent authorities of the Contracting States may communicate directly, including within a Joint Committee composed of themselves or their representatives.
Article 25. Exchange of information.
1. The competent authorities of the Contracting States shall exchange the information necessary to implement this Convention or the domestic law of the Contracting States relating to taxes covered by the Convention to the extent that the taxation provided for in the 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 on the basis of the domestic law of that State and shall be communicated only to persons or authorities (including courts and administrative bodies) responsible for the management or collection of taxes covered by the Convention, to declaratory or executive procedures relating to such taxes, or to the resolution of appeals relating thereto. Such persons or authorities shall use this information only for these purposes. They may disclose the information at public court hearings 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 that 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, commercial procedures or information whose communication is contrary to public policy.
3. Where the information is requested by a Contracting State in accordance with this article, the other Contracting State shall obtain the information referred to in the request in the same manner as if it were its own imposition, even if that other State, at that time, does not require such information.
Article 26. Members of diplomatic missions and consular posts.
The provisions of this Convention shall not affect the tax privileges enjoyed by members of diplomatic missions or consular offices in accordance with the general principles of international law or under the provisions of special agreements.
CHAPTER VII
Final provisions
Article 27. Entry into force.
1. Each Government of the Contracting States shall notify the other, through diplomatic channels, that domestic legal procedures for the entry into force of this Convention have been complied with. That Convention shall enter into force on the date of receipt of the last notification.
2. The provisions of the Convention shall apply:
(a) in Chile, with respect to income taxes and amounts paid, paid, made available or charged as expenditure, from the first day of January of the calendar year immediately following the date of entry into force of the Convention; and
(b) in Spain, in respect of income or property taxes for the fiscal year beginning on or after 1 January of the calendar year following the entry into force of the Convention.
3. The existing Convention between Chile and Spain on the avoidance of double taxation on income taxes as regards the taxation of the exercise of air navigation, concluded by means of an exchange of letters on 28 December 1976, is hereby repealed since the provisions of this Convention apply.
Article 28. Termination.
1. This Convention shall remain in force indefinitely, but any Contracting State may, after a period of five years from the date of its entry into force and not later than 30 June of each year, give the other Contracting State a written notice of termination through diplomatic channels.
2. The provisions of the Convention shall cease to have effect:
(a) In Chile, with respect to income taxes and the amounts paid, paid, made available or charged as expenditure, starting on the first day of January of the calendar year immediately following.
(b) in Spain, with regard to income and property taxes for the fiscal year beginning on or after 1 January of the calendar year following that in which the complaint is communicated.
In faith, the signatories, duly authorized to do so, have signed this Convention.
Done in double copy in Madrid on 7 July 2003, both texts being equally authentic.
For the Kingdom of Spain,
For the Republic of Chile,
Cristóbal Montoro Romero,
Minister for Finance
Nicolás Eyzaguirre Guzman,
Minister for Finance
PROTOCOL
At the time of signing the Convention between the Kingdom of Spain and the Republic of Chile to Prevent Double Taxation and Tax Evasion in the Field of Income and Property Taxes, the signatories have agreed on the following provisions which form an integral part of this Convention:
I. This Convention does not apply to ‘Funds for the Investment of Foreign Capital’ governed by Law N.
or
18.657 Chilean or any other substantially similar legislation issued in Chile after the signing of this Convention. The taxation of distributions and remittances of such funds shall be governed by the provisions of the said legislation.
II. For the purposes of Article XXII, paragraph 3, (Consultation) of the General Agreement on Trade in Services, Contracting States agree that, without prejudice to that paragraph, any dispute between them as to whether a measure falls within the scope of that Convention may be brought before the Trade in Services Council in accordance with the provisions of that paragraph, but only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved in accordance with article 24, paragraph 3, or, if it fails to reach agreement under this procedure, in accordance with any other procedure agreed by both Contracting States.
III. Nothing in this Convention will affect the application of the current provisions of the D.L. 600 (Foreign Investment Statute) of Chilean legislation, as they are in force at the date of signature of this Convention and even if they are eventually amended without altering its general principle.
IV. Contributions in one year for services rendered in that year and paid by, or on behalf of, a natural or natural person resident in or temporarily present in a Contracting State to a pension scheme that is recognised for tax purposes in the other Contracting State shall, for a period not exceeding a total of 60 months, be treated in the State referred to first, in the same manner as a contribution paid to a pension system recognized for tax purposes in that State, if:
(a) Such natural or natural person was participating in the pension scheme for a period that had ended immediately before he became a resident of or temporarily present in the State referred to above; and
(b) the competent authorities of the State referred to first agree that the pension scheme generally corresponds to a pension scheme recognised for tax purposes by that State.
For the purposes of this paragraph pension scheme includes the pension scheme established under the social security system of each Contracting State.
V. Considering that the main objective of this Convention is to avoid international double taxation, the Contracting States agree that, in the event that the provisions of the Convention are used in such a way as to confer benefits not contemplated or intended by it, the competent authorities of the Contracting States shall, in accordance with the mutual agreement procedure of Article 24, recommend specific amendments to the Convention. The Contracting States further agree that any such recommendation shall be considered and discussed expeditiously with a view to amending the Convention to the extent necessary.
VI. Ad Article 5.–In relation to natural resource exploration activities, Article 5 (3) (b) is understood to apply to the extent that such services are not carried out by the person to whom the concession of exploration or exploitation has been granted.
VII. Ad. Article 7.– Without prejudice to article 24, paragraph 2, it is understood that the provisions of article 7, paragraph 3, apply only if the expenses can be attributed to the permanent establishment in accordance with the provisions of the tax law of the Contracting State in which the permanent establishment is situated.
VIII. Ad. Article 10, paragraphs 2 and 6.– With regard to the application of the additional tax in accordance with the provisions of Chilean law, it is agreed that if:
(i) First-rate tax ceases to be fully deductible in determining the amount of additional tax payable; or
(ii) the rate of additional tax on a resident of Spain, as defined in Article 4 of this Agreement, exceeds 42 per cent;
Contracting States shall consult each other with a view to amending this Convention with a view to restoring the balance of the benefits thereof.
IX. Ad. Articles 10, 11 and 12.–The provisions of articles 10, 11 and 12 shall not apply if the principal purpose or one of the main purposes of any person connected with the creation or attribution of the right or credit in respect of which dividends, interest or royalties are paid, is to obtain the benefits of those articles by such creation or attribution.
X. Ad. Article 11 (Interests) and Article 12 (royalties or royalties). – It is agreed that, if in any agreement or agreement between Chile and a member State of the Organization for Economic Cooperation and Development that enters into force after the date of entry into force of this Agreement, it is agreed that Chile shall exempt from taxes interest and royalties (whether in general or in respect of any special category of interest or royalties) originating from Chile, or limit the tax rate payable on such interest or royalties (whether in general or in respect of a special category of interest or royalties) at a rate lower than those provided for in article 11, paragraph 2, or in article 12, paragraph 2, of the Convention, such exemption or reduced rate shall automatically apply to interest or royalties originating in Chile whose effective beneficiary is a resident of Spain and to interest or royalties or royalties from Spain whose cash is a resident of Chile under the same conditions as if such exemption or reduced rate had been specified in those paragraphs. The competent authority of Chile shall inform the competent authority of Spain without delay that the conditions for the application of this paragraph have been met.
XI. Ad. Article 13.–In the event that the recipient of the gain referred to in Article 13(4)(b) has held the shares or other rights which are disposed of for a period of more than twelve months and provided that the recipient does not habitually engage in the disposal of shares, the required tax may not exceed 16 per cent of the gain.
In any event, the recipient shall be deemed not to be habitually engaged in the sale of shares where the holding held directly is 50 per cent or more of the capital of the participating company.
XII. In the negotiations, it was found that, with regard to income from a third country entering Chile and then being sent to Spain, in certain cases double taxation is not entirely avoided, even if there is an agreement between the two countries. The contracting parties recognize the difficulties in solving this problem through a bilateral agreement between them and express their intention to continue to analyse it for the sake of a possible solution.
In faith, the signatories, duly authorized to do so, have signed this Protocol.
Done in double copy in Madrid on 7 July 2003, both texts being equally authentic.
For the Kingdom of Spain,
For the Republic of Chile,
Cristóbal Montoro Romero,
Minister for Finance
Nicolás Eyzaguirre Guzman,
Minister for Finance
This Convention entered into force on 23 December 2003, the date of receipt of the last notification of compliance with domestic legal procedures, as set out in its Article 27.1.
What is made public for general knowledge.
Madrid, January 9, 2004. –The Technical Secretary General, Julio Núñez Montesinos.