Direct Tax Avoidance Agreements
Spain
PROTOCOL
At the moment of signing the Convention between the Government of the Republic of India and the Government of the Kingdom of 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. In respect of clause (d) of paragraph 1 of Article 3 (General Definitions), it is understood that the term "tax" shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Convention applies or which represents a penalty imposed relating to those taxes.
2. In respect of clause (g) of paragraph 2 of Article 5 (Permanent Establishment), it is understood that this clause refers to a warehouse where space is rented to other persons.
3. In respect of clauses (b) and (c) of paragraph 1 of Article 7 (Business Profits), it is understood that in the case of any doubt as to whether the goods or merchandise sold are of the similar kind as those sold through the permanent establishment or whether the other business activities carried on are of the similar kind as those effected through the permanent establishment, the competent authorities may consult each other with a view to resolving the case by mutual agreement.
4. In respect of paragraph 3 of Article 7 (Business Profits), it is understood that in case of any substantial changes in the provisions of the taxation laws of a Contracting State relating to limitation on the deductibility of the expenses which are incurred for the purposes of the business of a permanent establishment, the competent authorities of the Contracting States shall consult each other on the necessity of modifying the provisions of this paragraph.
5. In respect of Article 8 (Air Transport) and Article 9 (Shipping), it is understood that interest on funds connected with the operation of aircraft or ships in international traffic shall be regarded as profits derived from the operation of such aircraft or ships, as the case may be, and the provisions of Article 12 (Interest) shall not apply in relation to such interest.
6. Paragraph 2 of Article 11 (Dividends), shall not be applicable, in the case of Spain, to the income attributable, whether distributed or not, to the shareholders of the corporations and entities referred to in Article 12.2 of Law 44/1978 of 8 September, 1978, and Article 19 of Law 61/1978 of 27 December, 1978, as long as the said income is not subject to the Spanish Corporation Tax. Such income may be taxed in Spain according to its internal Law.
7. The competent authorities shall initiate the appropriate procedures to review the provisions of Article 13 (Royalties and fees for technical services) after a period of five years from the date of its entry into force. However, if under any Convention or Agreement between India and a third State which is a Member of the OECD, which enters into force after 1-1-1990, India limits its taxation at source on royalties or fees for technical services to a rate lower or a scope more restricted than the rate or scope provided for in this Convention on the said items of incomes, the same rate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention with effect from the date on which the present Convention comes into force or the relevant Indian Convention or Agreement, whichever enters into force later.
8. In respect of paragraph 2 of Article 26 (Non-discrimination), it is understood that the provision of this paragraph shall not be construed as preventing a Contracting State from charging the profits of a permanent establishment which an enterprise of the other Contracting State has in the first-mentioned State at a rate of tax which is higher than that imposed on the profits of a similar enterprise of the first-mentioned State, nor as being in conflict with the provisions of paragraph 3 of Article 7 (Business Profits) of this Convention. It is also understood that in no case the taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall be less favourably levied than the taxation levied on a permanent establishment of an enterprise of a third State carrying on the same activities under a double taxation Convention concluded by the other Contracting State with that third State.
9. Notwithstanding the provisions of paragraph 4 of Article 26 (Non-discrimination), it is understood that in the case of India, payments by way of interest, royalties and fees for technical services made by an enterprise of India to a resident of Spain, shall not be allowed as a deduction for the purpose of determining the taxable profits of such enterprise unless tax has been paid or deducted at source from such payments under Indian law and in accordance with the provisions of this Convention.
10. For the purposes of this Convention, it is understood that the term "taxable year" in the case of India shall mean the "previous year" as defined in the Income-tax Act, 1961.
1[11. It is understood that Article 28 (exchange of information) allows that Contracting States may use other techniques to obtain information which may be relevant to both Contracting States such as simultaneous examination, tax examination abroad and industry-wide exchange of information
(i) in accordance with the domestic laws and administrative procedures of each Contracting State and;
(ii) provided that a procedure has been agreed upon by the competent authorities of both Contracting States in accordance with paragraph 3 of Article 27 of the Convention.]
2[12. With respect to Article 28A
It is understood that paragraph 4 of Article 28A (Assistance in the collection of taxes) will include interim measures of conservancy by freezing the assets before a revenue claim is raised against a person in accordance with the laws of both Contracting States.]
3[13. With respect to Article 28B
It is understood that the term 'transaction' referred to in paragraph 4 of Article 28B (Limitation of Benefit) includes the transaction of the creation, assignment or alienation of any shares, debt-claims, assets or other rights where the main purpose or one of the main purposes of such creation, assignment or alienation was to take advantage of this Convention.]
IN WITNESS WHEREOF the undersigned, being duly authorised thereto, have signed the present Protocol.
Done in duplicate at New Delhi this 8th day of February, one thousand nine hundred and ninety three in the Hindi, Spanish and English languages, all the texts being equally authentic. In case of divergence between any of the texts, the English text shall be the operative one.
(Sd.)
(illegible)
For the Government of Republic of India
(Sd.)
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For the Government of Kingdom of Spain
NOTES:-
1. Inserted vide NOTIFICATION NO. 58/2019 dated 27-08-2019
2. Inserted vide NOTIFICATION NO. 58/2019 dated 27-08-2019
3. Inserted vide NOTIFICATION NO. 58/2019 dated 27-08-2019