CONVENTION BETWEEN THE KINGDOM OF SPAIN AND THE DOMINICAN REPUBLIC TO AVOID DOUBLE IMPOSITION AND PREVENT TAX EVASION ON RENT TAX
The Kingdom of Spain and the Dominican Republic, wishing to conclude an agreement to avoid double taxation and prevent tax evasion in the area of income 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 taxes payable by each of the Contracting States, their political subdivisions or their local entities, whatever the system of their levy.
2. Income taxes are those that tax the entire income or any element thereof, including taxes on profits arising from the disposal of movable or immovable property, taxes on the amount of wages or salaries paid by enterprises, as well as taxes on capital gains.
3. The current taxes to which this Convention applies are, in particular:
(a) in Spain:
(i) Personal Income Tax;
(ii) corporation tax;
(iii) the non-resident income tax; and
(iv) local income taxes;
(hereinafter referred to as ‘the Spanish tax’);
(b) In the Dominican Republic:
Income tax;
(hereinafter referred to as ‘Dominican tax’).
4. The Convention shall also apply to taxes of an identical or similar nature which are established after the 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 any amendments made 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 ‘Spain’ means the Kingdom of Spain and, used geographically, means the territory of the Kingdom of Spain, including airspace, its internal waters, its territorial sea and areas outside its territorial sea in which, under international law and under its domestic law, the Kingdom of Spain exercises or may exercise in future jurisdiction or rights of sovereignty over the seabed, its subsoil and superjacent waters, and its natural resources;
(b) the term ‘Dominican Republic’ means the territory of the Dominican Republic, and used geographically, means the territory of the Dominican Republic, which consists of the eastern part of the island of Santo Domingo, its adjacent islands and the natural elements of its marine geomorphology. Its irreducible land limits are set by the 1929 Border Treaty and its 1936 Review Protocol. In addition, it includes the relevant territorial sea, marine soil and subsoil, as well as the contiguous zone, exclusive economic zone and continental shelf; it also contains airspace over the national territory, the electromagnetic spectrum and the space in which it operates, in accordance with its legislation and international law;
(c) the words ‘one Contracting State’ and ‘the other Contracting State’ mean Spain or the Dominican Republic, depending on the context;
(d) the term ‘person’ includes 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 term 'undertaking' applies to the pursuit of any activity or business;
(g) the terms ‘undertaking of a Contracting State’ and ‘undertaking of the other Contracting State’ mean, respectively, an undertaking operated by a resident of a Contracting State and an undertaking operated by a resident of the other Contracting State;
(h) 'international traffic' means any transport carried out by a ship or aircraft operated by a resident of a Contracting State, except where such transport takes place only between points situated in the other Contracting State;
(i) the expression ‘competent authority’ means:
(i) in Spain, the Minister of Economy and Finance or his authorised representative;
(ii) in the Dominican Republic, the Minister of Finance or his authorised representative.
(j) the term 'national' means:
(i) any natural person possessing the nationality of a Contracting State;
(ii) any legal person, company of persons or association constituted in accordance with the law in force in a Contracting State;
(k) the expression ‘activity’ or the term ‘business’ includes the exercise of professional services and the carrying out of other activities of an independent nature.
2. For the purpose of applying the Convention at a time determined by a Contracting State, any term or expression not defined therein shall, unless its context is affected by a different interpretation, have the meaning attributed at that time to it by the law of that State concerning the taxes which are the subject of the Convention, the meaning attributed by the tax law over which it would result from other branches of the law of that State being prevalent.
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, place of incorporation, seat of address or any other criterion of a similar nature, including also that State and its political subdivisions or local entities.
2. Where, under the provisions of paragraph 1, a natural person is resident in both Contracting States, his or her situation shall be resolved as follows:
(a) 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 lives habitually 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 is a national of both States or is not a national of either State, the competent authorities of the Contracting States shall decide the case by mutual agreement.
3. Where under the provisions of paragraph 1 a person other than a natural person is a resident of both Contracting States, the competent authorities shall settle the matter by mutual agreement procedure, taking into account the place of effective management and administration of their economic activity or any relevant economic factors.
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) the head offices;
(b) branches;
(c) Offices;
(d) factories;
(e) workshops; and
(f) mines, oil or gas wells, quarries or any other place of extraction of natural resources.
3. A work or a construction or installation project, including monitoring activities in connection with it, only constitute a permanent establishment if its duration exceeds six months.
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 undertaking, provided that no sales are made from those facilities directly in the Contracting State in which the facilities are located;
(b) the maintenance of a deposit of goods or goods belonging to the undertaking for the sole purpose of storing, displaying or delivering them, provided that no sales are made directly from that deposit in the Contracting State in which the deposit is situated;
(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 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.
5. By way of derogation from 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 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 they have been carried out through a fixed place of business, they have not determined the consideration of that fixed place of business as a permanent establishment in accordance with the provisions of that paragraph.
6. An undertaking 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. However, where the activities of such agents are carried out exclusively, or almost exclusively, on behalf of that undertaking, and the conditions accepted or imposed between that undertaking and the agent in its commercial and financial relations differ from those which would be given between independent undertakings, that agent shall not be considered an independent agent in accordance with the meaning of this paragraph.
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 make any of these companies 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 property attached to immovable property, livestock and equipment used on agricultural and forestry holdings, the rights to which private law provisions relating to real estate apply, the use of immovable property and the right to receive fixed or variable payments in exchange for exploitation, or the granting of exploitation, of mineral deposits, sources and other natural resources. Ships, vessels and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 apply to income derived from direct use, lease and 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.
5. Where the participation, directly or indirectly, in the capital or assets of a company or other entity confers on its owner the enjoyment in any form, direct use, lease or any other form of use of immovable property held by the company or entity, the income derived from such enjoyment, direct use, lease or any other form of use of such rights may be taxed in the Contracting State in which the immovable property is situated.
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 therein. If the undertaking does so, the profits of the undertaking may be taxed in the other State, but only to the extent that they are attributable to that permanent establishment.
2. Without prejudice to the provisions of paragraph 3, where an undertaking of one Contracting State carries out its activity in the other Contracting State through a permanent establishment situated therein, in each Contracting State the profits which it would have obtained from being a separate and separate undertaking carrying out identical or similar activities under identical or similar conditions and dealing entirely independently with the undertaking from which it is a permanent establishment shall be attributed to that 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. As long as it is customary in a Contracting State to determine the 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 the taxable profits in this 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 profits shall be attributed to a permanent establishment by reason of the mere purchase of goods or goods by that permanent establishment for the enterprise.
6. For the purposes of the preceding paragraphs, the profits attributable to the permanent establishment shall be determined 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 obtained by an undertaking of a Contracting State from operating ships or aircraft in international traffic may be taxed in that State.
2. Without prejudice to the provisions of paragraph 1, profits from sources located in a Contracting State obtained by an undertaking of the other Contracting State from the operation of ships or aircraft in international traffic may be taxed in the State mentioned above, but the tax thus required may not exceed the lesser of the following two amounts:
2.5 per cent of gross income obtained from sources located in that State; and
– The lowest rate recognised in an agreement or agreement with a third State on such benefits.
3. The provisions of paragraphs 1 and 2 also apply to profits from participation in a pool, on a joint holding or in an international operating body.
Article 9. Associated enterprises.
1. When
(a) an undertaking of a Contracting State participates directly or indirectly in the direction, control or capital of an undertaking of the other Contracting State; or
(b) the same persons participate directly or indirectly in the direction, control or capital of an undertaking of a Contracting State and of an undertaking of the other Contracting State,
and in either case the two undertakings are, in their commercial or financial relations, bound by accepted or imposed conditions which differ from those which would be agreed by independent undertakings, the profits which would have been obtained by one of the undertakings in the absence of such conditions, and which in fact have 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 profits of an enterprise of that State - and consequently subjects to taxation - the profits on which an enterprise of the other State has been taxed in that other Contracting State, and that other State recognizes that the profits thus included are profits that would have been realized by the enterprise of the State concerned in the first place if the terms agreed between the two companies had been those agreed between independent companies, that other State shall make the adjustment that would result in the amount of the tax that has taxed those profits. In determining such adjustment, account shall be taken of the other provisions of this Convention and the competent authorities of the Contracting States shall be consulted where necessary.
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 subject to taxation in the Contracting State in which the company paying the dividends resides and in accordance with the law of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax thus required may not exceed 10 per cent of the gross amount of the dividends.
The first subparagraph of this subparagraph shall not apply if the beneficial owner is a company (excluding companies of persons) holding directly at least 75 per cent of the capital of the company paying the dividends.
This paragraph does not affect the company's taxation of the profits from which dividends are paid.
3. The term ‘dividends’ within the meaning of this Article means the income from shares, shares or enjoyment bonds, parts of mines, parts of founders or other rights, except credit rights, which allow participation in profits, as well as income subject to the same tax regime as the income from shares or shares under the law of the State of which the distribution company is resident.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the dividends, resident of one Contracting State, carries out in the other Contracting State, of which the company paying the dividends is resident, a business activity through a permanent establishment located there, and the shareholding 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 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 located in that other State, or subject the undistributed profits of the company to a tax on them, even if dividends paid or profits not distributed consist, in whole or in part, of profits or income from that other State.
Article 11. Interest.
1. Interest from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such interest may also be taxed in the Contracting State from which it comes and in accordance with the law of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax thus required may not exceed 10 per cent of the gross amount of interest.
3. By way of derogation from paragraph 2, interest from one Contracting State and paid to a resident of the other Contracting State may be subject to taxation in that other State only if the recipient agrees with the beneficial owner of the interest and:
(a) is the State itself or the Central Bank, one of its political subdivisions, or local entities;
(b) The payer of the interest is the State from which it originates, or one of its political subdivisions, local authorities or public bodies;
(c) interest is paid on the basis of a loan or credit due to that State or to one of its political subdivisions, local authorities or export credit agency, or granted, granted, guaranteed or insured by any of the above;
(d) the interest is paid on account of a debt arising as a result of the sale on credit of any equipment, goods or service;
(e) is a pension fund approved for tax purposes by that State and the income of that fund is generally exempt from taxation in that State.
4. The term ‘interest’ within the meaning of 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 securities and income from bonds or 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 tax legislation of the State from which the income comes. 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 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.
6. Interest is considered to come from a Contracting State where the debtor is 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 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 in which the permanent establishment is situated.
7. Where, on account of the special relations between the debtor and the beneficial owner, or of those between them and third parties, the amount of interest, having regard to the claim for which it is paid, exceeds that agreed by the debtor and the creditor in the absence of such relationships, 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 taxed in the Contracting State from which they come and in accordance with the law of that State, but if the beneficial owner of the royalties or royalties is a resident of the other Contracting State the tax thus required may not exceed 10 per cent of the gross amount of the royalties or royalties.
3. The term ‘royalties’ or ‘gifts’ within the meaning of this Article means the amounts of any kind paid for the use, or the granting of use, of copyright, patents, trademarks, designs, plans, formulas or secret procedures, or for the use, or the granting of use, of industrial, commercial or scientific equipment, or for information relating to industrial, commercial or scientific experience, or for payments of any kind related to cinematographic films, radio and television recordings or other means of reproduction of the image and sound.
4. The provisions of paragraph 1 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, an industrial or commercial 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 cases 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 debtor of the royalties or royalties, whether or not resident of a Contracting State, has in one of the Contracting States a permanent establishment in respect of which the obligation to pay the royalties or royalties has been incurred and which bears the burden thereof, such royalties shall be deemed to come from the State in which the permanent establishment is situated.
6. 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 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 may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 13. Services provided.
1. Income obtained by a person resident of a Contracting State for the provision of services performed in the other Contracting State may be taxed in the State referred to first.
2. However, such services may be subject to taxation in the Contracting State in which they are performed and in accordance with the law of that State, but the tax thus required shall not exceed 10 per cent of the gross amount received for those services, except in the case where the person who obtains the income has a permanent establishment in that Contracting State for the purpose of carrying out his activities. In the latter case, such income shall be subject to taxation in that State in accordance with the provisions of Article 7.
3. The term ‘service provision’ used in this Article includes the following services: advisory services, consultancies or technical assistance in all areas of knowledge, business management not related to the purchase-sale of goods, representation, or any other type of activity involving the application of technical or professional knowledge or skills, provided they are not associated with the purchase-sale of goods.
Article 14. 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 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, including gains from the disposal of that permanent establishment (either with the enterprise as a whole or with the enterprise as a whole), may be taxed in that other Contracting State.
3. Profits that a resident of one Contracting State obtains from the disposal of shares or other rights of participation whose value is derived directly or indirectly from more than 40 per cent of immovable property located in the other Contracting State may be taxed in that other State.
4. Profits arising from the alienation of ships or aircraft of an undertaking of a Contracting State operated in international traffic or from movable property affected by the operation of such vessels or aircraft may only be taxed in that State.
5. Profits resulting from the disposal of any property other than those referred to in paragraphs 1, 2, 3 and 4 may be taxed only in the Contracting State in which the transferor resides.
Article 15. Dependent personal services.
1. Without prejudice to articles 16, 18 and 19, salaries, wages and other similar remuneration obtained by a resident of a Contracting State on account of employment may be subject to taxation 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. By way of derogation from paragraph 1, remuneration obtained by a resident of a Contracting State on the basis of employment in the other Contracting State may be taxed only in the State referred to above 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, an employer who is not a resident of the other State; and
(c) Remuneration is not borne by a permanent establishment held by the 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 by an undertaking of a Contracting State in international traffic may be subject to taxation by that State.
Article 16. Renumerations as an adviser.
Remuneration as an adviser and other similar remuneration obtained by a resident of a Contracting State as a member of a board or board of directors of a company resident of the other Contracting State may be taxed in that other State.
Article 17. Entertainers and sportspersons.
1. By way of derogation from Articles 7 and 15, the income which a resident of a Contracting State obtains from the exercise of his personal activity in the other Contracting State as a performer, theatre, film, radio or television actor, musician, or sportsman, may be subject to taxation in that other State.
2. Notwithstanding the provisions of Articles 7 and 15, where the income derived from the activities carried out personally by an artist or sportsman and in that capacity is attributed, not to the artist or sportsman himself but to another person, such income may be taxed in the Contracting State in which the activities of the artist or sportsman are carried out.
3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, income obtained by an artist or sportsman shall be exempt from taxation in the Contracting State in which such activities are carried out where they are wholly or partly financed by public funds of either State or of both States and are carried out under a cultural partnership agreement between the Contracting States.
Article 18. Pensions.
Without prejudice to Article 19(2), pensions and similar remuneration paid to a resident of a Contracting State on account of previous employment may only be taxed in that State.
Article 19. Remuneration for civil service.
(1) (a) Salaries, salaries and other similar remuneration paid by a Contracting State or by one of its political subdivisions or local entities to a natural person for the purpose of services rendered to that State or to that subdivision or entity may only be subject to taxation in that State.
(b) Such salaries, salaries and similar remuneration may, however, be subject to taxation in the other Contracting State only if the services are provided in that State and the natural person is a resident of that State who:
(i) is a national of that State; or
(ii) has not acquired the status of resident of that State solely to provide the services.
(a) Notwithstanding paragraph 1, pensions and other similar remuneration paid by a Contracting State or by one of its political subdivisions or local entities, either directly or from constituted funds, to a natural person on account of services rendered to that State or to that subdivision or entity, may only be subject to taxation in that State.
(b) Such pensions and similar remuneration may, however, be subject to taxation in the other Contracting State only if the natural person is a resident and a national of that State.
3. Articles 15, 16, 17 and 18 apply to salaries, salaries, pensions and other similar remuneration paid for services rendered in the context of an economic activity carried out by a Contracting State or by one of its political subdivisions or local authorities.
Article 20. Students.
The amounts received to cover the costs of maintenance, study or practical training by a student or a trainees who is, or was, immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the State referred to first for the sole purpose of continuing his studies or practical training, may not be subject to taxation in that State provided they come from sources outside that State.
Article 21. 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, shall be subject to taxation only in that State.
2. Paragraph 1 does not apply to income, other than that derived from immovable property within the meaning of Article 6(2), where the beneficiary of such income, resident of a Contracting State, carries out an entrepreneurial activity in the other Contracting State through a permanent establishment situated in that other State, and the right or for which the income is paid is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 apply.
3. By way of derogation from paragraph 1, income obtained by a resident of a Contracting State from lottery, betting and gambling prizes from the other Contracting State may be taxed in that other Contracting State.
CHAPTER IV
Methods for elimination of double taxation
Article 22. Elimination of double taxation.
1. In Spain, double taxation shall be avoided either in accordance with the provisions of its domestic law or in accordance with the following provisions, subject to Spanish domestic law:
(a) Where a resident of Spain obtains income which, under the provisions of this Agreement, may be taxed in the Dominican Republic, Spain shall permit:
(i) the deduction of the income tax of that resident in an amount equal to the income tax paid in the Dominican Republic;
(ii) the deduction of corporation tax actually paid by the company which distributes the dividends corresponding to the profits from which the dividends are paid, in accordance with its domestic law.
However, such deduction may not exceed the part of the income tax, calculated before the deduction, corresponding to income that may be taxed in the Dominican Republic.
(b) Where under any provision of this Agreement the income obtained by a resident of Spain is tax-exempt in Spain, Spain may, however, take into account the exempt income in calculating the tax on the rest of the income of that resident.
2. In the Dominican Republic, double taxation shall be avoided either in accordance with the provisions of its domestic law or in accordance with the following provisions:
(a) Where a resident of the Dominican Republic obtains income which, in accordance with the provisions of this Agreement, may be taxed in Spain, the Dominican Republic shall exempt such income, without prejudice to paragraphs 2 and 3.
(b) When a resident of the Dominican Republic obtains income which, in accordance with the provisions of Articles 11 (Interests), 12 (Registrations) and 13 (Prostrations of Services), may be taxed in Spain, the Dominican Republic shall admit the deduction in the income tax of that resident of an amount equal to the tax paid in Spain. However, this deduction may not exceed the part of the tax, calculated before the deduction, corresponding to the income obtained in Spain.
(c) Where, in accordance with any provision of the Convention, income obtained by a resident of the Dominican Republic is tax-exempt in the Dominican Republic, the Dominican Republic may, however, take into account exempt income for the purpose of calculating the amount of tax on the rest of the income of that resident.
CHAPTER V
Special provisions
Article 23. 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. Notwithstanding Article 1, this provision shall also apply to persons who are not residents of one or any of the Contracting States.
2. Permanent establishments held by an undertaking of one Contracting State in the other Contracting State shall not be subject to taxation in that State in a less favourable manner than undertakings of that other State carrying out the same activities. 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(1) of Article 11(7) or Article 12(6) apply, interest, royalties and other expenses paid by an undertaking of a Contracting State to a resident of the other Contracting State shall be deductible to determine the profits subject to taxation of that undertaking, under the same conditions as if they had been paid to a resident of the State referred to first.
4. Undertakings of a Contracting State whose capital is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State shall not be subject in the State referred to above to any tax or obligation relating thereto which is 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 Article 2, the provisions of this Article apply to all taxes irrespective of their nature or name.
Article 24. Mutual agreement procedure.
1. Where a person considers that the measures taken by one or both Contracting States involve or may entail for him an imposition which is not in conformity with the provisions of this Convention, irrespective of the remedies provided for by the domestic law of those States, he may submit his case to the competent authority of the Contracting State of which he is resident or, if Article 23(1) applies, 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 considers the complaint well founded and if it is not in itself able to reach a satisfactory solution, make every effort to resolve the matter by means of an amicable agreement with the competent authority of the other Contracting State, in order to avoid an imposition which does not comply with this Convention. The agreement shall apply irrespective of the time limits or any procedural limitations provided for by the national law of the Contracting States.
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. 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 with each other in order to reach agreement within the meaning of the preceding paragraphs. Where it is considered that this agreement may be facilitated by an exchange of views, it may be carried out through a committee composed of representatives of the competent authorities of the Contracting States.
Article 25. Exchange of information.
1. The competent authorities of the Contracting States shall exchange information likely to be relevant to the implementation of this Convention, or to the administration or application of national legislation relating to taxes of any kind or designations required by the Contracting States, their political subdivisions or local authorities, to the extent that such taxation is not contrary to the Convention. In particular, information useful to a Contracting State shall be exchanged to prevent the circumvention and tax evasion of such taxes. The exchange of information is not limited by Articles 1 and 2.
2. Information received by a Contracting State pursuant to paragraph 1 shall be kept secret in the same manner as information obtained under the domestic law of that State and shall only be disclosed to the persons or authorities (including courts and administrative bodies) responsible for the management or collection of the taxes referred to in paragraph 1 of their effective application or the prosecution of non-compliance with them or of the determination of appeals in relation to them or of the supervision of the previous functions. These persons or authorities shall use this information only for these purposes. They may disclose the information at public court hearings or in court judgements.
Notwithstanding the above provisions, information received by a Contracting State may be used for other purposes, if under the law of the requesting State it may be used for such other purposes and the competent authorities of the supplying State authorize such use.
3. Under no circumstances may the provisions of paragraphs 1 and 2 be interpreted as obliging a Contracting State to:
(a) take administrative measures contrary to its legislation or administrative practice or those of the other Contracting State;
(b) to provide information which cannot be obtained on the basis of their own legislation or in the exercise of their normal administrative practice or that of the other Contracting State; and
(c) provide information revealing business, industrial, commercial or professional secrecy, or an industrial process, or information the communication of which is contrary to public policy (ordre public).
4. If a Contracting State requests information pursuant to this Article, the other Contracting State shall use the measures to collect information available to it in order to obtain the information requested, even if that other State may not need such information for its own tax purposes. The above obligation is limited by paragraph 3, except where such limitations prevented a Contracting State from providing information solely because of the absence of national interest in it.
5. In no case shall the provisions of paragraph 3 be interpreted as allowing a Contracting State to refuse to provide information solely because it is held by banks, other financial institutions, or by any person acting in a representative or fiduciary capacity or because it relates to property rights in a person.
6. The competent authorities may, through consultations, develop methods and techniques that may help to improve the mechanisms for the exchange of information provided for in this Article.
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 or international bodies duly accredited to the respective Governments, in accordance with the general principles of international law or pursuant to the provisions of agreements concluded for that purpose.
CHAPTER VI
Final provisions
Article 27. Entry into force.
1. Each Government of the Contracting States shall notify the other that the domestic legal procedures for the entry into force of this Convention have been complied with.
2. The Convention shall enter into force within three months of the date of receipt of the last of the notifications referred to in paragraph 1, and its provisions shall take effect:
(a) in respect of taxes withheld at source, on amounts paid or owed to non-residents from the date, including on which the Convention enters into force;
(b) in respect of other taxes, for fiscal years beginning from the date, including the date, on which the Convention enters into force; and
(c) in the remaining cases, on or after the date on which the Convention enters into force.
Article 28. Termination.
This Convention shall remain in force until its denunciation by one of the Contracting States. Any Contracting State may notify in writing the denunciation of the Convention to the other Contracting State, through diplomatic channels, at least six months before the end of any calendar year commencing after a period of five years from the date on which the Convention enters into force. In such a case, the Convention shall cease to have effect:
(a) in relation to taxes withheld at source, on amounts paid or owed to non-residents from the end of that calendar year;
(b) in respect of other taxes, for fiscal years beginning from the end of that calendar year; and
(c) in the remaining cases, after the end of that calendar year.
In faith, the signatories, duly authorized to do so, have signed this Convention.
Done in duplicate in Madrid on 16 November 2011 in the Spanish language, both texts being equally authentic.
For the Kingdom of Spain,
For the Dominican Republic,
Juan Manuel López Carbajo, State Secretary for Finance and Budgets
Daniel Toribio Marmolejos, Minister of Finance
PROTOCOL
At the time of signing the Agreement between the Kingdom of Spain and the Dominican Republic to Prevent Double Taxation and Tax Evasion in Income Tax, the signatories have agreed on the following provisions which form an integral part of the Convention.
I. Limitation of benefits:
Right to benefit from the Convention:
(a) This Convention shall not be construed as preventing a Contracting State from applying the provisions of its domestic legislation relating to the prevention of tax evasion and avoidance.
(b) This Convention shall not prevent Contracting States from applying their domestic rules relating to international tax transparency (Controlled Foreign Companies) or sub-capitalization or the rules to be established on them.
(c) The provisions of articles 10, 11, 12 and 13 do not apply where the primary purpose or one of the primary purposes of any person related to the creation or assignment of the shares or other rights generated by dividends, the creation or assignment of the receivable generated by the interest, or the creation or assignment of the right generated by the royalties or royalties, is to obtain the benefit of those articles through such creation or assignment.
II. With regard to article 1:
This Convention does not in any way limit existing or future tax benefits established by:
(a) The laws of any Contracting State; or
(b) Any other agreement between the Contracting States.
III. With regard to article 13:
The term ‘made in the other Contracting State’ shall be understood to require the physical presence of the subjects in the State where the income is obtained.
IV. With regard to Article 25(5):
Each Contracting State guarantees, for the purposes of Article 25, its ability to obtain and provide, upon request, information held by banks, other financial intermediation institutions, and any person acting in a representative or fiduciary capacity, including designated and fiduciary agents.
In faith, the signatories, duly authorized to do so, have signed this Protocol.
Done in duplicate in Madrid on 16 November 2011 in the Spanish language, both texts being equally authentic.
For the Kingdom of Spain,
For the Dominican Republic,
Juan Manuel López Carbajo, State Secretary for Finance and Budgets
Daniel Toribio Marmolejos, Minister of Finance
* * *
This Convention and its Protocol shall enter into force on 25 July 2014, three months after the date of receipt of the last notification in which compliance with the necessary domestic legal procedures is notified, in accordance with Article 27 thereof.
Madrid, June 18, 2014.–The Technical General Secretary of the Ministry of Foreign Affairs and Cooperation, Fabiola Gallego Caballero.