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CONVENTION BETWEEN THE KINGDOM OF SPAIN AND UKRAINE TO ELIMINATE DOUBLE IMPOSITION IN RELATION TO RENT TAXES AND PREVENCE ELIMINATION AND EVALUATION
FISCALS
The Kingdom of Spain and Ukraine,
Desiring to further develop its economic relations and to strengthen its cooperation in tax matters,
Intending to conclude a convention to eliminate double taxation in relation to income taxes without generating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including the practice of seeking the most favourable convention aiming at obtaining the benefits provided for in this convention for the indirect benefit of residents of third States),
Have agreed as follows:
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 levied by each of the Contracting States, their political subdivisions or their local entities, irrespective of the system of their levy.
2. Income taxes are those which tax the entire income or elements thereof, including taxes on earnings arising from the disposal of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital gains.
3. The current taxes to which the Convention applies are, in particular:
(a) in Spain:
(i) Personal Income Tax; (ii) Corporate Income Tax; (iii) Non-Resident Income Tax; and (iv) Local Income Tax;
(hereinafter referred to as ‘the Spanish tax’);
(b) In Ukraine:
(i) personal income tax; and (ii) corporate profits tax;
(hereinafter referred to as ‘Ukrainian 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 notify each other of any significant changes made to their respective tax laws.
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Article 3
General definitions
1. For the purposes of this Convention, unless otherwise determined by the context:
(a) the term ‘Spain’ means the Kingdom of Spain and, used geographically, means the territory of the Kingdom of Spain, including internal waters, the territorial sea and areas outside the territorial sea where, 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 ‘Ukraine’, used geographically, means the territory of Ukraine, its continental shelf and its exclusive economic (maritime) zone, including areas outside the territorial sea of Ukraine in which, under international law, they have been or may be designated in the future as an area in which Ukraine may exercise its rights with respect to the seabed, its subsoil and its natural resources;
(c) the terms ‘one Contracting State’ and ‘the other Contracting State’ mean Spain or Ukraine, 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;
(g) the terms ‘undertaking of one Contracting State’ and ‘undertaking of the other Contracting State’ mean respectively an undertaking operated by a resident of one Contracting State and an undertaking operated by a resident of the other Contracting State;
(h) 'international traffic' means any transport by a ship or aircraft operated by an undertaking of a Contracting State, except where the ship or aircraft is operated only between points situated in the other Contracting State;
(i) the term ‘competent authority’ means:
(i) in Spain, the Minister of Finance or her authorized representative; and (ii) in Ukraine, the Ministry of Finance of Ukraine or its authorized representative;
(j) the term 'national' means:
(i) a natural person possessing the nationality of a Contracting State; (ii) a legal person, partnership or association established under the law in force in a Contracting State;
(k) the term 'economic activity' includes the provision of professional services and the carrying out of other activities of an independent nature.
2. For the purpose of the application of the Convention at any time by a Contracting State, any term not defined in the Convention shall have, unless its context provides for a different interpretation, or the competent authorities agree on a different meaning in accordance with article 23, 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 that tax legislation 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 or any other criterion of a similar nature, including also that State and its political subdivisions or local entities. This term does not include, without
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persons subject to taxation in that State solely for income derived from sources located in that State.
2. Where, under the provisions of paragraph 1, a natural person is resident in both Contracting States, his or her situation shall be resolved as follows:
(a) It shall be considered a resident exclusively of the State in which it has permanent housing at its disposal; if it has permanent housing at its disposal in both States, it shall be considered a resident exclusively of the State with which it has closer personal and economic relations (centre of vital interests);
(b) If it is not possible to determine the State in which the person has the centre of his or her vital interests, or if he or she does not have permanent housing at his or her disposal in any of the States, he or she shall be considered a resident exclusively of the State in which he or she habitually lives;
(c) If he or she habitually lives in both States or does not live in either State, he or she shall be deemed to be a resident exclusively 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 resident in both Contracting States, he or she shall be deemed to be resident exclusively in the State in which his or her place of effective management is located.
Article 5
Permanent establishment
1. For the purposes of this Agreement, the term ‘permanent establishment’ means a fixed place of business through which an undertaking carries out all or part of its activity.
2. The term ‘permanent establishment’ includes in particular:
(a) head offices; (b) branches; (c) offices; (d) factories; (e) workshops; (f) mines, oil or gas wells, quarries or any other natural resource extraction site; and
(g) premises used as retail stores.
3. The term ‘permanent establishment’ also includes:
(a) a work, a construction, installation or assembly project, only if its duration exceeds twelve months.
(b) a facility or structure for exploration of natural resources, only 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;
(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 carrying out any other business for the undertaking;
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(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 such activity or, in the case of sub-paragraph (f), the whole activity of the fixed place of business is auxiliary or preparatory.
4.1 Paragraph 4 above shall not apply to a fixed place of business which an undertaking uses or maintains, if that undertaking or another closely related undertaking engages in economic activities in the same place or in another place in the same Contracting State and:
(a) that place or other constitutes a permanent establishment for the closely linked undertaking or undertaking, as provided for in this Convention; or
(b) the whole activity resulting from the combination of activities carried out by the two undertakings in the same place, or by the same undertaking or the closely linked undertaking in the two locations, is not preparatory or auxiliary,
provided that the activities carried out by the two companies in the same place, or by the same undertaking or the closely linked undertaking in the two locations, constitute complementary functions forming part of a cohesive economic operation.
5. By way of derogation from paragraphs 1 and 2, but subject to paragraph 6, where a person operates in a Contracting State on behalf of an undertaking and, as such, habitually concludes contracts, or habitually plays the principal role in the conclusion of contracts routinely concluded without substantial modification by the undertaking, and such contracts are concluded:
(a) on behalf of the undertaking; or (b) for the transfer of ownership, or right of use, of an asset owned or entitled to use by the undertaking; or
(c) for the provision of services by that undertaking,
that undertaking shall be deemed to have a permanent establishment in that State in respect of the activities that that person carries out for the undertaking, unless the activities of that person are limited to those referred to in paragraph 4 which, if carried out through a fixed place of business (other than a fixed place of business to which paragraph 4.1 could apply), had not determined that that fixed place of business was to be considered a permanent establishment under the provisions of that subparagraph.
6. Paragraph 5 shall not apply where a person who intervenes in a Contracting State on behalf of an undertaking of the other Contracting State engages in an economic activity in the State referred to first as an independent agent and intervenes by the undertaking in the ordinary course of that activity. However, where a person intervenes exclusively or almost exclusively on behalf of one or more undertakings to which he is closely linked, that person shall not be regarded as an independent agent under the terms of this paragraph in relation to any of those undertakings.
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 economic activities in that other State (whether by permanent establishment or otherwise), does not by itself render any of these Societies permanent establishment of the other State.
8. For the purposes of this Article, a person or an undertaking is closely linked to an undertaking if, in the light of all relevant facts and circumstances, one has control over the other or both are under the control of the same persons or undertakings. In any event, a person or an undertaking shall be considered to be closely linked to an undertaking if one of them participates directly or indirectly in more than 50 per cent of the other (or, in the case of one company, in more than 50 per cent of the total voting rights and the value of the shares of the company or of the shareholding in its assets) or if a third person or undertaking participates, directly or indirectly, in more than 50 per cent (or, in the case of one company, in more than 50 per cent of the total voting rights and value of the shares of the company or of the right to share in the estate) in the person and the undertaking or in the two undertakings.
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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, the term includes property attached to immovable property, livestock and equipment used on agricultural and forestry holdings, rights to which the private law provisions relating to real estate, 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 apply; ships and aircraft shall not be regarded as immovable property.
3. The provisions of paragraph 1 are applicable to income derived from direct use, lease or shareholding, as well as from any other form of exploitation of immovable property.
4. Where ownership of shares, shares or other rights directly or indirectly grants the owner of such shares, shares or rights the right to the enjoyment of immovable property, income derived from direct use, lease or shareholding, or use in any other form of such right of enjoyment, may be subject to taxation in the Contracting State in which the immovable property is situated.
5. The provisions of paragraphs 1, 3 and 4 also apply to income derived from the immovable property of an undertaking.
Article 7
Business profits
1. The profits of an undertaking of a Contracting State shall be taxable exclusively in that State, unless the undertaking carries out its business in the other Contracting State by means of a permanent establishment, as defined in Article 5, 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 a Contracting State carries out its business in the other Contracting State by means of a permanent establishment situated therein, in each Contracting State the profits which 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 shall deal entirely independently with the undertaking from which it is a permanent establishment.
3. For the purpose of determining the benefit of the permanent establishment, the deduction of expenses incurred for the purposes of the permanent establishment, including management and general administrative expenses for the same purposes, shall be permitted, whether incurred in the Contracting 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 regulated separately in other articles of this Convention, the provisions of those articles shall not be affected by those of this Article.
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Article 8
Shipping and air transport
1. Profits derived by a resident of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable exclusively in that State.
2. For the purposes of this Article, profits obtained by a resident of a Contracting State from the operation of ships or aircraft in international traffic include:
(a) the rents from the bareboat lease of aircraft vessels; and (b) the profits from the lease of trailers and equipment related to the transport of containers) used for the transport of goods or goods;
where such lease is ancillary to the operation of ships or aircraft in international traffic.
3. The provisions of paragraph 1 also apply to profits arising from participation in a pool, on a joint holding or on 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 realized because of them, may be included in the profits of that undertaking and, consequently, subject to taxation.
2. Where a Contracting State includes in the profits of an enterprise of that State — and consequently serious — those of an enterprise of the other State that has already been subject to taxation 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 mentioned first if the terms agreed between the two companies had been those that would have been agreed upon by independent companies, that other State shall make such adjustment as may be appropriate to the amount of the tax that has taxed those profits. The other provisions of this Convention shall be taken into account in determining such adjustment 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. However, dividends paid by a company resident in a Contracting State may also be subject to taxation in that State under 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
(a) 5 per cent of the gross amount of dividends if the beneficial owner is a company holding directly at least 20 per cent of the company's capital that pays the dividends for a period of 365 days comprising the day of payment of the dividends (this period shall not be calculated by taking into account changes in ownership that may arise directly from a
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corporate restructuring, such as a merger or division, of the company holding the shares or paying dividends;
(b) 15 per cent of the gross amount of dividends in all other cases.
The competent authorities of the Contracting States may, by mutual agreement, determine how these limitations are to be applied.
This paragraph does not affect the company's taxation of the profits from which dividends are paid.
3. The term ‘dividends’ within the meaning of this Article means the returns on shares, shares or enjoyment bonds, shares in mines, founder's bonds or other rights allowing participation in profits other than credit, as well as income derived from other corporate rights subject to the same tax regime as income from shares or shares under the law of the State of residence of the distribution company.
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, an economic activity through a permanent establishment located there, and the share of the dividends is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 shall 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 5 per cent of the gross amount of interest. The competent authorities of the Contracting States shall determine by mutual agreement how this limitation is to be applied.
3. Notwithstanding the provisions of paragraph 2, interest from one Contracting State and paid to a resident of the other Contracting State shall be taxable exclusively in that other State if the recipient of the interest is its beneficial owner and:
(a) is that State, or the Central Bank, or one of its political subdivisions or local entities; (b) the interest is paid by the State from which it originates or by one of its political subdivisions or public or local entities;
(c) interest is paid by reason of a loan or credit due to that State or to one of its political subdivisions or local entities or public financial agency, or granted, granted, guaranteed or insured by any of the above;
4. The term ‘interest’ within the meaning of this Article means the income from claims of any kind, with or without a mortgage guarantee or a benefit-sharing clause of the debtor, and in particular the income from public securities and the income from bonds or bonds, including premiums and lots attached to such securities. 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, performs in the other Contracting State from which the interest derives,
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an economic activity through a permanent establishment situated 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 for which the interest is paid has been incurred and which bears the burden of the interest, such 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 between the debtor and the beneficial owner 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 shall be taxable in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
Article 12
Royalties
1. Fees from one Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. However, such 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 of the royalties is a resident of the other Contracting State, the tax thus required may not exceed 5 per cent of the gross amount of the royalties.
The competent authorities of the Contracting States shall determine by mutual agreement how this limitation is to be applied.
3. The term ‘royalties’ within the meaning of this Article means the amounts of any kind paid for the use or grant of copyright on literary, artistic or scientific works, including cinematographic films and films, tapes or other means of reproduction of the image or sound, patents, trademarks or trade marks, drawings, plans, formulas or secret procedures, or for the use or grant of use of industrial, commercial or scientific equipment, or information relating to industrial, commercial or scientific experience.
4. The provisions of paragraphs 1 and 2 do not apply if the beneficial owner of the royalties, resident of one Contracting State, carries out in the other Contracting State, from which the royalties come, an economic activity through a permanent establishment located in that other State and the right or for which the royalties are paid is effectively linked to that permanent establishment. In such a case, the provisions of Article 7 shall apply.
5. The royalties are considered to come from a Contracting State where the debtor is a resident of that Contracting State. However, where the debtor of the royalties, whether or not he is a resident of a Contracting State, has in a Contracting State a permanent establishment in respect of which the obligation to pay the royalties has been entered into and which bears the burden thereof, such fees shall be deemed to have come from the State where the permanent establishment is situated.
6. Where due to special relations between the debtor and the beneficial owner, or between them and third parties, the amount of the royalties, in view of the use, right or information for which they are paid, exceeds the amount that the debtor and beneficial owner would have agreed in the absence of such relationships, the provisions of this article apply only to the latter amount. In such a case, the excess amount may be imposed in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
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Article 13
Capital gains
1. Profits that a resident of one Contracting State obtains from the disposal of immovable property as defined in article 6 located in the other Contracting State may be taxed in that other State.
2. Gains 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 alone or with the enterprise as a whole), may be taxed in that other Contracting State.
3. Profits obtained by an undertaking of a Contracting State operating ships or aircraft in international traffic resulting from the alienation of such vessels or aircraft, or from movable property affected by their operation, shall be taxable exclusively in that Contracting State.
4. Earnings obtained by a resident of a Contracting State in the disposal of comparable shares or units, such as shares in companies of persons (partnerships) or trusts (trusts), may be taxed in the other Contracting State if, at any time during the 365 preceding the disposal, more than 50 per cent of the value of such comparable shares or units comes, directly or indirectly, from immovable property, as defined in Article 6, located in that other State.
5. Profits resulting from the disposal of shares or other rights which, directly or indirectly, grant the owner of such shares, shares or rights, the right to the enjoyment of immovable property situated in a Contracting State, may be subject to taxation in that State.
6. Profits resulting from the disposal of any property other than those referred to in paragraphs 1, 2, 3, 4 and 5 shall be taxable exclusively in the Contracting State in which the transferor resides.
Article 14
Income from dependent work
1. Without prejudice to articles 15, 17 and 18, salaries, wages and other similar remuneration obtained by a resident of a Contracting State on account of employment shall be taxable only in that State 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 account of employment in the other Contracting State shall be taxable only in the State referred to above where:
(a) the recipient remains in the other State for a period or periods of not more than 183 days together in any period of twelve months beginning or ending in the fiscal year concerned; and
(b) the payer, or the payee, is a non-resident employer of the other State; and
(c) Remuneration is not paid by a permanent establishment held by the employer in the other State.
3. Notwithstanding the above provisions of this Article, remunerations earned on account of employment on board a ship or aircraft operated in international traffic may be taxed in the Contracting State of which the undertaking operating the ship or aircraft is resident.
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Article 15
Councillors' fees
Fees as advisor and other similar remuneration 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. By way of derogation from Articles 7 and 14, any 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, or as a musician, or as an athlete, may be subject to taxation in that other State.
2. Notwithstanding Articles 7 and 14, where income derived from activities carried out by an artist or athlete personally and in that capacity is attributed not to the artist or athlete himself but to another person, such income may be taxed in the Contracting State in which the activities of the artist or athlete are carried out.
3. Notwithstanding the provisions of paragraphs 1 and 2, the income referred to in this Article shall be exempt from taxation in the Contracting State in which the artist or sportsman carries out his activity where it is wholly or substantially financed by public funds of both States and is carried out in the framework of a cultural cooperation agreement between the Contracting States.
Article 17
Pensions
Without prejudice to Article 18(2), pensions and similar remuneration paid to a resident of a Contracting State on account of previous employment shall be taxable exclusively in that State.
Article 18
Staff case
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 services rendered to that State, subdivision or entity shall be taxable exclusively in that State.
(b) However, such salaries, salaries and similar remuneration shall be taxable only in the other Contracting State where the services are provided in that State and the natural person is a resident of that State who:
(i) is a national of that State; or (ii) has not acquired the resident status of that State solely to provide the services.
2.
(a) 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 funds constituted, to a natural person on account of services rendered to that State, subdivision or entity, shall be taxable exclusively in that State.
(b) However, such pensions and similar remuneration shall be taxable only in the other Contracting State where the natural person is a resident and a national of that State.
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3. The provisions of Articles 14, 15, 16 and 17 apply to salaries, salaries, and other similar remuneration, and to pensions, 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 19
Students
The amounts received to cover the costs of maintenance, study or practical training by a student or an apprentice or trainees 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, irrespective of its origin, not mentioned in the previous articles of this Convention, shall be taxable exclusively 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 economic 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.
Article 21
Elimination of double taxation
1. In Spain, double taxation shall be avoided either in accordance with the provisions of its domestic legislation or in accordance with the following provisions, in accordance with Spanish domestic law:
(a) Where a resident of Spain obtains income which, in accordance with the provisions of this Convention, may be taxed in Ukraine, Spain shall permit:
(i) the deduction from the income tax of that resident in the amount equal to the income tax paid in Ukraine;
(ii) the deduction of corporation tax actually paid by the company distributing the dividends, corresponding to the profits from which those dividends are paid, in accordance with Spain's domestic law.
However, such deduction may not exceed the part of the income tax calculated before the deduction, corresponding to the income that may be taxed in Ukraine.
(b) Where under any provision of this Convention 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 Ukraine, double taxation will be eliminated as follows:
(a) When a resident of Ukraine obtains income which, in accordance with the provisions of this Convention, may be taxed in Spain, Ukraine shall allow the deduction of the income tax of that resident equal to the income tax paid in Spain.
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However, this deduction may not exceed the part of the income tax calculated before the deduction, corresponding to the income that may be taxed in Spain.
(b) Where under any provision of this Convention the income obtained by a resident of Ukraine is tax-exempt in Ukraine, Ukraine may, however, take into account the exempt income in calculating the tax on the rest of the income of that resident.
Article 22
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 also applies to persons who are not residents of one or any of the Contracting States.
2. Permanent establishments held by an undertaking of one Contracting State in the other Contracting State shall not be subject to taxation in that other State in a less favourable manner than undertakings of that other State carrying out the same activities. This provision 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(7) apply, the interest, royalties and other expenses paid by an undertaking of a Contracting State to a resident of the other Contracting State shall be deductible to determine the profits subject to taxation of that undertaking under the same conditions as if they had been paid to a resident of the State referred to first. Similarly, the debts of an undertaking of a Contracting State contracted with a resident of the other Contracting State shall be deductible for the determination of the taxable assets of that undertaking under the same conditions as if they had been contracted with a resident of the State referred to first.
4. Undertakings of a Contracting State whose capital is 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 23
Mutual agreement procedure
1. Where a person considers that the measures taken by one or both Contracting States imply or may entail for him an imposition which is not in conformity with the provisions of this Convention, irrespective of the remedies provided for by the domestic law of those States, he may submit his case to the competent authority of the State of which he is resident or, if Article 22 (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 finds the complaint well founded and if it cannot find a satisfactory solution in itself, make every effort to resolve the case through an amicable agreement with the competent authority of the other Contracting State in order to avoid an imposition which does not comply with the Convention. The agreement shall apply irrespective of the time limits provided for by the domestic 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 agreement.
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friendly. They may also agree to try to avoid double taxation in cases not covered by the Convention.
4 In order to reach agreement within the meaning of the preceding paragraphs, the competent authorities of the Contracting States may communicate directly. Where it is considered that such an agreement may be facilitated by an oral exchange of views, it may be carried out through a committee composed of representatives of the competent authorities of the Contracting States.
5. When,
(a) pursuant to paragraph 1, a person has referred his case to the competent authority of a Contracting State on the grounds that the measures taken by one or both Contracting States entail for him an imposition not in accordance with the provisions of this Convention; and
(b) the competent authorities may not agree to resolve the case in accordance with paragraph 2 within two years of the date on which the two competent authorities have received all the information required to deal with the case, unless, before the end of that period, the competent authorities of the Contracting States have agreed on a different period in relation to that case and have so notified the person submitting the case,
any unresolved matter relating to that case shall be submitted to arbitration if the person so requests in writing. However, such arbitration may not take place where a court or administrative body of any of the Contracting States has previously ruled on such matters. Unless a person directly concerned rejects the amicable agreement giving effect to the arbitral decision, that decision shall be binding on both States and shall apply irrespective of the time limits provided for by the domestic law of the Contracting States. The competent authorities of the Contracting States shall, by mutual agreement, determine the method of application of this paragraph.
6. Notwithstanding the provisions of paragraph 5, an unresolved issue arising from a case within the meaning of that paragraph may not be referred to arbitration if:
(a) The case involves the application of anti-abuse rules provided for in this Convention or based on domestic legislation;
(b) If by a final decision arising out of judicial or administrative proceedings, the conduct of a person directly related to the case has been punished for tax fraud, intentional failure or gross negligence in relation to the matters dealt with in such mutual agreement procedure;
(c) prior to the date on which the arbitration proceedings were commenced, the competent authorities would have agreed that the case could not be referred to arbitration and would have notified the person submitting the case.
Article 24
Exchange of information
1. The competent authorities of the Contracting States shall exchange information which is likely to be relevant to the application of this Convention or to the administration or application of national law relating to taxes of any kind or designation required by the Contracting States, their political subdivisions or their local authorities, to the extent that such taxation is not contrary to the Convention. 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 be communicated only to the persons or authorities (including courts and administrative bodies) responsible for the management or collection of taxes referred to in paragraph 1 of the declaratory or executive procedures relating to such taxes, for the determination of appeals relating thereto, or for the supervision of such activities. Such persons or authorities shall use this information only for those purposes. They may disclose the information at public court hearings or in court judgements.
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Notwithstanding the provisions of the preceding paragraph, information received by a Contracting State may be used for other purposes when, under the law of both Contracting States, such information may be used for the same other purposes and the competent authority of the supplying State authorizes such use.
3. In no case may the provisions of paragraphs 1 and 2 be interpreted as obliging a Contracting State to:
(a) take administrative measures contrary to its legislation and administrative practice or those of the other Contracting State;
(b) to provide information which cannot be obtained on the basis of their own legislation or in the exercise of their normal administrative practice, or that of the other Contracting State;
(c) providing information revealing business, industrial, commercial or professional secrecy, or an industrial procedure, or information the communication of which is contrary to public policy (ordre public).
4. Where a Contracting State requests information under this Article, the other Contracting State shall use the measures available to it to gather information for the purpose of obtaining the information requested, even if that other Contracting 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 the exchange of information solely because it is held by banks, other financial institutions or any person acting in a representative or fiduciary capacity, including designated agents, or because it relates to shares or shares in a person.
Article 25
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.
Article 26
Right to benefits of the convention
1. (a) When:
(i) an undertaking of one Contracting State obtains income from the other Contracting State and the said State first considers it as income attributable to a permanent establishment which the undertaking has in a third jurisdiction; and
(ii) the profits attributable to such a permanent establishment are exempt from taxation in the State referred to first,
the benefits of this Convention shall not apply in respect of any income element on which the tax required under that third jurisdiction is less than 60 per cent of the tax that would have been required by the State concerned in the first place on that income element if the permanent establishment had been situated therein. In such a case, any income to which the provisions of this paragraph apply shall remain taxable under the domestic law of the other State, irrespective of the other provisions of the Convention.
(b) The previous provisions of this subparagraph shall not apply if income from the other State is obtained in connection with or incidental to the active exercise of an economic activity through the permanent establishment (other than the investment activity, management or mere holding of investments on behalf of the undertaking, unless it is a banking activity);
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insurance or securities by a bank, an insurance institution or a registered securities agent, respectively).
(c) If the benefits of this Convention are denied under the previous provisions of this subparagraph in respect of an income element obtained by a resident of a Contracting State, the competent authority of the other Contracting State may, however, grant such benefits in respect of that income element if, in response to a request from that resident, that competent authority determines that the granting of the benefits is justified in view of the reasons why that resident did not meet the requirements of this subparagraph (such as the existence of losses). The competent authority of the Contracting State to which the request referred to in the preceding sentence is addressed shall consult with the competent authority of that other Contracting State before accepting or refusing the request.
2. Notwithstanding the other provisions of this Convention, benefits granted under this Convention shall not be granted in respect of an income or equity element where it is reasonable to conclude, taking into account all relevant facts and circumstances, that the legal instrument or operation which directly or indirectly generates the right to receive such benefit has as its main objectives the acquisition of such benefit, except where it is determined that the granting of the benefit in those circumstances is in conformity with the object and purpose of the relevant provisions of this Convention.
Article 27
Entry into force
1. Each Contracting State shall notify the other, through diplomatic means, that the internal procedures required by law 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 notification referred to in paragraph 1 and its provisions shall apply:
(i) in relation to taxes withheld at source, from 1 January of the year following the year in which the Convention enters into force;
(ii) for other taxes, for tax periods beginning on 1 January of the year following the year in which the Convention enters into force; and
(iii) in all other cases, from 1 January of the year following the year in which the Convention enters into force.
3. From the date on which this Convention takes effect in accordance with paragraph 2 of this Article, the Convention between the Government of Spain and the Government of the Union of Soviet Socialist Republics on the avoidance of double taxation on income and property made in Madrid on 1 March 1985 shall be deemed to have been terminated and shall not apply in respect of relations between the Kingdom of Spain and Ukraine.
4. As soon as this Convention has effect under paragraph 2 of this Article, Article XIV of the Agreement on Air Transport between the Government of Spain and the Government of Ukraine, done at Madrid on 7 October 1996, shall cease to have effect.
Article 28
Termination
This Convention shall remain in force indefinitely. 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:
(i) in relation to taxes withheld at the source, from 1 January of the year following the year in which the complaint was notified;
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(ii) in relation to other taxes in the tax periods beginning on 1 January of the year following the year in which the complaint was notified;
(iii) in all other cases, from 1 January of the year following the year in which the complaint was notified.
In faith, the signatories, duly authorized to do so, have signed this Convention.
Done in duplicate in Madrid on 10 September 2020, in the English, Ukrainian and Spanish languages, all texts being equally authentic. In the event of a divergence between any of the texts, the English text shall prevail.
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PROTOCOL
At the time of signing the Convention between the Kingdom of Spain and Ukraine on the elimination of double taxation in relation to income taxes and on the prevention of tax avoidance and evasion (hereinafter referred to as the Convention), the signatories have agreed on the following provisions which will form part of the Convention.
I. In relation to Article 2(3).
In the case of Ukraine, taxation of income from donations and successions shall be deemed not to fall within the scope of the Convention.
II. With regard to Article 3(1)(k).
The term ‘independent activities’ shall be defined in accordance with the internal rules of each Contracting State.
III. In relation to Article 11(3).
The term ‘public financial body’ refers to:
— in the case of Spain, the ICO (Institute of Official Credit) and the ICEX (Spanish Institute of Foreign Trade) or another body to replace them.
— in the case of Ukraine, the Ukreximbank (National Export-Import Bank) or another body to replace it.
IV. With regard to articles 10, 11 and 12.
With regard to Articles 10, 11 and 12, if Ukraine signs an agreement or agreement to avoid double taxation with any other Member State of the European Union after the entry into force of this Convention, and such agreement or agreement provides for lower rates of taxation than those laid down in this Convention in respect of income of any kind (including zero rate), such rates shall automatically replace the rates agreed in this Convention from the date of entry into force of the agreement or agreement between Ukraine and that other State.
V. General.
(i) Contracting States declare that their domestic rules and procedures with regard to abuses of the rule (including tax treaties) are applicable to the treatment of such abuses. In the case of Spain, the abuses of the rule include the situations provided for in articles 15 and 16 of the General Tax Law or other similar provision in any tax law in force or that may be adopted subsequently.
(ii) The benefits of this Convention shall not be deemed to be granted to a person other than the actual beneficiary of income from the other Contracting State.
(iii) This Convention does not prevent Contracting States from applying their internal rules on international tax transparency Controlled Foreign Company Rules (CFCs).