Spanish company doing business in Canada Article IV Spain Canada Income Tax Convention
QUESTION:
I am a Spanish citizen, I own a company that provides services to other
companies and individuals in different countries. My company is incorporated
in Spain and the main office is there, but I spend half of the year in
Canada too, as a visitor, and manage the company from my home office in
Canada too, since most of the business is done online.
I would like to know if my company should:
A) Charge GST when I invoice my Canadian clients
B) Be charged GST when a Canadian provider invoices me
Thank you!
david ingram replies:
Sounds like you are working illegally in Canada. Although "I" (not
necessarily Citizenship and Immigration) have no problem with your doing
something online in / from Canada for a Spanish, American, British, etc.
organization, when you perform that service in Canada for a Canadian
organization, you are illegal in my opinion.
When you are in Canada the length of time you suggest, you are also making
yourself liable for Canadian tax on your world income unless you manage to
convince Canada that you are still a resident of Spain for income tax
purposes.
You should be charging any Canadian company that you do business for while
in Canada GST if the total billings of your company are over $30,000C because you are a Canadian Company while mind and control are in Canada.
My answer would be quite different if you were only in Canada for 60 days
but what you have told me is that you are working half a year in Canada out
of a home office and the other half of the year in Spain, likely out of a
home office there.
If the Spanish Head office has five or more employees working there and you
come to Canada as a sole person, my answer would be different as well.
I am including here the full text of the Spanish Canadian Income Tax
Convention. Pay attention to Article IV
Your home office would be defined as a permanent establishment.
CONVENTION BETWEEN CANADA AND SPAIN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL
The Government of Canada and the Government of Spain desiring to
conclude a Convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital, have agreed
as follows:
I. SCOPE OF THE CONVENTION
Article I
Personal Scope
This Convention shall apply to persons who are residents of one or both of
the Contracting States.
Article II
Taxes Covered
1. This Convention shall apply to taxes on income and on capital imposed on
behalf of each Contracting State, irrespective of the manner in which they
are levied.
2. There shall be regarded as taxes on income and on capital all taxes
imposed on total income, on total capital, or on elements of income or of
capital, including taxes on gains from the alienation of movable or immovable
property, taxes on the total amounts of wages or salaries paid by enterprises, as well
as taxes on capital appreciation.
3. The existing taxes to which the Convention shall apply are, in particular:
a) in the case of Canada:
the income taxes imposed by the Government of Canada, (hereinafter
referred to as "Canadian tax");
b) in the case of Spain:
- the income tax on individuals;
- the income tax on companies and other legal persons;
- the following prepayments: the tax on rural and on urban land; the
tax on earned income; the tax on income from capital and the tax on
business and industrial activities and profits;
- the "surface royalty" and the tax on business profits, regulated by the
law of June 27, 1974, applicable to enterprises engaged in
prospecting and exploiting hydrocarbons; (hereinafter referred to as "Spanish tax").4. The Convention shall apply also to any identical or substantially similar
taxes and to taxes on capital which are imposed after the date of signature
of this Convention in addition to, or in place of, the existing taxes. The
Contracting States shall notify each other of changes which have been made in their
respective taxation laws.
II. DEFINITIONS
Article III
General Definitions
1. In this Convention, unless the context otherwise requires:
a)
(i) the term "Canada" used in a geographical sense, means the territory
of Canada, including any area beyond the territorial waters of
Canada which, under the laws of Canada, is an area within which
Canada may exercise rights with respect to the sea-bed and sub-soil
and their natural resources;
(ii) the term "Spain" means the Spanish State (Peninsular Spain, the
Balearic and Canary Islands, the Spanish towns in Africa) and the
areas adjacent to the territorial waters of Spain for which, in
accordance with international law, Spain may exercise rights with
respect to the sea-bed and sub-soil and their natural resources;
b) the terms "a Contracting State" and "the other Contracting State" mean,
as the context requires, Canada or Spain;
c) the term "person" includes an individual, an estate, a trust, a company,
a partnership and any other body of persons;
d) the term "company" means any body corporate or any entity which is
treated as a body corporate for tax purposes; in French, the term
"société" also means a "corporation" within the meaning of Canadian law;
e) the terms "enterprise of a Contracting State" and "enterprise of the
other Contracting State" mean respectively an enterprise carried on by a
resident of a Contracting State and an enterprise carried on by a resident
of the other Contracting State;
f) the term "competent authority" means:
(i) in the case of Canada, the Minister of National Revenue or his
authorized representative,
(ii) in the case of Spain, the Minister of Finance, the General Technical
Secretary, or any other authority duly authorized by the Minister;
g) the term "tax" means Canadian tax or Spanish tax, as the context
requires;
h) the term "national" means:
(i) any individual possessing the nationality of a Contracting State;
(ii) any legal person, partnership and association deriving its status as
such from the law in force in a Contracting State;
i) the term "international traffic" means any transport by a ship or
aircraft operated by an enterprise which has its place of effective management in
a Contracting State, except when the ship or aircraft is operated solely
between places in the other Contracting State.
2. As regards the application of the Convention by a Contracting State any
term not otherwise defined shall, unless the context otherwise requires,
have the meaning which it has under the laws of that Contracting State relating to
the taxes which are the subject of the Convention.
Article IV
Fiscal Domicile
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 liable to
taxation
therein by reason of his domicile, residence, place of effective management
or any
other criterion of a similar nature.
2. Where by reason of the provisions of paragraph 1 an individual is a
resident of both Contracting States, then this case shall be determined in
accordance with the following rules:
a) he shall be deemed to be a resident of the Contracting State in which he
has a permanent home available to him. If he has a permanent home
available to him in both Contracting States, he shall be deemed to be a
resident of the Contracting State with which his personal and economic
relations are closest (hereinafter referred to as his "centre of vital
interests");
b) if the Contracting State in which he has his centre of vital interests
cannot be determined, or if he has not a permanent home available to
him in either Contracting State, he shall be deemed to be a resident of
the Contracting State in which he has an habitual abode;
c) if he has an habitual abode in both Contracting States or in neither of
them, he shall be deemed to be a resident of the Contracting State of
which he is a national;
d) if he is a national of both Contracting States or of neither of them, the
competent authorities of the Contracting States shall settle the question
by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a company is a resident
of both Contracting States, then this case shall be determined in accordance
with the following rules:
a) it shall be deemed to be a resident of the Contracting State of which it
is a national;
b) if it is a national of neither of the Contracting States, it shall be
deemed to be a resident of the Contracting State in which its place of effective
management is situated.
4. Where by reason of the provisions of paragraph 1 a person other than an
individual or a company is a resident of both Contracting States, the
competent authorities of the Contracting States shall by mutual agreement endeavour to
settle the question and to determine the mode of application of the Convention to
such person.
Article V
Permanent Establishment
1. For the purposes of this Convention, the term "permanent establishment"
means a fixed place of business in which the business of the enterprise is
wholly or partly carried on.
2. The term "permanent establishment" shall include especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop;
f) a mine, quarry or other place of extraction of natural resources;
g) a building site or construction or assembly project which exists for more
than 12 months.
3. The term "permanent establishment" shall be deemed not to include:
a) the use of facilities solely for the purpose of storage, display or
delivery
of goods or merchandise belonging to the enterprise;
b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery;
c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
d) the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or for collecting information, for the
enterprise;
e) the maintenance of a fixed place of business solely for the purpose of
advertising, for the supply of information, for scientific research, or for
similar activities which have a preparatory or auxiliary character, for the
enterprise.
4. A person -- other than an agent of an independent status to whom
paragraph 5 applies -- acting in a Contracting State on behalf of an
enterprise of
the other Contracting State shall be deemed to be a permanent establishment
in the first-mentioned State if he has, and habitually exercises in that State,
an authority to conclude contracts in the name of the enterprise, unless his
activities are limited to the purchase of goods or merchandise for the enterprise.
5. An enterprise of a Contracting State shall not be deemed to have a
permanent establishment in the other Contracting State merely because it
carries on business in that other State through a broker, general commission agent
or any other agent of an independent status, where such persons are acting in the
ordinary course of their business.
6. The fact that a company which is a resident of a Contracting State
controls or is controlled by a company which is a resident of the other Contracting
State, or which carries on business in that other State (whether through a permanent
establishment or otherwise), shall not of itself constitute either company a
permanent establishment of the other.
III. TAXATION OF INCOME
Article VI
Income from Immovable Property
1. Income from immovable property including income from agriculture or
forestry may be taxed in the Contracting State in which such property is
situated.
2. For the purposes of this Convention, the term "immovable property" shall
be defined in accordance with the law of the Contracting State in which the
property in question is situated. The term shall in any case include
property accessory to immovable property, livestock and equipment used in agriculture
and forestry, rights to which the provisions of general law respecting landed
property apply, usufruct of immovable property and rights to variable or fixed
payments as consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources; ships, boats and aircraft shall not be regarded
as immovable property.
3. The provisions of paragraph 1 shall apply to income derived from the
direct use, letting, or use in any other form of immovable property and to
profits from the alienation of such property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from
immovable property used for the performance of professional services.
Article VII
Business Profits
1. The profits of an enterprise of a Contracting State shall be taxable only
in that State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated therein. If the enterprise
carries on or has carried on business as aforesaid, the profits of the enterprise may be
taxed in the other State but only so much of them as is attributable to that
permanent establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a
Contracting State carries on business in the other Contracting State through
a permanent establishment situated therein, there shall in each Contracting
State be attributed to that permanent establishment the profits which it might be
expected to make if it were a distinct and separate enterprise engaged in the same or
similar activities under the same or similar conditions and dealing wholly
independently with the enterprise of which it is a permanent establishment.
3. In the determination of the profits of a permanent establishment, there
shall be allowed those deductible expenses which are incurred for the
purposes of the permanent establishment including executive and general administrative
expenses, whether incurred in the State in which the permanent establishment
is situated or elsewhere.
4. No profits shall be attributed to a permanent establishment by reason of
the mere purchase by that permanent establishment of goods or merchandise
for the enterprise.
5. For the purposes of the preceding paragraphs, the profits to be
attributed to
the permanent establishment shall be determined by the same method year by
year unless there is good and sufficient reason to the contrary.
6. Where profits include items of income which are dealt with separately in
other Articles of this Convention, then, the provisions of those Articles
shall not be affected by the provisions of this Article.
Article VIII
Shipping and Air Transport
1. Profits derived by an enterprise of a Contracting State from the
operation of ships or aircraft in international traffic shall be taxable only in that
State.
2. Notwithstanding the provisions of paragraph 1 and Article VII, profits
derived from the operation of ships or aircraft used principally to
transport passengers or goods exclusively between places in a Contracting State may be
taxed in that State.
3. The provisions of paragraphs 1 and 2 shall also apply to profits referred
to in those paragraphs derived by an enterprise of a Contracting State from its
participation in a pool, a joint business or in an international operating agency.
Article IX
Associated Enterprises
1. Where
a) an enterprise of a Contracting State participates directly or indirectly in
the management, control or capital of an enterprise of the other Contracting State, or
b) the same persons participate directly or indirectly in the management,
control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State, and in either case conditions
are made or imposed between the two enterprises in their commercial or
financial relations which differ from those which would be made
between independent enterprises, then any profits which would, but for
those conditions, have accrued to one of the enterprises, but, by reason
of those conditions, have not so accrued, may be included in the profits
of that enterprise and taxed accordingly.
2. Where profits on which an enterprise of a Contracting State has been
charged to tax in that State are also included in the profits of an enterprise of the other Contracting State and taxed accordingly, and the profits so included
are profits which would have accrued to that enterprise of the other State, if
the conditions made between the enterprises had been those which would have been
made between independent enterprises, then the first-mentioned State shall
make an appropriated adjustment to the amount of tax charged on those profits in
the first-mentioned State. In determining such an adjustment due regard shall be
had to the other provisions of this Convention in relation to the nature of the
income.
3. A Contracting State shall not change the profits of an enterprise in the
circumstances referred to in paragraph 1 after the expiry of the time limits
provided in its national laws and, in any case, after five years from the
end of the
year in which the profits which would be subject to such change would have
accrued to an enterprise of that State.
Article X
Dividends
1. Dividends paid by a company which is a resident of a Contracting State to
a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends ma y be taxed in the Contracting State of which
the company paying the dividends is a resident, and according to the law of
that State; but if the recipient is the beneficial owner of the dividends, the
tax so charged shall not exceed 15 percent of the gross amount of the dividends.
The provisions of this paragraph shall not affect the taxation of the company on
the profits out of which the dividends are paid.
3. The term "dividends" as used in this Article means income from shares,
"jouissance" shares or "jouissance" rights, mining shares, founders’ shares
or other rights, not being debt-claims, participating in profits, as well as income
assimilated to income from shares by the taxation law of the State of which
the company making the distribution is a resident.
4. The provisions of paragraph 2 shall not apply if the recipient of the
dividends, being a resident of a Contracting State, carries on in the other
Contracting State of which the company paying the dividends is a resident, a
trade or business through a permanent establishment situated therein, or performs
in that other State professional services from a fixed base situated therein,
and the holding by virtue of which the dividends are paid is effectively connected
with such permanent establishment or fixed base. In such a case, the provisions
of Article VII or Article XIV, as the case may be, shall apply.
5. Where a company is a resident of a Contracting State, the other
Contracting State may not impose any tax on the dividends paid by the
company, except insofar as such dividends are paid to a resident of that other State
or insofar as the holding in respect of which the dividends are paid is effectively
connected with a permanent establishment or a fixed base situated in that other State,
nor subject the company’s undistributed profits to a tax on undistributed
profits, even if the dividends paid or the undistributed profits consist wholly or partly
of profits or income arising is such other State.
6. Notwithstanding any provisions of this Convention
a) a company which is a resident of Spain and which has a permanent
establishment in Canada shall, in accordance with the provisions of
Canadian law, remain subject to the additional tax on companies other
than Canadian corporations, but the rate of such tax shall not exceed 15
per cent;
b) a company which is a resident of Canada and which has a permanent
establishment in Spain shall remain subject to the withholding tax in
accordance with the provisions of Spanish law, but the rate of such tax
shall not exceed 15 per cent.
Article XI
Interest
1. Interest arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in that other State.
2. However, such interest may be taxed in the Contracting State in it
arises, and according to the law of that State; but the tax so charged shall,
provided that the interest is taxable in the other Contracting State, not exceed 15
percent of the gross amount of the interest.
3. The term "interest" as used in this Article means income from debt-claims
of every kind, whether or not secured by mortgage, and whether or not
carrying a right to participate in the debtor’s profits, and in particular, income from
government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bond or debentures, as well as income assimilated to income from money lent by the taxation law of the State in which the income arises. However, the term "interest" does not include income dealt with in Article X.
4. The provisions of paragraph 2 shall not apply if the recipient of the
interest, being a resident of a Contracting State, carries on in the other
Contracting State in which the interest arises a trade or business through a permanent
establishment situated therein, or performs in that other State professional
services from a fixed base situated therein, and the debt-claim in respect of which
the interest is paid is effectively connected with such permanent establishment
or fixed base. In such a case, the provisions of Article VII or Article XIV, as
the case may be, shall apply.
5. Interest shall be deemed to arise in a Contracting State when the payer is
that State itself, a political subdivision, a local authority or a resident
of that State.
Where, however, the person paying the interest, whether he is a resident of
a Contracting State or not, has in a Contracting State a permanent
establishment or fixed base in connection with which the indebtedness on which the interest
is paid was incurred, and the interest is borne by that permanent establishment or
fixed base, then such interest shall be deemed to arise in the Contracting State
in which the permanent establishment or fixed base is situated.
6. Where, owing to a special relationship between the payer and the
recipient or between both of them and some other person, the amount of the interest
paid, having regard to the debt-claim for which it is paid, exceeds the amount
which would have been agreed upon by the payer and the recipient in the absence of
such relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In that case, the excess part of the payments shall remain taxable
according to the law of each Contracting State, due regard being had to the
other provisions of this Convention.
7. Notwithstanding the provisions of paragraph 2,
a) interest arising in Spain and paid to a resident of Canada shall be
taxable only in Canada if it is paid in respect of a loan made, guaranteed or
insured, or a credit extended, guaranteed or insured by the Export
Development Corporation; and
b) interest arising in Canada and paid to a resident of Spain shall be
taxable only in Spain if it is paid in respect of a loan made, guaranteed or
insured, or a credit extended, guaranteed or insured by one of the
Spanish Official Credit institutions.
Article XII
Royalties
1. Royalties arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in that other State.
2. However, such royalties may be taxed in the Contracting State in which
they arise, and according to the law of that State; but the tax so charged
shall, provided that the royalties are taxpayer able in the other Contracting
State, not exceed 10 percent of the gross amount of the royalties.
3. Notwithstanding the provisions of paragraph 2, copyright royalties and
other like payments in respect of the production or reproduction of any
literary, dramatic, musical or artistic work (but not including royalties in respect
of motion picture films and works on film or videotape for use in connection with
television) arising in a Contracting State and paid to a resident of the other
Contracting State who is subject to tax thereon shall be taxable only in that other State.
4. The term "royalties" as used in this Article means payments of any kind
received as a consideration for the use of, or the right to use, any
copyright, patent, trade mark, design or model, plan, secret formula or process, or for the use
of, or the right to use, industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientific experience, and includes
payments of any kind in respect of motion picture films and works on film or
videotape for use in connection with television.
5. The provisions of paragraphs 2 and 3 shall not apply if the recipient of
the royalties, being a resident of a Contracting State, carries on in the other
Contracting State in which the royalties arise a trade or business through a
permanent establishment situated therein, or performs in that other State
professional services from a fixed base situated therein, and the right or
property in respect of which the royalties are paid is effectively connected with
such permanent establishment or fixed base. In such a case, the provisions of
Article VII or Article XIV, as the case may be, shall apply.
6. Royalties shall be deemed to arise in a Contracting State when the payer
is that State itself, a political subdivision, a local authority or a resident
of that State. Where, however, the person paying the royalties, whether he is a resident of
a Contracting State or not, has in a Contracting State a permanent
establishment or fixed base in connection with which the obligation to pay the royalties was
incurred, and those royalties are borne by that permanent establishment or
fixed base, then such royalties shall be deemed to arise in the Contracting State
in which the permanent establishment or fixed base is situated.
7. Where, owing to a special relationship between the payer and the
recipient or between both of them and some other person, the amount of the royalties
paid, having regard to the use, right or information for which they are paid,
exceeds the amount which would have been agreed upon by the payer and the recipient in
the absence of such relationship, the provisions of this Article shall apply
only to the last-mentioned amount. In that case, the excess part of the payments shall
remain taxable according to the law of each Contracting State, due regard being had
to the other provisions of this Convention.
Article XIII
Gains from the Alienation of Property
1. Gains from the alienation of immovable property may be taxed in the
Contracting State in which such property is situated.
2. Gains from the alienation of movable property forming part of the
business property of a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State or of movable property pertaining to a
fixed base available to a resident of a Contracting State in the other Contracting
State for the purpose of performing professional services, including such gains
from the alienation of such a permanent establishment (alone or together with the
whole enterprise) or of such a fixed base may be taxed in the other State.
However, gains from the alienation of ships or aircraft operated in international
traffic and movable property pertaining to the operation of such ships or aircraft,
shall be taxable only in the Contracting State in which such property is taxable
according to paragraph 3 of Article XXII.
3. Gains from the alienation of
a) shares of a company the property of which consists principally of
immovable property situated in a Contracting State, or
b) an interest in a partnership or a trust, the property of which consists
principally of immovable property situated in a Contracting State, may
be taxed in that State. For the purposes of this paragraph the term
"immovable property" shall not include property, other than rental
property, in which the business of the company, partnership or trust is
carried on; however, the term shall include shares of a company
described in subparagraph (a) above and an interest in a partnership or a
trust described in subparagraph (b) above.
4. Gains from the alienation of any property, other than those mentioned in
paragraph 1, 2 and 3 shall be taxable only in the Contracting State of which
the alienator is a resident.
5. The provisions of paragraph 4 shall not affect the right of a Contracting
State to tax, according to its law, gains derived by an individual resident
in the other Contracting State from the alienation of any property, if the
alienator:
a) is a national of the first-mentioned Contracting State or was a resident
of that State for fifteen years or more prior to the alienation of the
property, and
b) was a resident of that first-mentioned Contracting State at any time
during the five years immediately preceding such alienation.
Article XIV
Independent Personal Services
1. Income derived by a resident of a Contracting State in respect of
professional services or other independent activities of a similar character
shall be taxable only in that State. However, in the following circumstances such
income may be taxed in the other Contracting State, that is to say:
a) if he has a fixed base regularly available to him in the other
Contracting State for the purpose of performing his activities; in that case, only so
much of the income as is attributable to that fixed base may be taxed in
that other Contracting State; or
b) if his stay in the other Contracting State is for a period or periods
amounting to or exceeding in the aggregate 183 days in the fiscal year; or
c) if the remuneration for his services in the other Contracting State
derived in the fiscal year from residents of that other State exceeds,
(i) in the case of services performed in Spain, one hundred thousand
pesetas (100,000 Pts), and
(ii) in the case of services performed in Canada, two thousand Canadian dollars
($2,000).
notwithstanding that his stay in that State is for a period or periods amounting to less than 183 days during the fiscal year.
2. The term "professional services" includes independent scientific,
literary, artistic, educational or teaching activities as well as the independent
activities of physicians, lawyers, engineers, architects, dentists and accountants.
Article XV
Dependent Personal Services
1. Subject to the provisions of Articles XVI, XVIII and XIX, salaries, wages
and other similar remuneration derived by a resident of a Contracting State
in respect of an employment shall be taxable only in that State unless the
employment is exercised in the other Contracting State. If the employment is
so exercised, such remuneration as is derived there from may be taxed in that
other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the
other Contracting State shall be taxable only in the first-mentioned State if the
recipient is present in the other Contracting State for a period or periods not
exceeding in the aggregate 183 days in the calendar year concerned, and either
a) the remuneration earned in the other Contracting State in the calendar
year concerned does not exceed two thousand Canadian dollars ($2,000)
if the employment is exercised in Canada or one hundred thousand
pesetas (100,000 Pts) if the employment is exercised in Spain; or
b) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the other State, and such remuneration is not borne by a
permanent establishment or a fixed base which the employer has in the
other State.
3. Notwithstanding the preceding provisions of this Article, remuneration in
respect of an employment exercised aboard a ship or aircraft operated in
international traffic by an enterprise of a Contracting State, shall be
taxable only in that State.
Article XVI
Directors’ Fees
Directors’ fees and similar payments derived by a resident of a Contracting
State in his capacity as a member of the board of directors or a similar
organ of a company which is a resident of the other Contracting State, may be taxed in
that other State.
Article XVII
Artistes and Athletes
1. Notwithstanding the provisions of Articles VII, XIV and XV, income
derived by entertainers, such as theatre, motion picture, radio or
television artistes, and musicians, and by athletes, from their personal activities as such may
be taxed in the Contracting State in which these activities are exercised.
2. Where income in respect of personal activities as such of an entertainer
or athlete accrues not to that entertainer or athlete himself but to another
person, that income may, notwithstanding the provisions of Articles VII, XIV and XV, be
taxed in the Contracting State in which the activities of the entertainer or
athlete are exercised.
3. The provisions of paragraph 2 shall not apply if it is established that
neither the entertainer or the athlete nor persons related there to,
participate directly or indirectly in the profits of the person referred to in that
paragraph.
Article XVIII
Pensions and Annuities
1. Pensions and annuities arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other State.
2. Pensions arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in the State in which they arise, and
according to the law of that State. However, in the case of periodic pension payments,
the tax so charged shall not exceed the lesser of
a) 15 percent of the gross amount of the payment, and
b) the rate determined by reference to the amount of tax that the recipient
of the payment would otherwise be required to pay for the year on the total
amount of the periodic pension payments received by him in the year, if
he were resident in the Contracting State in which the payment arises.
3. Annuities arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in the State in which they arise, and
according to the law of that State; but the tax so charged shall not exceed 15 percent of
the portion thereof which is subject to tax in that State. However, this
limitation does not apply to lump-sum payments arising on the surrender, cancellation,
redemption, sale or other alienation of an annuity, or to payments of any
kind under an income-averaging annuity contract.
4. Notwithstanding anything in this Convention:
a) periodic or non-periodic social security pensions and other similar
allowances and war veterans pensions paid by a Contracting State or a
political subdivision, a local authority or a governmental instrumentality
thereof (personne morale ressortissant à son droit public), shall, where a
resident of the other Contracting State is the beneficial owner thereof,
not be taxable in that other State so long as they are not subject to tax in
the first-mentioned State;
b) alimony and other similar payments arising in a Contracting State and
paid to a resident of the other Contracting State who is the beneficial
owner thereof, shall be taxable only in that other State.
Article XIX
Government Service
1. a) Remuneration, other than a pension, paid by a Contracting State or a
political subdivision or a local authority thereof to any individual in respect
of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.
b) However, such remuneration shall be taxable only in the Contracting
State of which the recipient is a resident, if the services are rendered in
that State and the recipient did not become a resident of that State solely
for the purpose of performing his services.
2. The provisions of paragraph 1 shall not apply to remuneration in respect
of services rendered in connection with any trade or business carried on by one
of the Contracting States or a political subdivision or a local authority thereof.
Article XX
Students
Payments which a student, apprentice or business trainee who is, or was
immediately before visiting one of the Contracting States, a resident of the
other Contracting State and who is present in the first-mentioned Contracting
State solely for the purpose of his education or training receives for the purpose
of his maintenance, education or training shall not be taxed in that
first-mentioned State, provided that such payments are made to him from sources outside that State.
Article XXI
Income not Expressly Mentioned
Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Convention may be taxed in
that Contracting State. However, such items of income may be taxed in the
Contracting State in which they arise, and according to the laws of that State.
Article XXII
Capital
1. Capital represented by immovable property may be taxed in the Contracting State in which such property is situated.
2. Capital represented by movable property forming part of the business
property of a permanent establishment of an enterprise, or by movable
property pertaining to a fixed base used for the performance of professional
services, may be taxed in the Contracting State in which the permanent establishment or
fixed base is situated.
3. Ships and aircraft operated by an enterprise of a Contracting State in
international traffic and movable property pertaining to the operation of
such ships and aircraft, shall be taxable only in that State.
4. All other elements of capital of a resident of a Contracting State shall
be taxable only in that State.
V. METHODS FOR PREVENTION OF DOUBLE TAXATION
Article XXIII
Elimination of Double Taxation
1. In the case of Canada, double taxation shall be avoided as follows:
a) Subject to the existing provisions of the law of Canada regarding the
deduction from tax payable in Canada of tax paid in a territory outside
Canada and to any subsequent modification of those provisions -- which
shall not affect the general principle hereof - - and unless a greater
deduction or relief is provided under the laws of Canada, tax payable in
Spain on profits, income or gains arising in Spain shall be deducted from
any Canadian tax payable in respect of such profits, income or gains.
b) Subject to the existing provisions of the law of Canada regarding the
determination of the exempt surplus of a foreign affiliate and to any
subsequent modification of those provisions -- which shall not affect the
general principle hereof -- for the purpose of computing Canadian tax, a
company resident in Canada shall be allowed to deduct in computing its
taxable income any dividend received by it out of the exempt surplus of
a foreign affiliate resident in Spain.
2. For the purposes of paragraph 1(a), tax payable in Spain by a resident of
Canada
a) in respect of profits attributable to a trade or business carried on by
it in
Spain, or
b) in respect of dividends, interest or royalties received by it from a
company which is a resident of Spain, shall be deemed to include any
amount which would have been payable as Spanish tax for any year but
for an exemption from, or reduction of, tax granted for that year or any
- 21 -
part thereof under --
c) any of the following provisions, that is to say: paragraphs 2 and 3 of
Article 6, paragraphs 1, 2, 3, 4 and 5 of Article 7, paragraph 2A of
Article 20 and Articles 29, 31 and 32 of the Decree 3357/1967 of
December 23, 1967, so far as they were in force on, and have not been
modified since, the date of signature of this Convention, or have been
modified only in minor respects so as not to affect their general
character; and except to the extent that any of the said provisions (other
than Articles 7, 29 and 31 of the Decree 3357/1967) has the effect of
exempting or relieving a source of income for a period in excess of ten
years;
d) any other provision which may subsequently be made granting an
exemption or reduction of tax which is agreed by the competent
authorities of the Contracting States to be of a substantially similar
character, if it has not been modified thereafter or has been modified
only in minor respects so as not to affect its general character.
3. In the case of Spain, double taxation shall be avoided as follows:
a) Where a resident of Spain derives income which, in accordance with this
Convention, may be taxed in Canada, Spain shall allow as a deduction
from the tax on the income of that person an amount equal to the tax
paid in Canada. Such deduction shall not, however, exceed that part of
the tax, as computed before the deduction is given, which is appropriate
to the income derived from Canada and such deduction from the Spanish
tax shall apply to both the general taxes as to the prepayments. The
provisions of this paragraph shall not apply to an income tax paid in
Canada in accordance with the provisions of paragraph 5 of Article XIII.
b) Where the income of a company resident in Spain includes dividends
received from a company resident in Canada, the first-mentioned
company is entitled to a relief identical to that which would be
applicable if both companies were resident in Spain.
4. For the purposes of this Article, profits, income or gains of a resident
of a Contracting State which are taxed in the other Contracting State in
accordance with this Convention shall be deemed to arise from sources in that other
State.
VI. SPECIAL PROVISIONS
Article XXIV
Non-Discrimination
1. The nationals of a Contracting State shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith
which is other or more burdensome than the taxation and connected requirements to
which nationals of that other State in the same circumstances are or may be
subjected.
2. The taxation on a permanent establishment which an enterprise of a
Contracting State has in the other Contracting State shall not be less
favourably levied in that other State than the taxation levied on enterprises of that
other State carrying on the same activities.
3. Nothing in this Article shall be construed as obliging a Contracting
State to grant to residents of the other Contracting State any personal
allowances, reliefs and reductions for taxation purposes on account of civil status or family
responsibilities which it grants to its own residents.
4. Enterprises of a Contracting State, the capital of which is wholly or
partly owned or controlled, directly or indirectly, by one or more residents of the
other Contracting State, shall not be subjected in the first-mentioned State to
any taxation or any requirement connected there with which is other or more
burdensome than the taxation and connected requirements to which other
similar enterprises of the first-mentioned State, the capital of which is wholly or
partly owned or controlled, directly or indirectly, by one or more residents of a
third State, are or may be subjected.
5. In this Article, the term "taxation" means taxes which are the subject of
this Convention.
Article XXV
Mutual Agreement Procedure
1. Where a resident of a Contracting State considers that the actions of one
or both of the Contracting States result or will result for him in taxation not
in accordance with this Convention, he may, without prejudice to the remedies
provided by the national laws of those States, address to the competent
authority of the Contracting State of which he is a resident an application in writing
stating the grounds for claiming the revision of such taxation. To be admissible,
the said application must be submitted within two years from the first notification
of the action which gives rise to taxation not in accordance with the Convention.
2. The competent authority referred to in paragraph 1 shall endeavour, if
the objection appears to it to be justified and if it is not itself able to
arrive at an appropriate solution, to resolve the case by mutual agreement with the
competent authority of the other Contracting State, with a view to the avoidance of
taxation
not in accordance with the Convention.
3. The competent authorities of the Contracting States shall endeavour to
resolve by mutual agreement any difficulties or doubts arising as to the
interpretation or application of the Convention. In particular, the
competent
authorities of the Contracting States may consult together to endeavour to
agree:
a) to the same attribution of profits to a resident of a Contracting State
and
its permanent establishment situated in the other Contracting State;
b) to the same allocation of income between a resident of a Contracting
State and any associated person provided for in Article IX.
4. The competent authorities of the Contracting States may consult together
for the elimination of double taxation in cases not provided for in this
Convention.
Article XXVI
Exchange of Information
1. The competent authorities of the Contracting States shall exchange such
information as is necessary for the carrying out of this Convention or of
the domestic laws of the Contracting States concerning taxes covered by this
Convention insofar as the taxation thereunder is in accordance with this
Convention. Any information so exchanged shall be treated as secret and
shall not be disclosed to any persons or authorities other than those concerned
with the assessment or collection of the taxes which are the subject of this
Convention.
2. In no case shall the provisions of paragraph 1 be construed so as to
impose on one of the Contracting States the obligation:
a) to carry out administrative measures at variance with the laws or the
administrative practice of that or of the other Contracting State;
b) to supply particulars which are not obtainable under the laws or in the
normal course of the administration of that or of the other Contracting
State;
c) to supply information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or information,
the disclosure of which would be contrary to public policy (ordre public).
Article XXVII
Diplomatic and Consular Officials
1. Nothing in this Convention shall affect the fiscal privileges of members
of diplomatic or consular missions under the general rules of international law
or under the provisions of special agreements.
2. Notwithstanding Article IV of this Convention, an individual who is a
member of a diplomatic, consular or permanent mission of a Contracting State
which is situated in the other Contracting or in a third State shall be
deemed for the purposes of this Convention to be a resident of these sending State if
he is liable in the sending State to the same obligations in relation to tax on
his total world income as are residents of that sending State.
3. This Convention shall not apply to international Organizations, to organs
or officials thereof and to persons who are members of a diplomatic,
consular or permanent mission of a third State, being present in a Contracting State and
who are not liable in either Contracting State to the same obligations in relation to tax
on their total world income as are residents thereof.
Article XXVIII
Miscellaneous Rules
1. The provisions of this Convention shall not be construed to restrict in
any manner any exclusion, exemption, deduction, credit, or other allowance now
or hereafter accorded
a) by the laws of one of the Contracting States in the determination of the
tax imposed by that Contracting State, or
b) by any other agreement entered into by a Contracting State.
2. The competent authorities of the Contracting States may communicate
with each other directly for the purpose of applying this Convention.
VII. FINAL PROVISIONS
Article XXIX
Entry into Force
1. This Convention shall be ratified and the instruments of ratification
shall be exchanged at 2. The Convention shall enter into force upon the exchange
of instruments of ratification and its provisions shall have effect:
a) in respect of tax withheld at the source on amounts paid or credited to
non-residents on or after the first day of January in the calendar year in
which the exchange of instruments of ratification takes place; and
b) in respect of other taxes, for taxation years beginning on or after the
first day of January in the calendar year in which the exchange of instruments
of ratification takes place.
Article XXX
Termination
This Convention shall continue in effect indefinitely but either Contracting
State may, on or before June 30 in any calendar year after the year of the
exchange of instruments of ratification, give notice of termination to the other
Contracting State and in such event the Convention shall cease to have effect:
a) in respect of tax withheld at the source on amounts paid or credited to
non-residents on or after the first day of January in the calendar year next
following that in which the notice is given; and
b) in respect of other taxes, for taxation years beginning on or after the
first day of January in the calendar year next following that in which the
notice is given.
IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have
signed this Convention.
DONE in duplicate at Ottawa, this 23rd day of November, 1976, in the
English, French and Spanish languages, each version being equally authentic.
FOR THE GOVERNMENT OF CANADA: FOR THE GOVERNMENT OF SPAIN:
Don Jamieson Marceline Oreja Aquirre
PROTOCOL
At the moment of signing the Convention between Canada and Spain, for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income and on Capital, the undersigned have agreed upon
the following provisions which shall be an integral part of the Convention.
1. With respect to paragraph 3 of Article IX, it is understood that a
Contracting State is not obliged to apply the provisions of this paragraph
in the case of fraud, wilful default or neglect.
2. With respect to Article XI, the Spanish Official Credit Institutions
referred to in paragraph 7(b) of that Article are the following:
The External Bank of Spain
The Industrial Credit Bank
The Credit Bank for Construction
It is also understood that the provisions of paragraph 7 of Article XI shall
also apply to any other financial institution as is specified and agreed in
letters exchanged between the competent authorities of the Contracting States.
3. With respect to Article XIV, it is understood that the provisions of
subparagraphs (b) and (c) of paragraph 1 shall not apply to income derived
by a broker, a general commission agent or any other agent of an independent
status.
4. With respect to Articles XVIII and XIX, it is understood that pensions
paid by, or out of funds created by, the Spanish State or a political subdivision
or a local authority thereof to any individual in respect of services rendered to
that State or subdivision or authority thereof, shall be taxable only in Spain.
5. With respect to Article XXI, it is understood that income derived by a
resident of Spain from a trust or an estate which is a resident of Canada
may be taxed in Canada in accordance with its law; however, provided that the
income is taxable in Spain, the tax so charged shall not exceed 15 percent of the
gross amount of the income.
6. It is understood that nothing in this Convention shall be construed as
preventing Canada from imposing a tax on amounts included in the income of a
resident of Canada according to section 91 of the Canadian Income Tax Act.
IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have
signed this Convention.
DONE in duplicate at Ottawa, this 23rd day of November, 1976, in the
English, French and Spanish languages, each version being equally authentic.
FOR THE GOVERNMENT FOR THE GOVERNMENT
OF CANADA: OF SPAIN:
Don Jamieson Marceline Oreja Aquirre
I am a Spanish citizen, I own a company that provides services to other
companies and individuals in different countries. My company is incorporated
in Spain and the main office is there, but I spend half of the year in
Canada too, as a visitor, and manage the company from my home office in
Canada too, since most of the business is done online.
I would like to know if my company should:
A) Charge GST when I invoice my Canadian clients
B) Be charged GST when a Canadian provider invoices me
Thank you!
david ingram replies:
Sounds like you are working illegally in Canada. Although "I" (not
necessarily Citizenship and Immigration) have no problem with your doing
something online in / from Canada for a Spanish, American, British, etc.
organization, when you perform that service in Canada for a Canadian
organization, you are illegal in my opinion.
When you are in Canada the length of time you suggest, you are also making
yourself liable for Canadian tax on your world income unless you manage to
convince Canada that you are still a resident of Spain for income tax
purposes.
You should be charging any Canadian company that you do business for while
in Canada GST if the total billings of your company are over $30,000C because you are a Canadian Company while mind and control are in Canada.
My answer would be quite different if you were only in Canada for 60 days
but what you have told me is that you are working half a year in Canada out
of a home office and the other half of the year in Spain, likely out of a
home office there.
If the Spanish Head office has five or more employees working there and you
come to Canada as a sole person, my answer would be different as well.
I am including here the full text of the Spanish Canadian Income Tax
Convention. Pay attention to Article IV
Your home office would be defined as a permanent establishment.
CONVENTION BETWEEN CANADA AND SPAIN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL
The Government of Canada and the Government of Spain desiring to
conclude a Convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income and on capital, have agreed
as follows:
I. SCOPE OF THE CONVENTION
Article I
Personal Scope
This Convention shall apply to persons who are residents of one or both of
the Contracting States.
Article II
Taxes Covered
1. This Convention shall apply to taxes on income and on capital imposed on
behalf of each Contracting State, irrespective of the manner in which they
are levied.
2. There shall be regarded as taxes on income and on capital all taxes
imposed on total income, on total capital, or on elements of income or of
capital, including taxes on gains from the alienation of movable or immovable
property, taxes on the total amounts of wages or salaries paid by enterprises, as well
as taxes on capital appreciation.
3. The existing taxes to which the Convention shall apply are, in particular:
a) in the case of Canada:
the income taxes imposed by the Government of Canada, (hereinafter
referred to as "Canadian tax");
b) in the case of Spain:
- the income tax on individuals;
- the income tax on companies and other legal persons;
- the following prepayments: the tax on rural and on urban land; the
tax on earned income; the tax on income from capital and the tax on
business and industrial activities and profits;
- the "surface royalty" and the tax on business profits, regulated by the
law of June 27, 1974, applicable to enterprises engaged in
prospecting and exploiting hydrocarbons; (hereinafter referred to as "Spanish tax").4. The Convention shall apply also to any identical or substantially similar
taxes and to taxes on capital which are imposed after the date of signature
of this Convention in addition to, or in place of, the existing taxes. The
Contracting States shall notify each other of changes which have been made in their
respective taxation laws.
II. DEFINITIONS
Article III
General Definitions
1. In this Convention, unless the context otherwise requires:
a)
(i) the term "Canada" used in a geographical sense, means the territory
of Canada, including any area beyond the territorial waters of
Canada which, under the laws of Canada, is an area within which
Canada may exercise rights with respect to the sea-bed and sub-soil
and their natural resources;
(ii) the term "Spain" means the Spanish State (Peninsular Spain, the
Balearic and Canary Islands, the Spanish towns in Africa) and the
areas adjacent to the territorial waters of Spain for which, in
accordance with international law, Spain may exercise rights with
respect to the sea-bed and sub-soil and their natural resources;
b) the terms "a Contracting State" and "the other Contracting State" mean,
as the context requires, Canada or Spain;
c) the term "person" includes an individual, an estate, a trust, a company,
a partnership and any other body of persons;
d) the term "company" means any body corporate or any entity which is
treated as a body corporate for tax purposes; in French, the term
"société" also means a "corporation" within the meaning of Canadian law;
e) the terms "enterprise of a Contracting State" and "enterprise of the
other Contracting State" mean respectively an enterprise carried on by a
resident of a Contracting State and an enterprise carried on by a resident
of the other Contracting State;
f) the term "competent authority" means:
(i) in the case of Canada, the Minister of National Revenue or his
authorized representative,
(ii) in the case of Spain, the Minister of Finance, the General Technical
Secretary, or any other authority duly authorized by the Minister;
g) the term "tax" means Canadian tax or Spanish tax, as the context
requires;
h) the term "national" means:
(i) any individual possessing the nationality of a Contracting State;
(ii) any legal person, partnership and association deriving its status as
such from the law in force in a Contracting State;
i) the term "international traffic" means any transport by a ship or
aircraft operated by an enterprise which has its place of effective management in
a Contracting State, except when the ship or aircraft is operated solely
between places in the other Contracting State.
2. As regards the application of the Convention by a Contracting State any
term not otherwise defined shall, unless the context otherwise requires,
have the meaning which it has under the laws of that Contracting State relating to
the taxes which are the subject of the Convention.
Article IV
Fiscal Domicile
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 liable to
taxation
therein by reason of his domicile, residence, place of effective management
or any
other criterion of a similar nature.
2. Where by reason of the provisions of paragraph 1 an individual is a
resident of both Contracting States, then this case shall be determined in
accordance with the following rules:
a) he shall be deemed to be a resident of the Contracting State in which he
has a permanent home available to him. If he has a permanent home
available to him in both Contracting States, he shall be deemed to be a
resident of the Contracting State with which his personal and economic
relations are closest (hereinafter referred to as his "centre of vital
interests");
b) if the Contracting State in which he has his centre of vital interests
cannot be determined, or if he has not a permanent home available to
him in either Contracting State, he shall be deemed to be a resident of
the Contracting State in which he has an habitual abode;
c) if he has an habitual abode in both Contracting States or in neither of
them, he shall be deemed to be a resident of the Contracting State of
which he is a national;
d) if he is a national of both Contracting States or of neither of them, the
competent authorities of the Contracting States shall settle the question
by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a company is a resident
of both Contracting States, then this case shall be determined in accordance
with the following rules:
a) it shall be deemed to be a resident of the Contracting State of which it
is a national;
b) if it is a national of neither of the Contracting States, it shall be
deemed to be a resident of the Contracting State in which its place of effective
management is situated.
4. Where by reason of the provisions of paragraph 1 a person other than an
individual or a company is a resident of both Contracting States, the
competent authorities of the Contracting States shall by mutual agreement endeavour to
settle the question and to determine the mode of application of the Convention to
such person.
Article V
Permanent Establishment
1. For the purposes of this Convention, the term "permanent establishment"
means a fixed place of business in which the business of the enterprise is
wholly or partly carried on.
2. The term "permanent establishment" shall include especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop;
f) a mine, quarry or other place of extraction of natural resources;
g) a building site or construction or assembly project which exists for more
than 12 months.
3. The term "permanent establishment" shall be deemed not to include:
a) the use of facilities solely for the purpose of storage, display or
delivery
of goods or merchandise belonging to the enterprise;
b) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of storage, display or delivery;
c) the maintenance of a stock of goods or merchandise belonging to the
enterprise solely for the purpose of processing by another enterprise;
d) the maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise, or for collecting information, for the
enterprise;
e) the maintenance of a fixed place of business solely for the purpose of
advertising, for the supply of information, for scientific research, or for
similar activities which have a preparatory or auxiliary character, for the
enterprise.
4. A person -- other than an agent of an independent status to whom
paragraph 5 applies -- acting in a Contracting State on behalf of an
enterprise of
the other Contracting State shall be deemed to be a permanent establishment
in the first-mentioned State if he has, and habitually exercises in that State,
an authority to conclude contracts in the name of the enterprise, unless his
activities are limited to the purchase of goods or merchandise for the enterprise.
5. An enterprise of a Contracting State shall not be deemed to have a
permanent establishment in the other Contracting State merely because it
carries on business in that other State through a broker, general commission agent
or any other agent of an independent status, where such persons are acting in the
ordinary course of their business.
6. The fact that a company which is a resident of a Contracting State
controls or is controlled by a company which is a resident of the other Contracting
State, or which carries on business in that other State (whether through a permanent
establishment or otherwise), shall not of itself constitute either company a
permanent establishment of the other.
III. TAXATION OF INCOME
Article VI
Income from Immovable Property
1. Income from immovable property including income from agriculture or
forestry may be taxed in the Contracting State in which such property is
situated.
2. For the purposes of this Convention, the term "immovable property" shall
be defined in accordance with the law of the Contracting State in which the
property in question is situated. The term shall in any case include
property accessory to immovable property, livestock and equipment used in agriculture
and forestry, rights to which the provisions of general law respecting landed
property apply, usufruct of immovable property and rights to variable or fixed
payments as consideration for the working of, or the right to work, mineral deposits,
sources and other natural resources; ships, boats and aircraft shall not be regarded
as immovable property.
3. The provisions of paragraph 1 shall apply to income derived from the
direct use, letting, or use in any other form of immovable property and to
profits from the alienation of such property.
4. The provisions of paragraphs 1 and 3 shall also apply to the income from
immovable property used for the performance of professional services.
Article VII
Business Profits
1. The profits of an enterprise of a Contracting State shall be taxable only
in that State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated therein. If the enterprise
carries on or has carried on business as aforesaid, the profits of the enterprise may be
taxed in the other State but only so much of them as is attributable to that
permanent establishment.
2. Subject to the provisions of paragraph 3, where an enterprise of a
Contracting State carries on business in the other Contracting State through
a permanent establishment situated therein, there shall in each Contracting
State be attributed to that permanent establishment the profits which it might be
expected to make if it were a distinct and separate enterprise engaged in the same or
similar activities under the same or similar conditions and dealing wholly
independently with the enterprise of which it is a permanent establishment.
3. In the determination of the profits of a permanent establishment, there
shall be allowed those deductible expenses which are incurred for the
purposes of the permanent establishment including executive and general administrative
expenses, whether incurred in the State in which the permanent establishment
is situated or elsewhere.
4. No profits shall be attributed to a permanent establishment by reason of
the mere purchase by that permanent establishment of goods or merchandise
for the enterprise.
5. For the purposes of the preceding paragraphs, the profits to be
attributed to
the permanent establishment shall be determined by the same method year by
year unless there is good and sufficient reason to the contrary.
6. Where profits include items of income which are dealt with separately in
other Articles of this Convention, then, the provisions of those Articles
shall not be affected by the provisions of this Article.
Article VIII
Shipping and Air Transport
1. Profits derived by an enterprise of a Contracting State from the
operation of ships or aircraft in international traffic shall be taxable only in that
State.
2. Notwithstanding the provisions of paragraph 1 and Article VII, profits
derived from the operation of ships or aircraft used principally to
transport passengers or goods exclusively between places in a Contracting State may be
taxed in that State.
3. The provisions of paragraphs 1 and 2 shall also apply to profits referred
to in those paragraphs derived by an enterprise of a Contracting State from its
participation in a pool, a joint business or in an international operating agency.
Article IX
Associated Enterprises
1. Where
a) an enterprise of a Contracting State participates directly or indirectly in
the management, control or capital of an enterprise of the other Contracting State, or
b) the same persons participate directly or indirectly in the management,
control or capital of an enterprise of a Contracting State and an
enterprise of the other Contracting State, and in either case conditions
are made or imposed between the two enterprises in their commercial or
financial relations which differ from those which would be made
between independent enterprises, then any profits which would, but for
those conditions, have accrued to one of the enterprises, but, by reason
of those conditions, have not so accrued, may be included in the profits
of that enterprise and taxed accordingly.
2. Where profits on which an enterprise of a Contracting State has been
charged to tax in that State are also included in the profits of an enterprise of the other Contracting State and taxed accordingly, and the profits so included
are profits which would have accrued to that enterprise of the other State, if
the conditions made between the enterprises had been those which would have been
made between independent enterprises, then the first-mentioned State shall
make an appropriated adjustment to the amount of tax charged on those profits in
the first-mentioned State. In determining such an adjustment due regard shall be
had to the other provisions of this Convention in relation to the nature of the
income.
3. A Contracting State shall not change the profits of an enterprise in the
circumstances referred to in paragraph 1 after the expiry of the time limits
provided in its national laws and, in any case, after five years from the
end of the
year in which the profits which would be subject to such change would have
accrued to an enterprise of that State.
Article X
Dividends
1. Dividends paid by a company which is a resident of a Contracting State to
a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends ma y be taxed in the Contracting State of which
the company paying the dividends is a resident, and according to the law of
that State; but if the recipient is the beneficial owner of the dividends, the
tax so charged shall not exceed 15 percent of the gross amount of the dividends.
The provisions of this paragraph shall not affect the taxation of the company on
the profits out of which the dividends are paid.
3. The term "dividends" as used in this Article means income from shares,
"jouissance" shares or "jouissance" rights, mining shares, founders’ shares
or other rights, not being debt-claims, participating in profits, as well as income
assimilated to income from shares by the taxation law of the State of which
the company making the distribution is a resident.
4. The provisions of paragraph 2 shall not apply if the recipient of the
dividends, being a resident of a Contracting State, carries on in the other
Contracting State of which the company paying the dividends is a resident, a
trade or business through a permanent establishment situated therein, or performs
in that other State professional services from a fixed base situated therein,
and the holding by virtue of which the dividends are paid is effectively connected
with such permanent establishment or fixed base. In such a case, the provisions
of Article VII or Article XIV, as the case may be, shall apply.
5. Where a company is a resident of a Contracting State, the other
Contracting State may not impose any tax on the dividends paid by the
company, except insofar as such dividends are paid to a resident of that other State
or insofar as the holding in respect of which the dividends are paid is effectively
connected with a permanent establishment or a fixed base situated in that other State,
nor subject the company’s undistributed profits to a tax on undistributed
profits, even if the dividends paid or the undistributed profits consist wholly or partly
of profits or income arising is such other State.
6. Notwithstanding any provisions of this Convention
a) a company which is a resident of Spain and which has a permanent
establishment in Canada shall, in accordance with the provisions of
Canadian law, remain subject to the additional tax on companies other
than Canadian corporations, but the rate of such tax shall not exceed 15
per cent;
b) a company which is a resident of Canada and which has a permanent
establishment in Spain shall remain subject to the withholding tax in
accordance with the provisions of Spanish law, but the rate of such tax
shall not exceed 15 per cent.
Article XI
Interest
1. Interest arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in that other State.
2. However, such interest may be taxed in the Contracting State in it
arises, and according to the law of that State; but the tax so charged shall,
provided that the interest is taxable in the other Contracting State, not exceed 15
percent of the gross amount of the interest.
3. The term "interest" as used in this Article means income from debt-claims
of every kind, whether or not secured by mortgage, and whether or not
carrying a right to participate in the debtor’s profits, and in particular, income from
government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bond or debentures, as well as income assimilated to income from money lent by the taxation law of the State in which the income arises. However, the term "interest" does not include income dealt with in Article X.
4. The provisions of paragraph 2 shall not apply if the recipient of the
interest, being a resident of a Contracting State, carries on in the other
Contracting State in which the interest arises a trade or business through a permanent
establishment situated therein, or performs in that other State professional
services from a fixed base situated therein, and the debt-claim in respect of which
the interest is paid is effectively connected with such permanent establishment
or fixed base. In such a case, the provisions of Article VII or Article XIV, as
the case may be, shall apply.
5. Interest shall be deemed to arise in a Contracting State when the payer is
that State itself, a political subdivision, a local authority or a resident
of that State.
Where, however, the person paying the interest, whether he is a resident of
a Contracting State or not, has in a Contracting State a permanent
establishment or fixed base in connection with which the indebtedness on which the interest
is paid was incurred, and the interest is borne by that permanent establishment or
fixed base, then such interest shall be deemed to arise in the Contracting State
in which the permanent establishment or fixed base is situated.
6. Where, owing to a special relationship between the payer and the
recipient or between both of them and some other person, the amount of the interest
paid, having regard to the debt-claim for which it is paid, exceeds the amount
which would have been agreed upon by the payer and the recipient in the absence of
such relationship, the provisions of this Article shall apply only to the last-mentioned
amount. In that case, the excess part of the payments shall remain taxable
according to the law of each Contracting State, due regard being had to the
other provisions of this Convention.
7. Notwithstanding the provisions of paragraph 2,
a) interest arising in Spain and paid to a resident of Canada shall be
taxable only in Canada if it is paid in respect of a loan made, guaranteed or
insured, or a credit extended, guaranteed or insured by the Export
Development Corporation; and
b) interest arising in Canada and paid to a resident of Spain shall be
taxable only in Spain if it is paid in respect of a loan made, guaranteed or
insured, or a credit extended, guaranteed or insured by one of the
Spanish Official Credit institutions.
Article XII
Royalties
1. Royalties arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in that other State.
2. However, such royalties may be taxed in the Contracting State in which
they arise, and according to the law of that State; but the tax so charged
shall, provided that the royalties are taxpayer able in the other Contracting
State, not exceed 10 percent of the gross amount of the royalties.
3. Notwithstanding the provisions of paragraph 2, copyright royalties and
other like payments in respect of the production or reproduction of any
literary, dramatic, musical or artistic work (but not including royalties in respect
of motion picture films and works on film or videotape for use in connection with
television) arising in a Contracting State and paid to a resident of the other
Contracting State who is subject to tax thereon shall be taxable only in that other State.
4. The term "royalties" as used in this Article means payments of any kind
received as a consideration for the use of, or the right to use, any
copyright, patent, trade mark, design or model, plan, secret formula or process, or for the use
of, or the right to use, industrial, commercial or scientific equipment, or for
information concerning industrial, commercial or scientific experience, and includes
payments of any kind in respect of motion picture films and works on film or
videotape for use in connection with television.
5. The provisions of paragraphs 2 and 3 shall not apply if the recipient of
the royalties, being a resident of a Contracting State, carries on in the other
Contracting State in which the royalties arise a trade or business through a
permanent establishment situated therein, or performs in that other State
professional services from a fixed base situated therein, and the right or
property in respect of which the royalties are paid is effectively connected with
such permanent establishment or fixed base. In such a case, the provisions of
Article VII or Article XIV, as the case may be, shall apply.
6. Royalties shall be deemed to arise in a Contracting State when the payer
is that State itself, a political subdivision, a local authority or a resident
of that State. Where, however, the person paying the royalties, whether he is a resident of
a Contracting State or not, has in a Contracting State a permanent
establishment or fixed base in connection with which the obligation to pay the royalties was
incurred, and those royalties are borne by that permanent establishment or
fixed base, then such royalties shall be deemed to arise in the Contracting State
in which the permanent establishment or fixed base is situated.
7. Where, owing to a special relationship between the payer and the
recipient or between both of them and some other person, the amount of the royalties
paid, having regard to the use, right or information for which they are paid,
exceeds the amount which would have been agreed upon by the payer and the recipient in
the absence of such relationship, the provisions of this Article shall apply
only to the last-mentioned amount. In that case, the excess part of the payments shall
remain taxable according to the law of each Contracting State, due regard being had
to the other provisions of this Convention.
Article XIII
Gains from the Alienation of Property
1. Gains from the alienation of immovable property may be taxed in the
Contracting State in which such property is situated.
2. Gains from the alienation of movable property forming part of the
business property of a permanent establishment which an enterprise of a Contracting
State has in the other Contracting State or of movable property pertaining to a
fixed base available to a resident of a Contracting State in the other Contracting
State for the purpose of performing professional services, including such gains
from the alienation of such a permanent establishment (alone or together with the
whole enterprise) or of such a fixed base may be taxed in the other State.
However, gains from the alienation of ships or aircraft operated in international
traffic and movable property pertaining to the operation of such ships or aircraft,
shall be taxable only in the Contracting State in which such property is taxable
according to paragraph 3 of Article XXII.
3. Gains from the alienation of
a) shares of a company the property of which consists principally of
immovable property situated in a Contracting State, or
b) an interest in a partnership or a trust, the property of which consists
principally of immovable property situated in a Contracting State, may
be taxed in that State. For the purposes of this paragraph the term
"immovable property" shall not include property, other than rental
property, in which the business of the company, partnership or trust is
carried on; however, the term shall include shares of a company
described in subparagraph (a) above and an interest in a partnership or a
trust described in subparagraph (b) above.
4. Gains from the alienation of any property, other than those mentioned in
paragraph 1, 2 and 3 shall be taxable only in the Contracting State of which
the alienator is a resident.
5. The provisions of paragraph 4 shall not affect the right of a Contracting
State to tax, according to its law, gains derived by an individual resident
in the other Contracting State from the alienation of any property, if the
alienator:
a) is a national of the first-mentioned Contracting State or was a resident
of that State for fifteen years or more prior to the alienation of the
property, and
b) was a resident of that first-mentioned Contracting State at any time
during the five years immediately preceding such alienation.
Article XIV
Independent Personal Services
1. Income derived by a resident of a Contracting State in respect of
professional services or other independent activities of a similar character
shall be taxable only in that State. However, in the following circumstances such
income may be taxed in the other Contracting State, that is to say:
a) if he has a fixed base regularly available to him in the other
Contracting State for the purpose of performing his activities; in that case, only so
much of the income as is attributable to that fixed base may be taxed in
that other Contracting State; or
b) if his stay in the other Contracting State is for a period or periods
amounting to or exceeding in the aggregate 183 days in the fiscal year; or
c) if the remuneration for his services in the other Contracting State
derived in the fiscal year from residents of that other State exceeds,
(i) in the case of services performed in Spain, one hundred thousand
pesetas (100,000 Pts), and
(ii) in the case of services performed in Canada, two thousand Canadian dollars
($2,000).
notwithstanding that his stay in that State is for a period or periods amounting to less than 183 days during the fiscal year.
2. The term "professional services" includes independent scientific,
literary, artistic, educational or teaching activities as well as the independent
activities of physicians, lawyers, engineers, architects, dentists and accountants.
Article XV
Dependent Personal Services
1. Subject to the provisions of Articles XVI, XVIII and XIX, salaries, wages
and other similar remuneration derived by a resident of a Contracting State
in respect of an employment shall be taxable only in that State unless the
employment is exercised in the other Contracting State. If the employment is
so exercised, such remuneration as is derived there from may be taxed in that
other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a
resident of a Contracting State in respect of an employment exercised in the
other Contracting State shall be taxable only in the first-mentioned State if the
recipient is present in the other Contracting State for a period or periods not
exceeding in the aggregate 183 days in the calendar year concerned, and either
a) the remuneration earned in the other Contracting State in the calendar
year concerned does not exceed two thousand Canadian dollars ($2,000)
if the employment is exercised in Canada or one hundred thousand
pesetas (100,000 Pts) if the employment is exercised in Spain; or
b) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the other State, and such remuneration is not borne by a
permanent establishment or a fixed base which the employer has in the
other State.
3. Notwithstanding the preceding provisions of this Article, remuneration in
respect of an employment exercised aboard a ship or aircraft operated in
international traffic by an enterprise of a Contracting State, shall be
taxable only in that State.
Article XVI
Directors’ Fees
Directors’ fees and similar payments derived by a resident of a Contracting
State in his capacity as a member of the board of directors or a similar
organ of a company which is a resident of the other Contracting State, may be taxed in
that other State.
Article XVII
Artistes and Athletes
1. Notwithstanding the provisions of Articles VII, XIV and XV, income
derived by entertainers, such as theatre, motion picture, radio or
television artistes, and musicians, and by athletes, from their personal activities as such may
be taxed in the Contracting State in which these activities are exercised.
2. Where income in respect of personal activities as such of an entertainer
or athlete accrues not to that entertainer or athlete himself but to another
person, that income may, notwithstanding the provisions of Articles VII, XIV and XV, be
taxed in the Contracting State in which the activities of the entertainer or
athlete are exercised.
3. The provisions of paragraph 2 shall not apply if it is established that
neither the entertainer or the athlete nor persons related there to,
participate directly or indirectly in the profits of the person referred to in that
paragraph.
Article XVIII
Pensions and Annuities
1. Pensions and annuities arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that other State.
2. Pensions arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in the State in which they arise, and
according to the law of that State. However, in the case of periodic pension payments,
the tax so charged shall not exceed the lesser of
a) 15 percent of the gross amount of the payment, and
b) the rate determined by reference to the amount of tax that the recipient
of the payment would otherwise be required to pay for the year on the total
amount of the periodic pension payments received by him in the year, if
he were resident in the Contracting State in which the payment arises.
3. Annuities arising in a Contracting State and paid to a resident of the
other Contracting State may be taxed in the State in which they arise, and
according to the law of that State; but the tax so charged shall not exceed 15 percent of
the portion thereof which is subject to tax in that State. However, this
limitation does not apply to lump-sum payments arising on the surrender, cancellation,
redemption, sale or other alienation of an annuity, or to payments of any
kind under an income-averaging annuity contract.
4. Notwithstanding anything in this Convention:
a) periodic or non-periodic social security pensions and other similar
allowances and war veterans pensions paid by a Contracting State or a
political subdivision, a local authority or a governmental instrumentality
thereof (personne morale ressortissant à son droit public), shall, where a
resident of the other Contracting State is the beneficial owner thereof,
not be taxable in that other State so long as they are not subject to tax in
the first-mentioned State;
b) alimony and other similar payments arising in a Contracting State and
paid to a resident of the other Contracting State who is the beneficial
owner thereof, shall be taxable only in that other State.
Article XIX
Government Service
1. a) Remuneration, other than a pension, paid by a Contracting State or a
political subdivision or a local authority thereof to any individual in respect
of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.
b) However, such remuneration shall be taxable only in the Contracting
State of which the recipient is a resident, if the services are rendered in
that State and the recipient did not become a resident of that State solely
for the purpose of performing his services.
2. The provisions of paragraph 1 shall not apply to remuneration in respect
of services rendered in connection with any trade or business carried on by one
of the Contracting States or a political subdivision or a local authority thereof.
Article XX
Students
Payments which a student, apprentice or business trainee who is, or was
immediately before visiting one of the Contracting States, a resident of the
other Contracting State and who is present in the first-mentioned Contracting
State solely for the purpose of his education or training receives for the purpose
of his maintenance, education or training shall not be taxed in that
first-mentioned State, provided that such payments are made to him from sources outside that State.
Article XXI
Income not Expressly Mentioned
Items of income of a resident of a Contracting State which are not expressly mentioned in the foregoing Articles of this Convention may be taxed in
that Contracting State. However, such items of income may be taxed in the
Contracting State in which they arise, and according to the laws of that State.
Article XXII
Capital
1. Capital represented by immovable property may be taxed in the Contracting State in which such property is situated.
2. Capital represented by movable property forming part of the business
property of a permanent establishment of an enterprise, or by movable
property pertaining to a fixed base used for the performance of professional
services, may be taxed in the Contracting State in which the permanent establishment or
fixed base is situated.
3. Ships and aircraft operated by an enterprise of a Contracting State in
international traffic and movable property pertaining to the operation of
such ships and aircraft, shall be taxable only in that State.
4. All other elements of capital of a resident of a Contracting State shall
be taxable only in that State.
V. METHODS FOR PREVENTION OF DOUBLE TAXATION
Article XXIII
Elimination of Double Taxation
1. In the case of Canada, double taxation shall be avoided as follows:
a) Subject to the existing provisions of the law of Canada regarding the
deduction from tax payable in Canada of tax paid in a territory outside
Canada and to any subsequent modification of those provisions -- which
shall not affect the general principle hereof - - and unless a greater
deduction or relief is provided under the laws of Canada, tax payable in
Spain on profits, income or gains arising in Spain shall be deducted from
any Canadian tax payable in respect of such profits, income or gains.
b) Subject to the existing provisions of the law of Canada regarding the
determination of the exempt surplus of a foreign affiliate and to any
subsequent modification of those provisions -- which shall not affect the
general principle hereof -- for the purpose of computing Canadian tax, a
company resident in Canada shall be allowed to deduct in computing its
taxable income any dividend received by it out of the exempt surplus of
a foreign affiliate resident in Spain.
2. For the purposes of paragraph 1(a), tax payable in Spain by a resident of
Canada
a) in respect of profits attributable to a trade or business carried on by
it in
Spain, or
b) in respect of dividends, interest or royalties received by it from a
company which is a resident of Spain, shall be deemed to include any
amount which would have been payable as Spanish tax for any year but
for an exemption from, or reduction of, tax granted for that year or any
- 21 -
part thereof under --
c) any of the following provisions, that is to say: paragraphs 2 and 3 of
Article 6, paragraphs 1, 2, 3, 4 and 5 of Article 7, paragraph 2A of
Article 20 and Articles 29, 31 and 32 of the Decree 3357/1967 of
December 23, 1967, so far as they were in force on, and have not been
modified since, the date of signature of this Convention, or have been
modified only in minor respects so as not to affect their general
character; and except to the extent that any of the said provisions (other
than Articles 7, 29 and 31 of the Decree 3357/1967) has the effect of
exempting or relieving a source of income for a period in excess of ten
years;
d) any other provision which may subsequently be made granting an
exemption or reduction of tax which is agreed by the competent
authorities of the Contracting States to be of a substantially similar
character, if it has not been modified thereafter or has been modified
only in minor respects so as not to affect its general character.
3. In the case of Spain, double taxation shall be avoided as follows:
a) Where a resident of Spain derives income which, in accordance with this
Convention, may be taxed in Canada, Spain shall allow as a deduction
from the tax on the income of that person an amount equal to the tax
paid in Canada. Such deduction shall not, however, exceed that part of
the tax, as computed before the deduction is given, which is appropriate
to the income derived from Canada and such deduction from the Spanish
tax shall apply to both the general taxes as to the prepayments. The
provisions of this paragraph shall not apply to an income tax paid in
Canada in accordance with the provisions of paragraph 5 of Article XIII.
b) Where the income of a company resident in Spain includes dividends
received from a company resident in Canada, the first-mentioned
company is entitled to a relief identical to that which would be
applicable if both companies were resident in Spain.
4. For the purposes of this Article, profits, income or gains of a resident
of a Contracting State which are taxed in the other Contracting State in
accordance with this Convention shall be deemed to arise from sources in that other
State.
VI. SPECIAL PROVISIONS
Article XXIV
Non-Discrimination
1. The nationals of a Contracting State shall not be subjected in the other
Contracting State to any taxation or any requirement connected therewith
which is other or more burdensome than the taxation and connected requirements to
which nationals of that other State in the same circumstances are or may be
subjected.
2. The taxation on a permanent establishment which an enterprise of a
Contracting State has in the other Contracting State shall not be less
favourably levied in that other State than the taxation levied on enterprises of that
other State carrying on the same activities.
3. Nothing in this Article shall be construed as obliging a Contracting
State to grant to residents of the other Contracting State any personal
allowances, reliefs and reductions for taxation purposes on account of civil status or family
responsibilities which it grants to its own residents.
4. Enterprises of a Contracting State, the capital of which is wholly or
partly owned or controlled, directly or indirectly, by one or more residents of the
other Contracting State, shall not be subjected in the first-mentioned State to
any taxation or any requirement connected there with which is other or more
burdensome than the taxation and connected requirements to which other
similar enterprises of the first-mentioned State, the capital of which is wholly or
partly owned or controlled, directly or indirectly, by one or more residents of a
third State, are or may be subjected.
5. In this Article, the term "taxation" means taxes which are the subject of
this Convention.
Article XXV
Mutual Agreement Procedure
1. Where a resident of a Contracting State considers that the actions of one
or both of the Contracting States result or will result for him in taxation not
in accordance with this Convention, he may, without prejudice to the remedies
provided by the national laws of those States, address to the competent
authority of the Contracting State of which he is a resident an application in writing
stating the grounds for claiming the revision of such taxation. To be admissible,
the said application must be submitted within two years from the first notification
of the action which gives rise to taxation not in accordance with the Convention.
2. The competent authority referred to in paragraph 1 shall endeavour, if
the objection appears to it to be justified and if it is not itself able to
arrive at an appropriate solution, to resolve the case by mutual agreement with the
competent authority of the other Contracting State, with a view to the avoidance of
taxation
not in accordance with the Convention.
3. The competent authorities of the Contracting States shall endeavour to
resolve by mutual agreement any difficulties or doubts arising as to the
interpretation or application of the Convention. In particular, the
competent
authorities of the Contracting States may consult together to endeavour to
agree:
a) to the same attribution of profits to a resident of a Contracting State
and
its permanent establishment situated in the other Contracting State;
b) to the same allocation of income between a resident of a Contracting
State and any associated person provided for in Article IX.
4. The competent authorities of the Contracting States may consult together
for the elimination of double taxation in cases not provided for in this
Convention.
Article XXVI
Exchange of Information
1. The competent authorities of the Contracting States shall exchange such
information as is necessary for the carrying out of this Convention or of
the domestic laws of the Contracting States concerning taxes covered by this
Convention insofar as the taxation thereunder is in accordance with this
Convention. Any information so exchanged shall be treated as secret and
shall not be disclosed to any persons or authorities other than those concerned
with the assessment or collection of the taxes which are the subject of this
Convention.
2. In no case shall the provisions of paragraph 1 be construed so as to
impose on one of the Contracting States the obligation:
a) to carry out administrative measures at variance with the laws or the
administrative practice of that or of the other Contracting State;
b) to supply particulars which are not obtainable under the laws or in the
normal course of the administration of that or of the other Contracting
State;
c) to supply information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or information,
the disclosure of which would be contrary to public policy (ordre public).
Article XXVII
Diplomatic and Consular Officials
1. Nothing in this Convention shall affect the fiscal privileges of members
of diplomatic or consular missions under the general rules of international law
or under the provisions of special agreements.
2. Notwithstanding Article IV of this Convention, an individual who is a
member of a diplomatic, consular or permanent mission of a Contracting State
which is situated in the other Contracting or in a third State shall be
deemed for the purposes of this Convention to be a resident of these sending State if
he is liable in the sending State to the same obligations in relation to tax on
his total world income as are residents of that sending State.
3. This Convention shall not apply to international Organizations, to organs
or officials thereof and to persons who are members of a diplomatic,
consular or permanent mission of a third State, being present in a Contracting State and
who are not liable in either Contracting State to the same obligations in relation to tax
on their total world income as are residents thereof.
Article XXVIII
Miscellaneous Rules
1. The provisions of this Convention shall not be construed to restrict in
any manner any exclusion, exemption, deduction, credit, or other allowance now
or hereafter accorded
a) by the laws of one of the Contracting States in the determination of the
tax imposed by that Contracting State, or
b) by any other agreement entered into by a Contracting State.
2. The competent authorities of the Contracting States may communicate
with each other directly for the purpose of applying this Convention.
VII. FINAL PROVISIONS
Article XXIX
Entry into Force
1. This Convention shall be ratified and the instruments of ratification
shall be exchanged at 2. The Convention shall enter into force upon the exchange
of instruments of ratification and its provisions shall have effect:
a) in respect of tax withheld at the source on amounts paid or credited to
non-residents on or after the first day of January in the calendar year in
which the exchange of instruments of ratification takes place; and
b) in respect of other taxes, for taxation years beginning on or after the
first day of January in the calendar year in which the exchange of instruments
of ratification takes place.
Article XXX
Termination
This Convention shall continue in effect indefinitely but either Contracting
State may, on or before June 30 in any calendar year after the year of the
exchange of instruments of ratification, give notice of termination to the other
Contracting State and in such event the Convention shall cease to have effect:
a) in respect of tax withheld at the source on amounts paid or credited to
non-residents on or after the first day of January in the calendar year next
following that in which the notice is given; and
b) in respect of other taxes, for taxation years beginning on or after the
first day of January in the calendar year next following that in which the
notice is given.
IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have
signed this Convention.
DONE in duplicate at Ottawa, this 23rd day of November, 1976, in the
English, French and Spanish languages, each version being equally authentic.
FOR THE GOVERNMENT OF CANADA: FOR THE GOVERNMENT OF SPAIN:
Don Jamieson Marceline Oreja Aquirre
PROTOCOL
At the moment of signing the Convention between Canada and Spain, for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income and on Capital, the undersigned have agreed upon
the following provisions which shall be an integral part of the Convention.
1. With respect to paragraph 3 of Article IX, it is understood that a
Contracting State is not obliged to apply the provisions of this paragraph
in the case of fraud, wilful default or neglect.
2. With respect to Article XI, the Spanish Official Credit Institutions
referred to in paragraph 7(b) of that Article are the following:
The External Bank of Spain
The Industrial Credit Bank
The Credit Bank for Construction
It is also understood that the provisions of paragraph 7 of Article XI shall
also apply to any other financial institution as is specified and agreed in
letters exchanged between the competent authorities of the Contracting States.
3. With respect to Article XIV, it is understood that the provisions of
subparagraphs (b) and (c) of paragraph 1 shall not apply to income derived
by a broker, a general commission agent or any other agent of an independent
status.
4. With respect to Articles XVIII and XIX, it is understood that pensions
paid by, or out of funds created by, the Spanish State or a political subdivision
or a local authority thereof to any individual in respect of services rendered to
that State or subdivision or authority thereof, shall be taxable only in Spain.
5. With respect to Article XXI, it is understood that income derived by a
resident of Spain from a trust or an estate which is a resident of Canada
may be taxed in Canada in accordance with its law; however, provided that the
income is taxable in Spain, the tax so charged shall not exceed 15 percent of the
gross amount of the income.
6. It is understood that nothing in this Convention shall be construed as
preventing Canada from imposing a tax on amounts included in the income of a
resident of Canada according to section 91 of the Canadian Income Tax Act.
IN WITNESS WHEREOF the undersigned, duly authorized to that effect, have
signed this Convention.
DONE in duplicate at Ottawa, this 23rd day of November, 1976, in the
English, French and Spanish languages, each version being equally authentic.
FOR THE GOVERNMENT FOR THE GOVERNMENT
OF CANADA: OF SPAIN:
Don Jamieson Marceline Oreja Aquirre
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