PROTOCOL 

Amending the Convention Between 

the United States of America and the Kingdom of Spain for the Avoidance of 

Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on 

Income, and its Protocol signed at Madrid, on February 22, 1990. 

 The United States of America and the Kingdom of Spain, 

 Desiring to amend the Convention between the United States of America 

and the Kingdom of Spain for the Avoidance of Double Taxation and the 

Prevention of Fiscal Evasion with Respect to Taxes on Income, and its Protocol, 

signed at Madrid on February 22, 1990 (hereinafter the “Convention”), 

 Have agreed as follows: 
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Article I 

The following new paragraphs shall be added to Article 1 (General Scope) of the 

Convention: 

“5. (a) Notwithstanding the provisions of subparagraph (b) of paragraph 2 

of this Article: 

(i) for purposes of paragraph 3 of Article XXII (Consultation) of 

the General Agreement on Trade in Services, the Contracting States 

agree that any question arising as to the interpretation or application 

of this Convention and, in particular, whether a taxation measure is 

within the scope of this Convention, shall be determined 

exclusively in accordance with the provisions of Article 26 (Mutual 

Agreement Procedure) of this Convention; and 

(ii) the provisions of Article XVII of the General Agreement on 

Trade in Services shall not apply to a taxation measure unless the 

competent authorities agree that the measure is not within the scope 

of Article 25 (Non-Discrimination) of this Convention. 

(b) For the purposes of this paragraph, a “measure” is a law, regulation, 

rule, procedure, decision, administrative action, or any similar provision 

or action. 

6. For purposes of applying this Convention, an item of income, profit or 

gain derived through an entity that is fiscally transparent under the laws of either 

Contracting State, and that is formed or organized: 

 

 (a) in either Contracting State, or; 

 (b) in a state that has an agreement in force containing a provision for 

the exchange of information on tax matters with the Contracting State 

from which the income, profit, or gain is derived, 

shall be considered to be derived by a resident of a Contracting State to the 

extent that the item is treated for purposes of the taxation law of such 

Contracting State as the income, profit or gain of a resident.” 

Article II 

1. Paragraph 1 of Article 3 (General Definitions) of the Convention shall be 

amended by adding the following: 

“(j) the term “pension fund” means: 

(i) in Spain, any scheme, fund, mutual benefit institution 

or other entity established in Spain: 

 
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 (A) which is operated principally to manage the 

right of its beneficiaries to receive income or capital 

upon retirement, survivorship, widowhood, 

orphanhood, or disability; and 

 

 (B) contributions to which are deductible from the 

taxable base of personal taxes; 

(ii) in the United States, any person established in the 

United States that is generally exempt from income taxation 

in the United States, and operated principally either: 

 (A) to administer or provide pension or retirement 

benefits; or 

(B) to earn income principally for the benefit of one 

or more persons established in the United States that 

are generally exempt from income taxation in the 

United States and are operated principally to 

administer or provide pension or retirement benefits.” 

2. Paragraph 2 of Article 3 (General Definitions) of the Convention shall be 

deleted and replaced by the following: 

“2. As regards the application of this Convention at any time by a Contracting 

State any term not defined therein shall, unless the context otherwise requires, 

and subject to the provisions of Article 26 (Mutual Agreement Procedure), have 

the meaning which it has under the laws of that State concerning the taxes to 

which this Convention applies, any meaning under the applicable tax laws of 

that State prevailing over a meaning given to the term under other laws of that 

State.” 

Article III 

Paragraph 3 of Article 5 (Permanent Establishment) of the Convention shall be 

deleted and replaced by the following: 

“3. A building site or construction or installation project or an installation or 

drilling rig or ship used for the exploration of natural resources, constitutes a 

permanent establishment only if it lasts or the exploration activity continues for 

more than twelve months.” 
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Article IV 

Article 10 (Dividends) of the Convention shall be deleted and replaced by the 

following: 

“Article 10 

Dividends 

1. Dividends paid by a company that 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 may also be taxed in the Contracting State of 

which the company paying the dividends is a resident and according to the laws 

of that State, but if the beneficial owner of the dividends is a resident of the 

other Contracting State, except as otherwise provided, the tax so charged shall 

not exceed: 

(a) 5 percent of the gross amount of the dividends if the beneficial 

owner is a company that owns directly at least 10 percent of the voting 

stock of the company paying the dividends; 

(b) 15 percent of the gross amount of the dividends in all other cases. 

This paragraph shall not affect the taxation of the company in respect of the 

profits out of which the dividends are paid. 

3. Notwithstanding the provisions of paragraph 2, such dividends shall not 

be taxed in the Contracting State of which the company paying the dividends is 

a resident if the beneficial owner is a company that is a resident of the other 

Contracting State that has owned, directly or indirectly through one or more 

residents of either Contracting State, shares representing 80 percent or more of 

the voting stock in the company paying the dividends for a 12-month period 

ending on the date on which entitlement to the dividends is determined and: 

(a) satisfies the conditions of paragraph 2 (c) of Article 17 (Limitation 

on Benefits); 

(b) satisfies the conditions of paragraph 2 (e) of Article 17, provided 

that the company satisfies the conditions described in paragraph 4 of that 

Article with respect to the dividends; 

 (c) is entitled to the benefits of this Convention with respect to the 

dividends under paragraph 3 of Article 17; or 

(d) has received a determination pursuant to paragraph 7 of Article 17 

with respect to this paragraph. 

4. Notwithstanding paragraph 2, dividends shall not be taxed in the 

Contracting State of which the company paying the dividends is a resident if: 
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(a) the beneficial owner of the dividends is a pension fund that is a 

resident of the other Contracting State and is generally exempt from tax or 

subject to a zero rate of tax; and 

(b) such dividends are not derived from the carrying on of a trade or 

business by the pension fund or through an associated enterprise. 

5. 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 

that is subjected to the same taxation treatment as income from shares by the 

laws of the State of which the company making the distribution is a resident. 

6. The provisions of paragraphs 1 through 4 of this Article shall not apply if 

the beneficial owner of the dividends, being a resident of a Contracting State, 

carries on or has carried on a business in the other Contracting State, of which 

the company paying the dividends is a resident, through a permanent 

establishment situated therein, or performs or has performed in that other State 

independent personal services from a fixed base situated therein, and the holding 

in respect of which the dividends are paid is effectively connected with such 

permanent establishment or fixed base. In such case the provisions of Article 7 

(Business Profits) or Article 15 (Independent Personal Services), as the case 

may be, shall apply. 

7. A Contracting State may not impose any tax on dividends paid by a 

company resident of the other Contracting State, except insofar as the dividends 

are paid to a resident of the first-mentioned Contracting State or the dividends 

are effectively connected with a permanent establishment or a fixed base 

situated in that Contracting State, nor may it impose tax on a company’s 

undistributed profits, except as provided in paragraph 8 of this Article, even if 

the dividends paid or the undistributed profits consist wholly or partly of profits 

or income arising in that Contracting State. 

8. A company that is a resident of one of the Contracting States and that has 

a permanent establishment in the other Contracting State or that is subject to tax 

in the other Contracting State on a net basis on its income that may be taxed in 

the other Contracting State under Article 6 (Income from Real Property 

(Immovable Property)) or under paragraph 1 of Article 13 (Capital Gains) may 

be subject in that other Contracting State to a tax in addition to the tax allowable 

under the other provisions of this Convention. Such tax, however, may be 

imposed only on the portion of the business profits of the company attributable 

to the permanent establishment and the portion of the income that is subject to 

tax under Article 6 or under paragraph 1 of Article 13 that, in the case of the 

United States, represents the dividend equivalent amount of such profits or 

income and, in the case of Spain, represents the amount of income (Imposición 

Complementaria) determined under the Spanish Non Residents Income Tax 

regulated by the Amended Text of Non Residents Income Tax Law, passed by 

Legislative Royal Decree 5/2004 of 5th March, as it may be amended from time 

to time. 
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9. The tax referred to in paragraph 8 of this Article shall not be imposed at a 

rate exceeding the rate specified in subparagraph (a) of paragraph 2 of this 

Article. In any case, it shall not be imposed on a company that: 

(a) satisfies the conditions of paragraph 2 (c) of Article 17; 

(b) satisfies the conditions of paragraph 2 (e) of Article 17, provided 

that the company satisfies the conditions described in paragraph 4 of that 

Article with respect to an item of income, profit or gain described in 

paragraph 8 of this Article; 

(c) is entitled under paragraph 3 of Article 17 to benefits with respect 

to an item of income, profit or gain described in paragraph 8 of this 

Article; or 

(d) has received a determination pursuant to paragraph 7 of Article 17 

with respect to this paragraph.” 

Article V 

Article 11 (Interest) of the Convention shall be deleted and replaced by the 

following: 

“Article 11 

Interest 

1. Interest arising in a Contracting State and beneficially owned by a 

resident of the other Contracting State shall be taxable only in that other State. 

2. Notwithstanding the provisions of paragraph 1 of this Article: 

(a) interest arising in the United States that is contingent interest of a 

type that does not qualify as portfolio interest under United States law 

may be taxed by the United States but, if the beneficial owner of the 

interest is a resident of Spain, the interest may be taxed at a rate not 

exceeding 10 percent of the gross amount of the interest; and 

(b) interest that is an excess inclusion with respect to a residual interest 

in a real estate mortgage investment conduit may be taxed by the United 

States in accordance with its domestic law. 

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, bonds or debentures, and all 

other income that is subjected to the same taxation treatment as income from 

money lent by the taxation laws of the Contracting State in which the income 
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arises. Income dealt with in Article 10 (Dividends) and penalty charges for late 

payment shall not be regarded as interest for the purpose of this Article. 

4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the 

beneficial owner of the interest, being a resident of a Contracting State, carries 

on or has carried on business in the other Contracting State, in which the interest 

arises, through a permanent establishment situated therein, or performs or has 

performed in that other Contracting State independent personal 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 case the provisions of Article 7 (Business Profits) or Article 15 

(Independent Personal Services), as the case may be, shall apply. 

5. Interest shall be deemed to arise in a Contracting State when the payer is a 

resident of that Contracting 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 a fixed base in connection with 

which the indebtedness on which the interest is paid was incurred, and such 

interest is borne by such permanent establishment or fixed base, then such 

interest shall be deemed to arise in the State in which the permanent 

establishment or fixed base is situated. 

6. Where, by reason of a special relationship between the payer and the 

beneficial owner or between both of them and some other person, the amount of 

the interest, 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 beneficial 

owner in the absence of such relationship, the provisions of this Article shall 

apply only to the last-mentioned amount. In such case, the excess part of the 

payments shall remain taxable according to the laws of each Contracting State, 

due regard being had to the other provisions of this Convention.” 

Article VI 

Article 12 (Royalties) of the Convention shall be deleted and replaced by the 

following: 

“Article 12 

Royalties 

1. Royalties arising in a Contracting State and beneficially owned by a 

resident of the other Contracting State shall be taxable only in that other State. 

2. 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 of 

literary, artistic, scientific or other work (including cinematographic films, and 

films and recordings for radio or television broadcasting), any patent, trademark, 

design or model, plan, secret formula or process, or for information concerning 

industrial, commercial or scientific experience. 
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3. The provisions of paragraph 1 shall not apply if the beneficial owner of 

the royalties, being a resident of a Contracting State, carries on or has carried on 

business in the other Contracting State through a permanent establishment 

situated therein, or performs or has performed in that other State independent 

personal 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 case, the provisions of Article 7 

(Business Profits) or Article 15 (Independent Personal Services), as the case 

may be, shall apply. 

4. Where, by reason of a special relationship between the payer and the 

beneficial owner or between both of them and some other person, the amount of 

the royalties, 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 beneficial owner in the absence of such relationship, the provisions of this 

Article shall apply only to the last-mentioned amount. In such case, the excess 

part of the payments shall remain taxable according to the laws of each 

Contracting State, due regard being had to the other provisions of this 

Convention.” 

Article VII 

1. Article 13 (Capital Gains) of the Convention shall be amended by deleting 

paragraph 4 and replacing it by the following: 

“4. Gains from the alienation of shares or other rights, which directly or 

indirectly entitle the owner of such shares or rights to the enjoyment of 

immovable property situated in a Contracting State, may be taxed in that 

Contracting State.” 

2. Paragraphs 6 and 7 of Article 13 (Capital Gains) of the Convention shall 

be deleted and replaced by the following: 

“6. Gains from the alienation of any property other than property referred to 

in paragraphs 1 through 5 shall be taxable only in the Contracting State of which 

the alienator is a resident.” 

Article VIII 

Article 14 (Branch Tax) of the Convention shall be deleted and replaced by the 

following: 

“Article 14 (Branch Tax) (Deleted)”. 
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Article IX 

Article 17 (Limitation on Benefits) of the Convention shall be deleted and 

replaced by the following: 

“Article 17 

Limitation on Benefits 

1. Except as otherwise provided in this Article, a resident of a Contracting 

State shall not be entitled to the benefits of this Convention otherwise accorded 

to residents of a Contracting State unless such resident is a "qualified person" as 

defined in paragraph 2 of this Article. 

2. A resident of a Contracting State shall be a qualified person for a taxable 

year if the resident is: 

(a) an individual; 

 

(b) a Contracting State, or a political subdivision or local authority 

thereof or wholly-owned instrumentality thereof; 

 (c) a company, if: 

(i) the principal class of its shares (and any disproportionate 

class of shares) is regularly traded on one or more recognized stock 

exchanges, and either: 

(A) its principal class of shares is primarily traded on one 

or more recognized stock exchanges located in the 

Contracting State of which the company is a resident (or, in 

the case of a company resident in Spain, on a recognized 

stock exchange located within the European Union or, in the 

case of a company resident in the United States, on a 

recognized stock exchange located in another state that is a 

party to the North American Free Trade Agreement); or 

(B) the company's primary place of management and 

control is in the Contracting State of which it is a resident; or 

(ii) at least 50 percent of the aggregate vote and value of the 

shares (and at least 50 percent of any disproportionate class of 

shares) in the company is owned directly or indirectly by five or 

fewer companies entitled to benefits under clause (i) of this 

subparagraph, provided that, in the case of indirect ownership, each 

intermediate owner is a resident of either Contracting State; 

(d) a person other than an individual that is: 

(i) established and maintained in that Contracting State 

exclusively for religious, charitable, scientific, artistic, cultural, or 
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educational purposes, notwithstanding that all or part of its income 

or gains may be exempt from tax under the domestic law of that 

Contracting State; or 

(ii) described in subparagraph (j) of paragraph 1 of Article 3 

(General Definitions), provided that: 

(A) in Spain, in the case of a person described in clause (i) 

of subparagraph (j) of paragraph 1 of Article 3, and in the 

United States, in the case of a person described in clause (ii) 

(A) of subparagraph (j) of paragraph 1 of Article 3, more 

than 50 percent of the person's beneficiaries, members or 

participants are individuals resident in either Contracting 

State; and 

(B) in the United States, in the case of a person described 

in clause (ii) (B) of subparagraph (j) of paragraph 1 of 

Article 3, all of the persons for which such person earns the 

income satisfy the requirements of clause (A) of this 

subparagraph; 

(e) a person other than an individual, if: 

(i) on at least half the days of the taxable year, persons who are 

residents of that Contracting State and that are entitled to the 

benefits of this Convention under subparagraph (a), subparagraph 

(b), clause (i) of subparagraph (c), or subparagraph (d) of this 

paragraph own, directly or indirectly, shares or other beneficial 

interests representing at least 50 percent of the aggregate voting 

power and value (and at least 50 percent of any disproportionate 

class of shares) of the person, provided that, in the case of indirect 

ownership, each intermediate owner is a resident of that 

Contracting State, and 

(ii) less than 50 percent of the person’s gross income for the 

taxable year, is paid or accrued, directly or indirectly, to persons 

who are not residents of either Contracting State entitled to the 

benefits of this Convention under subparagraph (a), subparagraph 

(b), clause (i) of subparagraph (c), or subparagraph (d) of this 

paragraph in the form of payments that are deductible for purposes 

of the taxes covered by this Convention in the person’s State of 

residence. For purposes of the foregoing, such deductible payments 

do not include arm ́s length payments in the ordinary course of 

business for services or tangible property and payments in respect 

of financial obligations to a bank that is not related to the payor. 

3. A company that is a resident of a Contracting State shall also be entitled 

to the benefits of this Convention if: 
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(a) at least 95 percent of the aggregate voting power and value of its 

shares (and at least 50 percent of any disproportionate class of shares) is 

owned, directly or indirectly, by seven or fewer persons that are 

equivalent beneficiaries, provided that in the case of indirect ownership, 

each intermediate owner is a resident of a member state of the European 

Union or any party to the North American Free Trade Agreement; and 

(b) less than 50 percent of the company's gross income, as determined 

in the company's State of residence, for the taxable year is paid or 

accrued, directly or indirectly, to persons who are not equivalent 

beneficiaries, in the form of payments (but not including arm's length 

payments in the ordinary course of business for services or tangible 

property and payments in respect of financial obligations to a bank that is 

not related to the payor), that are deductible for the purposes of the taxes 

covered by this Convention in the company's State of residence. 

4. 

(a) A resident of a Contracting State will be entitled to benefits of the 

Convention with respect to an item of income derived from the other 

State, regardless of whether the resident is a qualified person, if the 

resident is engaged in the active conduct of a trade or business in the firstmentioned State (other than the business of making or managing 

investments for the resident’s own account, unless these activities are 

banking, insurance or securities activities carried on by a bank, insurance 

company or registered securities dealer), and the income derived from the 

other Contracting State is derived in connection with, or is incidental to, 

that trade or business. 

(b) If a resident of a Contracting State derives an item of income from 

a trade or business activity conducted by that resident in the other 

Contracting State, or derives an item of income arising in the other 

Contracting State from a related person, the conditions described in 

subparagraph (a) shall be considered to be satisfied with respect to such 

item only if the trade or business activity carried on by the resident in the 

first-mentioned Contracting State is substantial in relation to the trade or 

business activity carried on by such resident or related person in the other 

Contracting State. Whether a trade or business activity is substantial for 

the purposes of this paragraph will be determined based on all the facts 

and circumstances. 

(c) For purposes of applying this paragraph, activities conducted by 

persons connected to a person shall be deemed to be conducted by such 

person. A person shall be connected to another if one possesses at least 

50 percent of the beneficial interest in the other (or, in the case of a 

company, at least 50 percent of the aggregate vote and value of the 

company's shares or of the beneficial equity interest in the company) or 

another person possesses at least 50 percent of the beneficial interest (or, 

in the case of a company, at least 50 percent of the aggregate vote and 

value of the company's shares or of the beneficial equity interest in the 

company) in each person. In any case, a person shall be considered to be 
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connected to another if, based on all the relevant facts and circumstances, 

one has control of the other or both are under the control of the same 

person or persons. 

5. A person that is a resident of a Contracting State shall also be entitled to 

all the benefits of this Convention otherwise accorded to residents of a 

Contracting State if that person functions as a headquarters company for a 

multinational corporate group and that resident satisfies any other specified 

conditions for the obtaining of such benefits other than those of this Article. A 

person shall be considered a headquarters company for this purpose only if: 

 

(a) it provides a substantial portion of the overall supervision and 

administration of the group, which may include, but cannot be principally, 

group financing; 

(b) the corporate group consists of corporations resident in, and 

engaged in an active business in, at least five countries, and the business 

activities carried on in each of the five countries (or five groupings of 

countries) generate at least 10 percent of the gross income of the group; 

(c) the business activities carried on in any one country other than the 

Contracting State of residence of the headquarters company generate less 

than 50 percent of the gross income of the group; 

(d) no more than 25 percent of its gross income is derived from the 

other Contracting State; 

(e) it has, and exercises, independent discretionary authority to carry 

out the functions referred to in subparagraph (a); 

(f) it is subject to the same income taxation rules in its State of 

residence as persons described in paragraph 4; and 

(g) the income derived in the other Contracting State either is derived 

in connection with, or is incidental to, the active business referred to in 

subparagraph (b). 

 

If the gross income requirements of subparagraphs (b), (c), or (d) of this 

paragraph are not fulfilled, they will be deemed to be fulfilled if the required 

ratios are met when averaging the gross income of the preceding four years. 

6. Notwithstanding the preceding provisions of this Article, where an 

enterprise of a Contracting State derives income from the other Contracting 

State, and that income is attributable to a permanent establishment which that 

enterprise has in a third state, the tax benefits that would otherwise apply under 

the other provisions of the Convention will not apply to that income if the profits 

of that permanent establishment are subject to a combined aggregate effective 

rate of tax in the first-mentioned Contracting State and third state that is less 

than 60 percent of the general rate of company tax applicable in the firstmentioned Contracting State. Any dividends, interest or royalties to which the 
13

provisions of this paragraph apply shall be subject to tax in the other Contracting 

State at a rate that shall not exceed 15 percent of the gross amount thereof. Any 

other income to which the provisions of this paragraph apply shall be subject to 

tax under the provisions of the domestic law of the other Contracting State, 

notwithstanding any other provision of the Convention. The provisions of this 

paragraph shall not apply if: 

(a) in the case of royalties, the royalties are received as compensation 

for the use of, or the right to use, intangible property produced or 

developed by the permanent establishment; or 

(b) in the case of any other income, the income derived from the other 

Contracting State is derived in connection with, or is incidental to, the 

active conduct of a trade or business carried on by the permanent 

establishment in the third state (other than the business of making, 

managing or simply holding investments for the enterprise’s own account, 

unless these activities are banking or securities activities carried on by a 

bank or registered securities dealer). 

7. If a resident of a Contracting State is not a qualified person pursuant to 

paragraph 2 of this Article, nor entitled to the benefits of this Convention under 

paragraphs 3 or 5 of this Article, nor entitled to benefits with respect to an item 

of income under paragraph 4 of this Article, the competent authority of the other 

Contracting State may grant the benefits of this Convention, or benefits with 

respect to a specific item of income, to the resident of the first-mentioned 

Contracting State, if such grant of benefits is justified based on an evaluation of 

the extent to which such resident satisfies the requirements of paragraphs 2, 3, 4 

or 5 of this Article and after considering the opinion, if any, of the competent 

authority of the first-mentioned Contracting State as to whether under the 

circumstances it would be appropriate to grant such benefits. 

8. For purposes of this Article: 

(a) the term "recognized stock exchange" means: 

(i) the NASDAQ System and any stock exchange registered 

with the U.S. Securities and Exchange Commission as a national 

securities exchange under the U.S. Securities Exchange Act of 

1934; 

 

(ii) any Spanish stock exchange controlled by the “Comisión 

Nacional del Mercado de Valores”; 

(iii) the principal stock exchanges of Stuttgart, Hamburg, 

Dusseldorf, Frankfurt, Berlin, Hannover, Munich, London, 

Amsterdam, Milan, Budapest, Lisbon, Toronto, Mexico City and 

Buenos Aires; and 

(iv) any other stock exchange agreed upon by the competent 

authorities; 
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(b) the term “principal class of shares” means the ordinary or common 

shares of the company, provided that such class of shares represents the 

majority of the voting power and value of the company. If no single class 

of ordinary or common shares represents the majority of the aggregate 

voting power and value of the company, the “principal class of shares” are 

those classes that in the aggregate represent a majority of the aggregate 

voting power and value of the company; 

(c) the term “disproportionate class of shares” means any class of 

shares of a company resident in one of the Contracting States that entitles 

the shareholder to disproportionately higher participation through 

dividends, redemption payments or otherwise, in the earnings generated in 

the other Contracting State by particular assets or activities of the 

company; 

(d) a company’s “primary place of management and control” will be in 

the Contracting State of which it is a resident only if executive officers 

and senior management employees exercise day-to-day responsibility for 

more of the strategic, financial and operational policy decision making for 

the company (including its direct and indirect subsidiaries, if any) in that 

Contracting State than in any other state and the staff of such persons 

conduct more of the day-to-day activities necessary for preparing and 

making those decisions in that Contracting State than in any other state; 

(e) the term “shares” includes depository receipts thereof; 

(f) the term “gross income” means gross receipts, determined in the 

person’s Contracting State of residence, or where the person is engaged in 

a business which includes the manufacture, production or sale of goods, 

such gross receipts reduced by the direct costs of labor and materials 

attributable to such manufacture or production, or cost of goods purchased 

for resale; 

(g) the term "equivalent beneficiary" means a resident of a member 

state of the European Union or of a party to the North American Free 

Trade Agreement, but only if that resident: 

(i) 

(A) would be entitled to all the benefits of a 

comprehensive convention for the avoidance of double 

taxation between any member state of the European Union or 

any party to the North American Free Trade Agreement and 

the State from which the benefits of this Convention are 

claimed under provisions analogous to subparagraph (a), (b), 

clause (i) of subparagraph (c), or subparagraph (d) of 

paragraph 2 of this Article, provided that if such convention 

does not contain a comprehensive limitation on benefits 

article, the person would be entitled to the benefits of this 

Convention by reason of subparagraph (a), (b), clause (i) of 
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subparagraph (c), or subparagraph (d) of paragraph 2 of this 

Article if such person were a resident of one of the States 

under Article 4 of this Convention; and 

(B) with respect to insurance premiums and to income 

referred to in Articles 10 (Dividends), 11 (Interest) and 12 

(Royalties) of this Convention, would be entitled under such 

convention to an exemption from excise tax on such 

premiums or to a rate of tax with respect to the particular 

class of income for which benefits are being claimed under 

this Convention that is at least as low as the rate applicable 

under this Convention; or 

(ii) is a resident of a Contracting State that is entitled to the 

benefits of this Convention by reason of subparagraph (a), (b), 

clause (i) of subparagraph (c) or subparagraph (d) of paragraph 2 of 

this Article. 

 For the purposes of applying paragraph 3 of Article 10 (Dividends), 

in order to determine whether a person owning shares, directly or 

indirectly, in the company claiming the benefits of this Convention 

is an equivalent beneficiary, such person shall be deemed to hold 

the same voting power, for the same period of time, in the company 

paying the dividend as the company claiming the benefits holds in 

such company; and 

(h) with respect to dividends, interest and royalties arising in Spain and 

beneficially owned by a company that is a resident of the United States, a 

company that is a resident of a member state of the European Union will 

be treated as satisfying the requirements of clause (i) (B) of subparagraph 

(g) of this paragraph for purposes of determining whether such United 

States resident is entitled to benefits under this paragraph if a payment of 

dividends, interest and royalties arising in Spain and paid directly to such 

resident of a member state of the European Union would have been 

exempt from tax pursuant to any directive of the European Union, 

notwithstanding that the convention to avoid double taxation between 

Spain and that other member state of the European Union would provide 

for a higher rate of tax with respect to such payment than the rate of tax 

applicable to such United States company under Article 10, 11, 12 of this 

Convention.” 

Article X 

Article 20 (Pensions, Annuities, Alimony, and Child Support) of the Convention 

shall be amended by adding a new paragraph: 

“5. Where an individual who is a resident of one of the Contracting States is a 

member or beneficiary of, or participant in, a pension fund that is a resident of 

the other Contracting State, income earned by the pension fund may be taxed as 

income of that individual only when, and, subject to the provisions of 
16

subparagraph (a) of paragraph 1 of Article 20 (Pensions, Annuities, Alimony 

and Child Support), to the extent that, it is paid to, or for the benefit of, that 

individual from the pension fund (and not transferred to another pension fund in 

that other Contracting State).” 

Article XI 

Paragraph 3 of Article 25 (Non-Discrimination) of the Convention shall be 

deleted and replaced by the following: 

“3. Nothing in this Article shall be construed as preventing either Contracting 

State from imposing a tax as described in paragraph 8 of Article 10 

(Dividends).” 

Article XII 

Article 26 (Mutual Agreement Procedure) of the Convention shall be amended 

by adding the following new paragraphs: 

“5. Where, pursuant to this Article, a person has presented a case to the 

competent authority of the Contracting State of which he is a resident or national 

on the basis that the actions of one or both of the Contracting States have 

resulted for that person in taxation not in accordance with the provisions of this 

Convention, and the competent authorities have endeavored, but are unable to 

reach agreement to resolve that case within two years from the commencement 

date of the case, the case shall be resolved through arbitration conducted in the 

manner prescribed by, and subject to, the requirements of this paragraph, 

paragraph 6 of this Article, and any rules or procedures agreed upon by the 

competent authorities of the Contracting States pursuant to subparagraph (g) of 

paragraph 6 of this Article, if: 

(a) tax returns have been filed with at least one of the Contracting 

States with respect to the taxable years at issue in the case; 

(b) the case is not a particular case that both competent authorities of 

the Contracting States agree, before the date on which arbitration 

proceedings would otherwise have begun, is not suitable for resolution 

through arbitration;

(c) no decision with respect to such case has already been rendered by 

a court or administrative tribunal of either Contracting State; 

(d) the case does not involve a determination under paragraph 3 of 

Article 4 (Residence) of the residence of a company; and 

(e) all the conditions for the beginning of an arbitration proceeding 

provided for in subparagraph (c) of paragraph 6 of this Article have been 

satisfied. 
17

6. For the purposes of paragraph 5 of this Article and this paragraph, the 

following rules and definitions shall apply: 

(a) the term “concerned person” means the presenter of a case to a 

competent authority for consideration under this Article and all other 

persons, if any, whose tax liability to either Contracting State may be 

directly affected by a mutual agreement arising from that consideration; 

(b) the “commencement date” for a case is the earliest date on which 

the information necessary to undertake substantive consideration for a 

mutual agreement procedure has been received by both competent 

authorities; 

(c) an arbitration proceeding with respect to a case shall begin on the 

latest of: 

(i) two years after the commencement date of that case, unless 

both competent authorities have agreed to a different date; 

(ii) the date upon which the presenter of the case to a competent 

authority of a Contracting State has submitted a written request to 

that competent authority for a resolution of the case through 

arbitration, which request may not be submitted prior to the date 

determined in clause (i) of this subparagraph; 

 

(iii) the date upon which all concerned persons and their 

authorized representatives or agents agree in writing not to disclose 

to any other person any information received during the course of 

the arbitration proceeding from either Contracting State or the 

arbitration panel, other than the determination of such panel; and 

(iv) the date on which all legal actions or suits pending before the 

courts of either Contracting State concerning any issue involved in 

the case are suspended or withdrawn as applicable under the laws 

of the Contracting State in which such legal actions or suits are 

pending. 

(d) The determination of the arbitration panel with respect to a case 

shall constitute a resolution of such case by mutual agreement under this 

Article and shall be binding on the Contracting States, unless the presenter 

of the case does not accept the determination; 

(e) for purposes of an arbitration proceeding under paragraph 5 of this 

Article and this paragraph, the members of the arbitration panel and their 

staff shall be considered to be “persons or authorities” to whom 

information may be disclosed under Article 27 (Exchange of Information 

and Administrative Assistance) of this Convention; 
18

(f) no information relating to an arbitration proceeding (including the 

arbitration panel's determination) may be disclosed by the competent 

authorities of the Contracting States, except as permitted by this 

Convention and the domestic laws of the Contracting States. In addition, 

all material prepared in the course of, or relating to, an arbitration 

proceeding shall be considered to be information exchanged between the 

Contracting States. All members of the arbitration panel and their staff 

must agree in writing in statements sent to each of the competent 

authorities of the Contracting States not to disclose any information 

relating to an arbitration proceeding (including the arbitration panel’s 

determination), and to abide by and be subject to the confidentiality and 

nondisclosure provisions of Article 27 of this Convention and the 

applicable domestic laws of the Contracting States. In the event those 

provisions conflict, the most restrictive condition shall apply. Such 

statement shall also include confirmation of their appointment to the 

arbitration panel; and 

(g) the competent authorities of the Contracting States shall agree in 

writing, before the date that the first arbitration proceeding commences, 

on time periods and procedures that are consistent with paragraph 5 and 

this paragraph for: 

(i) notifying the presenter of the case of any agreements 

pursuant to subparagraph (b) of paragraph 5 of this Article that the 

case is not suitable for resolution through arbitration, or under 

clause (i) of subparagraph (c) of paragraph 6 of this Article to 

change the date on which an arbitration proceeding could begin; 

(ii) obtaining the statements of each concerned person, 

authorized representative or agent, and member of the arbitration 

panel (including their staff), in which each such person agrees not 

to disclose to any other person any information received during the 

course of the arbitration proceeding from the competent authority 

of either Contracting State or the arbitration panel, other than the 

determination of such panel; 

(iii) the appointment of the members of the arbitration panel; 

(iv) the submission of proposed resolutions, position papers, and 

reply submissions by the competent authorities of the Contracting 

States to the arbitration panel; 

(v) the submission by the presenter of the case of a paper setting 

forth the presenter’s views and analysis of the case for 

consideration by the arbitration panel; 

(vi) the delivery by the arbitration panel of its determination to 

the competent authorities of the Contracting States; 
19

(vii) the acceptance or rejection by the presenter of the case of the 

determination of the arbitration panel; and 

(viii) the adoption by the arbitration panel of any additional 

procedures necessary for the conduct of its business. 

The competent authorities of the Contracting States may agree in writing 

on such other rules and procedures as may be necessary for the effective 

and timely implementation of the provisions of paragraph 5 of this Article 

and this paragraph.” 

Article XIII 

Article 27 (Exchange of Information and Administrative Assistance) of the 

Convention shall be deleted and replaced with the following: 

“Article 27 

Exchange of Information and Administrative Assistance 

1. The competent authorities of the Contracting States shall exchange such 

information as is foreseeably relevant for carrying out the provisions of this 

Convention or to the administration or enforcement of the domestic laws 

concerning taxes of every kind and description imposed by a Contracting State 

to the extent that the taxation thereunder is not contrary to the Convention. The 

exchange of information is not restricted by paragraph 1 of Article 1 (General 

Scope) or Article 2 (Taxes Covered). 

2. Any information received under this Article by a Contracting State shall 

be treated as secret in the same manner as information obtained under the 

domestic laws of that State and shall be disclosed only to persons or authorities 

(including courts and administrative bodies) involved in the assessment or 

collection of, the enforcement or prosecution in respect of, the determination of 

appeals in relation to the taxes referred to in paragraph 1 of this Article, or the 

oversight of such functions. Such persons or authorities shall use the information 

only for such purposes. They may disclose the information in public court 

proceedings or in judicial decisions. The competent authority of the Contracting 

State that receives information under the provisions of this Article may, with the 

written consent of the Contracting State that provided the information, also 

make available that information to be used for other purposes allowed under the 

provisions of a mutual legal assistance treaty in force between the Contracting 

States that allows for the exchange of tax information. 

3. In no case shall the provisions of the preceding paragraphs be construed 

so as to impose on a Contracting State the obligation: 

(a) to carry out administrative measures at variance with the laws and 

administrative practice of that or of the other Contracting State; 
20

(b) to supply information that is 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 that 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. 

4. If information is requested by a Contracting State in accordance with this 

Article, the other Contracting State shall use its information gathering measures 

to obtain the requested information, even though that other State may not need 

such information for its own tax purposes. The obligation contained in the 

preceding sentence is subject to the limitations of paragraph 3 of this Article, but 

in no case shall such limitations be construed to permit a Contracting State to 

decline to supply information solely because it has no domestic interest in such 

information. 

5. In no case shall the provisions of paragraph 3 of this Article be construed 

to permit a Contracting State to decline to supply information solely because the 

information is held by a bank, other financial institution, nominee or person 

acting in an agency or a fiduciary capacity or because it relates to ownership 

interests in a person. 

6. If specifically requested by the competent authority of a Contracting 

State, the competent authority of the other Contracting State shall, if possible, 

provide information under this Article in the form of depositions of witnesses 

and authenticated copies of unedited original documents (including books, 

papers, statements, records, accounts, and writings) to the same extent such 

depositions and documents can be obtained under the laws and administrative 

practices of that other Contracting State with respect to its own taxes. 

7. Each of the Contracting States shall endeavor to collect on behalf of the 

other Contracting State such amounts as may be necessary to ensure that any 

exemption or reduced rate of tax granted by the Convention from taxation 

imposed by that other State shall not be enjoyed by persons not entitled to such 

benefits. This paragraph shall not impose upon a Contracting State the 

obligation to carry out administrative measures: 

(a) at variance with the laws and administrative practice of either 

Contracting State, or 

(b) that would be contrary to its sovereignty, security, or public policy. 

8. The competent authorities of the Contracting States may develop an 

agreement upon the mode of application of this Article, including agreement to 

ensure comparable levels of assistance to each of the Contracting States, but in 

no case will the lack of such agreement relieve a Contracting State of its 

obligations under this Article. 
21

Article XIV 

1. Subparagraph (b) of paragraph 5 of the Protocol to the Convention shall 

be deleted, and subparagraph (c) of paragraph 5 of the Protocol to the 

Convention shall be renamed subparagraph (b). 

2. Paragraph 7 of the Protocol to the Convention shall be deleted and 

replaced by the following: 

“7. With reference to Article 10 (Dividends) 

(a) In the case of Spain: 

(i) Subparagraph (a) of paragraph 2 of Article 10 shall not apply 

in the case of dividends paid by any entity regulated under the Law 

11/2009 of 26th October on Sociedades Anónimas Cotizadas de 

Inversión en el Mercado Inmobiliario (SOCIMI) or successor 

statutes. Subparagraph (b) of paragraph 2 and paragraph 4 shall 

apply with respect to such dividends only if the beneficial owner of 

the dividends holds, directly or indirectly, capital that represents not 

more than 10 percent of all the capital in the SOCIMI. 

(ii) Subparagraph (a) of paragraph 2 of Article 10 shall not apply 

in the case of dividends paid by a Spanish investment institution 

regulated under the Law 35/2003 of 4th November on Instituciones 

de Inversión Colectiva or successor statutes. In such case, 

subparagraph (b) of paragraph 2 and paragraph 4 of Article 10 shall 

apply with respect to such dividends. 

(b) In the case of the United States: 

Subparagraph (a) of paragraph 2 of Article 10 shall not apply in the 

case of dividends paid by a U.S. Regulated Investment Company 

(RIC) or a U.S. Real Estate Investment Trust (REIT). In the case of 

dividends paid by a RIC, subparagraph b) of paragraph 2 and 

paragraph 4 of Article 10 shall apply. In the case of dividends paid 

by a REIT, subparagraph b) of paragraph 2 and paragraph 4 of 

Article 10 shall apply only if: 

(i) the beneficial owner of the dividends is an individual or 

pension fund, in either case holding an interest of not more than 10 

percent in the REIT; 

(ii) the dividends are paid with respect to a class of stock that is 

publicly traded and the beneficial owner of the dividends is a 

person holding an interest of not more than 5 percent of any class of 

the REIT’s stock; or 
22

(iii) the beneficial owner of the dividends is a person holding an 

interest of not more than 10 percent in the REIT and the REIT is 

diversified. 

For purposes of this paragraph, a REIT shall be “diversified” if the value 

of no single interest in real property exceeds 10 percent of its total 

interests in real property. For the purposes of this rule, foreclosure 

property shall not be considered an interest in real property. Where a 

REIT holds an interest in a partnership, it shall be treated as owning 

directly a proportion of the partnership's interests in real property 

corresponding to its interest in the partnership.” 

3. Paragraph 8 of the Protocol to the Convention shall be deleted and 

replaced by the following paragraph: 

“8. With reference to Article 11 (Interest) 

For purposes of subparagraph (b) of paragraph 2, the term real estate mortgage 

investment conduit means an entity that has in effect an election to be treated as 

a REMIC under Section 860D of the US Internal Revenue Code.” 

4. Subparagraph (c) of paragraph 10 of the Protocol to the Convention shall 

be deleted. 

5. Paragraph 11 of the Protocol to the Convention shall be deleted and 

replaced by the following: 

“Paragraph 11 (Deleted)”. 

6. Paragraph 12 of the Protocol to the Convention shall be deleted and 

replaced by the following: 

“Paragraph 12 (Deleted)”. 

7. Paragraph 13 of the Protocol to the Convention shall be amended by 

deleting the words “tax-exempt” and replacing the words “paragraph 1 (d)” with 

the words “clause (ii) of subparagraph (d) of paragraph 2”. 

8. Paragraph 18 of the Protocol to the Convention shall be deleted and 

replaced by the following paragraph: 

“18. With reference to paragraphs 1 and 5 of Article 26 (Mutual agreement 

procedure) 

The term “first notification” means, in the case of the United States, the Notice 

of Proposed Adjustment and, in the case of Spain, the Notification of the 

Administrative Act of Assessment. In the case of taxes at source, the “first 

notification” means, in the case of both Contracting States, the date on which the 

tax is withheld or paid. In addition, for purposes of paragraph 5, it is understood 

that an action of either Contracting State that has resulted in taxation not in 

accordance with the provisions of the Convention shall include a Notice of 
23

Proposed Adjustment, a Notification of the Administrative Act of Assessment, 

or in the case of taxes at source, a payment or withholding of tax.” 

9. Paragraph 19 of the Protocol to the Convention shall be deleted and 

replaced by the following: 

“Paragraph 19 (Deleted)”. 

10. The Protocol to the Convention shall be amended by adding the following 

paragraph: 

“21. With reference to paragraphs 5 and 6 of Article 26 (Mutual Agreement 

Procedure) of the Convention: 

(a) The arbitration panel shall consist of three individual members. 

The members appointed shall not be employees nor have been employees 

within the twelve-month period prior to the date on which the arbitration 

proceeding begins, of the tax administration, the Treasury Department or 

the Ministry of Finance of the Contracting State which identifies them. 

Each competent authority of the Contracting States shall select one 

member of the arbitration panel, and the two members selected by the 

competent authorities of the Contracting States shall select the third 

member, who shall serve as Chair of the arbitration panel. If the 

members selected by the competent authorities of the Contracting States 

fail to agree on the third member, these members shall be dismissed, and 

each competent authority of the Contracting States shall select a new 

member of the arbitration panel. The Chair shall not be a national, citizen 

or lawful permanent resident of either Contracting State. 

(b) The arbitration proceeding and the mutual agreement procedure 

with respect to a case shall terminate if at any time before the arbitration 

panel delivers a determination to the competent authorities of the 

Contracting States: 

(i) the competent authorities of the Contracting States reach a 

mutual agreement to resolve the case; 

(ii) the presenter of the case withdraws the request for 

arbitration; 

(iii) any concerned person, or any of their representatives or 

agents, willfully violates the written statement of nondisclosure 

referred to in clause (iii) of subparagraph (c) of paragraph 6, and 

the competent authorities of both Contracting States agree that such 

violation should result in the termination of the arbitration 

proceeding; or 

 (iv) any concerned person initiates a legal action or suit before 

the courts of either Contracting State concerning any issue involved 

in the case, unless such legal action or suit is suspended according 

to the applicable laws of the Contracting State. 
24

(c) The competent authority of each of the Contracting States shall be 

permitted to submit a proposed resolution addressing each adjustment or 

similar issue raised in the case. Such proposed resolution shall be a 

resolution of the entire case, and shall reflect, without modification, all 

matters in the case previously agreed between the competent authorities of 

both Contracting States. Such proposed resolution shall be limited to a 

disposition of specific monetary amounts (for example, income, profit, 

gain or expense) or, where specified, the maximum tax charged pursuant 

to the Convention for each adjustment or similar issue in the case. The 

competent authority of each of the Contracting States shall also be 

permitted to submit a supporting position paper for consideration by the 

arbitration panel. 

(d) Notwithstanding the preceding provisions of this paragraph, it is 

understood that, in the case of an arbitration proceeding concerning: 

(i) the tax liability of an individual with respect to whom the 

competent authorities have been unable to reach an agreement on 

the individual’s State of residence; 

(ii) the taxation of the business profits of an enterprise with 

respect to which the competent authorities have been unable to 

reach an agreement on whether a permanent establishment exists; 

or 

(iii) such other issues the determination of which are contingent 

on resolution of similar threshold questions; 

the competent authorities of the Contracting States may submit proposed 

resolutions separately addressing the relevant threshold questions as 

described in clause (i), (ii) or (iii) above (for example, the question of 

whether a permanent establishment exists), and the contingent 

determinations (for example, the determination of the amount of profit 

attributable to such permanent establishment). 

(e) Where an arbitration proceeding concerns a case comprising 

multiple adjustments or similar issues each requiring a disposition of 

specific monetary amounts (for example, of income, profit, gains or 

expense) or where specified, the maximum tax charged pursuant to the 

Convention, the proposed resolution may propose a separate disposition 

for each adjustment or similar issue. 

(f) Each of the competent authorities of the Contracting States shall 

receive the proposed resolution and position paper submitted by the other 

competent authority, and shall be permitted to submit a reply submission 

to the arbitration panel. Each of the competent authorities of the 

Contracting States shall also receive the reply submission of the other 

competent authority. 
25

(g) The presenter of the case shall be permitted to submit for 

consideration by the arbitration panel a paper setting forth its analysis and 

views of the case. Such submission shall not include any information not 

previously provided to the competent authorities during the mutual 

agreement procedure and shall be made available to the competent 

authorities of both Contracting States. 

(h) The arbitration panel shall deliver a determination in writing to the 

competent authorities of the Contracting States. The determination 

reached by the arbitration panel in the arbitration proceeding shall be 

limited to one of the proposed resolutions for the case submitted by one of 

the competent authorities of the Contracting States for each adjustment or 

similar issue and any threshold questions, and shall not include a rationale 

or any other explanation of the determination. The determination of the 

arbitration panel shall have no precedential value with respect to the 

application of the Convention in any other case. 

(i) Unless the competent authorities of both Contracting States agree to 

a longer time period, the presenter of the case shall have 45 days after 

receiving the determination of the arbitration panel to notify, in writing, 

the competent authority of the Contracting State to whom the case was 

presented, of his acceptance of the determination. If the presenter of the 

case fails to so advise the relevant competent authority, the determination 

shall be considered not to be accepted. In addition, in the event the case is 

pending in litigation or appeal, the determination of the arbitration panel 

shall be considered not to be accepted by the presenter of the case if any 

concerned person who is a party to the litigation or appeal does not 

withdraw from consideration by the relevant court or administrative 

tribunal, within the same time frame described above, the issues resolved 

in the arbitration proceeding. Where the determination of the arbitration 

panel is not accepted, the case will not be eligible for any further 

consideration by the competent authorities. 

(j) The fees and expenses of the members of the arbitration panel, as 

well as any costs incurred in connection with the arbitration proceeding by 

the Contracting States, shall be borne equitably by the competent 

authorities of Contracting States.” 

Article XV 

1. The Governments of the Contracting States shall notify each other, 

through diplomatic channels when the internal procedures required by each 

Contracting State for the entry into force of this Protocol have been complied 

with. 

2. This Protocol shall enter into force after the period of three months 

following the date of the later of the Notes referred to in paragraph 1 and its 

provisions shall have effect: 
26

(a) in respect of taxes withheld at source, on amounts paid or credited, 

on or after the date on which the Protocol enters into force; 

 

(b) in respect to taxes determined with reference to a taxable period, 

for taxable periods beginning on or after the date on which the Protocol 

enters into force; and 

(c) in all other cases, on or after the date on which the Protocol enters 

into force. 

3. Notwithstanding paragraph 2, the provisions of paragraphs 5 and 6 of 

Article 26 (Mutual Agreement Procedure) of the Convention, as amended by 

this Protocol, shall not have effect with respect to cases that are under 

consideration by the competent authorities of the Contracting States on the date 

on which this Protocol enters into force. With respect to cases that come under 

consideration by the competent authorities of the Contracting States after the 

date on which this Protocol enters into force, the provisions of paragraphs 5 and 

6 of Article 26 of the Convention, as amended by this Protocol, shall have effect 

on the date on which the competent authorities agree in writing on a mode of 

application pursuant to subparagraph (g) of paragraph 6 of Article 26. For cases 

that come under consideration by the competent authorities of the Contracting 

States after the entry into force of this Protocol, but before such provisions have 

effect, the commencement date shall be the date on which the competent 

authorities have agreed in writing on the mode of application. 

 IN WITNESS WHEREOF, the undersigned, duly authorized to that 

effect, have signed this Protocol. 

 DONE in duplicate at Madrid, this 14th day of January, 2013, in the 

English and Spanish languages, both texts being equally authentic. 

FOR THE UNITED STATES FOR THE KINGDOM 

OF AMERICA: OF SPAIN: 
27

MEMORANDUM OF UNDERSTANDING 

At the signing today of the Protocol (hereinafter the “2013 Protocol”) amending 

the Convention Between the United States of America and the Kingdom of 

Spain for the Avoidance of Double Taxation and the Prevention of Fiscal 

Evasion with Respect to Taxes on Income, and its Protocol, signed at Madrid, on 

February 22, 1990 (hereinafter the “Convention”), the United States of America 

and Spain have agreed as follows: 

1. With reference to paragraph 6 of Article 1 (General Scope) of the 

Convention, as amended by the 2013 Protocol, it is understood that paragraph 6 

of Article 1 applies to identify the person that derives an item of income, profit 

or gain paid to a fiscally transparent entity for purposes of applying the 

Convention to that first mentioned person. Under paragraph 6 of Article 1, a 

person shall be treated as deriving an item of income, profit or gain paid to an 

entity that is fiscally transparent under the laws of either Contracting State, to 

the extent that the same item of income, profit or gain is treated, for the purposes 

of the taxation law of the Contracting State in which the person is resident, as 

the income, profit or gain of a resident. In order to obtain the benefits of the 

Convention, with respect to the item of income, such person must satisfy all 

applicable requirements specified in the Convention, including other applicable 

requirements of Article 1, residence as defined in Article 4 (Residence), 

beneficial ownership and Article 17 (Limitation on Benefits), and the fiscally 

transparent entity through which the item of income was paid must be formed or 

organized in either Contracting State or in a state that has concluded an 

agreement containing a provision for the exchange of information on tax matters 

with the Contracting State from which the income, profit or gain arises. 

2. With reference to paragraph 3 of the Protocol to the Convention, the 

Contracting States commit to initiate discussions as soon as possible, but no 

later than six months after the entry into force of the 2013 Protocol, regarding 

the conclusion of an appropriate agreement to avoid double taxation on 

investments between Puerto Rico and Spain. 

3. With reference to subparagraph (j) of paragraph 1 of Article 3 (General 

Definitions) of the Convention, as amended by the 2013 Protocol: 

(a) In the case of the United States, the term “pension fund” includes 

the following: a trust providing pension or retirement benefits under an 

Internal Revenue Code section 401(a) qualified pension plan (which 

includes a Code section 401(k) plan), a profit sharing or stock bonus plan, 

a Code section 403(a) qualified annuity plan, a Code section 403(b) plan, 

a trust that is an individual retirement account under Code section 408, a 

Roth individual retirement account under Code section 408A, or a simple 

retirement account under Code section 408(p), a trust providing pension 

or retirement benefits under a simplified employee pension plan under 

Code section 408(k), a trust described in section 457(g) providing pension 

or retirement benefits under a Code section 457(b) plan, and the Thrift 

Savings Fund (section 7701(j)). A group trust described in Revenue 

Ruling 81-100, as amended by Revenue Ruling 2004-67 and Revenue 
28

Ruling 2011-1, qualifies as a pension fund only if each participant is a 

pension fund that is itself entitled to benefits under the Convention as a 

resident of the United States. 

 

(b) In the case of Spain, the term “pension fund” includes the 

following: 

(i) any fund regulated under the Amended Text of the Law on 

pension funds and pension schemes (Texto Refundido de la Ley 

sobre Fondos y Planes de Pensiones), passed by Legislative Royal 

Decree 1/2002 of 29th November; 

(ii) any entity defined under Article 64 of the Amended Text of 

the Law on the regulation and monitoring of private insurances 

(Texto Refundido de la Ley de Ordenación y Supervisión de los 

Seguros Privados) passed by Legislative Royal Decree 6/2004 of 

29th October, provided that in the case of mutual funds all 

participants are employees; promoters and sponsoring partners are 

the companies, institutions or individual entrepreneurs to which the 

employees are engaged; and benefits are exclusively derived from 

the social welfare agreement between both parties, as well as any 

other comparable entity regulated within the scope of the political 

subdivisions (Comunidades Autónomas); and 

(iii) insurance companies regulated under the Amended Text of 

the Law on the regulation and monitoring of private insurances 

passed by Legislative Royal Decree 6/2004 of 29th October whose 

activity is the coverage of the contingencies provided for in the 

Amended Text of the Law on pension funds and pension schemes. 

 

4. With reference to Article 4 (Residence) of the Convention, it is 

understood that the principles of paragraph 8.6 of the Commentaries to the 

OECD Model Tax Convention of July 2010 apply for purposes of determining 

the residence of pension funds and organizations established and maintained in a 

State exclusively for religious, charitable, scientific, artistic, cultural, or 

educational purposes. 

5. With reference to Article 17 (Limitation on Benefits) of the Convention, 

as amended by the 2013 Protocol, it is understood that a person shall be deemed 

to be related to another person if either person participates directly or indirectly 

in the management, control or capital of the other, or the same persons 

participate directly or indirectly in the management, control or capital of both. 

This Memorandum of Understanding shall enter into force on the date of entry 

into force of the 2013 Protocol. 
29

IN WITNESS WHEREOF, the undersigned, being duly authorized thereto, have 

signed this Memorandum of Understanding. 

DONE at Madrid in duplicate, this 14th day of January, 2013, in the English and 

Spanish languages, each text being equally authentic. 

FOR THE UNITED STATES FOR THE KINGDOM 

OF AMERICA: OF SPAIN: