Protocol between Canada and The Kingdom of Spain Amending the Convention Between Canada and Spain Signed at Ottawa on 23 November 1976

Canada and the Kingdom of Spain,

DESIRING to amend 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, signed at Ottawa on 23 November 1976 (hereinafter referred to as the "Convention"),

HAVE AGREED as follows:

Paragraph 3 of Article II (Taxes Covered) of the Convention shall be deleted and replaced by the following paragraph:

(a) in Spain:

(i) the income tax on individuals;

(ii) the corporation tax;

(iii) the income tax on non residents;

(iv) local taxes on income; and

(v) the capital tax;
(hereinafter referred to as "Spanish Tax");

(b) in Canada, the taxes imposed by the Government of Canada under the Income Tax Act (hereinafter referred to as "Canadian tax")."

1. Subparagraph (i) of paragraph 1 of Article III (General Definitions) of the Convention shall be deleted and replaced by the following subparagraph:
2. Paragraph 1 of Article III (General Definitions) of the Convention shall be amended by adding the following subparagraphs:
Paragraphs 3 and 4 of Article IV (Fiscal Domicile) of the Convention shall be deleted and replaced by the following paragraph:
Paragraph 3 of Article IX (Associated Enterprises) of the Convention shall be deleted and replaced by the following paragraphs:
1. Paragraph 2 of Article X (Dividends) of the Convention shall be deleted and replaced by the following paragraph:

(a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends;

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

2. Paragraph 6 of Article X (Dividends) of the Convention shall be deleted and replaced by the following paragraph:
3. Article X (Dividends) of the Convention shall be amended by adding the following paragraphs:
9. For the purposes of paragraph 8,
1. Paragraph 2 of Article XI (Interest) of the Convention shall be deleted and replaced by the following paragraph:
2. Paragraph 7 of Article XI (Interest) of the Convention shall be deleted and replaced by the following paragraphs:
1. Article XIV (Independent Personal Services) shall be deleted and the subsequent Articles of the Convention shall not be renumbered, and the following consequential changes shall be made to the Convention:
Paragraph 2 of Article XV (Dependent Personal Services) of the Convention shall be deleted and replaced by the following paragraph:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned, and

(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

(c) the remuneration is not borne by a permanent establishment which the employer has in the other State."

Paragraph 3 of Article XVII (Artists and Athletes) of the Convention shall be deleted and replaced by the following paragraph:

Article XXIII (Elimination of Double Taxation) of the Convention shall be deleted and replaced by the following Article:

1. In Spain, double taxation shall be avoided following either the provisions of its internal legislation or the following provisions in accordance with the internal legislation of Spain:

(i) as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Canada;

(ii) the deduction of the underlying corporation tax shall be given in accordance with the internal legislation of Spain.

Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income which may be taxed in Canada.

The provisions of this subparagraph shall not apply to any income tax paid in Canada in accordance with the provisions of paragraph 5 of Article XIII.

2. In Canada, double taxation shall be avoided as follows:

(a) subject to the existing provisions of the laws 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 laws of Canada regarding the allowance as a credit against Canadian tax of tax payable in a territory outside Canada and to any subsequent modification of those provisions which shall not affect the general principle hereof where a company which is a resident of Spain pays a dividend to a company which is a resident of Canada and which controls directly or indirectly at least 10 per cent of the voting power in the first-mentioned company, the credit shall take into account the tax payable in Spain by that first-mentioned company in respect of the profits out of which such dividend is paid; and

(c) where, in accordance with any provision of this Convention, income derived by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income, take into account the exempted income.

3. For the purpose of paragraph 2, profits, income or gains of a resident of Canada that may be taxed in Spain in accordance with this Convention shall be deemed to arise from sources in Spain."

Article XXV (Mutual Agreement Procedure) of the Convention shall be deleted and replaced by the following Article:

1. Where a person considers that the actions of one or both of the Contracting States result or will result for that person in taxation not in accordance with the provisions of this Convention, that person may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which that person 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 three years from the first notification of the action resulting in taxation not in accordance with the provisions of this 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 a satisfactory 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 which is not in accordance with this Convention. Any agreement reached shall be implemented notwithstanding any time limits in the domestic law of the Contracting States.

3. A Contracting State shall not, after the expiry of the time limits provided in its domestic laws and, in any case, after eight years from the end of the taxable period to which the income concerned was attributed, increase the tax base of a resident of either of the Contracting States by including therein items of income that have also been included in income in the other Contracting State. This paragraph shall not apply in the case of fraud, wilful default or when a Contracting State applies anti-abuse rules.

4. 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 this Convention.

5. The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in this Convention and may communicate with each other directly for the purpose of applying this Convention."

Article XXVI (Exchange of Information) of the Convention shall be deleted and replaced by the following Article:

1. The competent authorities of the Contracting States shall exchange such information as is forseeably 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 on behalf of the Contracting States, insofar as the taxation thereunder is not contrary to this Convention. The exchange of information is not restricted by Articles I and II.

2. Any information received under paragraph 1 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) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes, or the oversight of the above. 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. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use.

3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:

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 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 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 the information relates to ownership interests in a person."

The following new Article XXVI-A (Assistance in the Collection of Taxes) shall be inserted into the Convention after Article XXVI:

1. The Contracting States undertake to lend assistance to each other in the collection of revenue claims. This assistance is not restricted by Articles I and II. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this Article, including agreement to ensure comparable levels of assistance.

2. The term "revenue claim" as used in this Article means an amount owed in respect of taxes of every kind and description collected by or on behalf of the Contracting States, insofar as the taxation thereunder is not contrary to this Convention or any other instrument to which the Contracting States are parties, as well as interest, administrative penalties and costs related to such amount.

3. When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the other Contracting State. Where an application for collection of a revenue claim is accepted:

4. Notwithstanding the provisions of paragraph 3, a revenue claim accepted by a Contracting State shall not, in that State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. In addition, a revenue claim accepted by a Contracting State for the purposes of paragraph 3 shall not, in that State, have any priority applicable to that revenue claim under the laws of the other Contracting State. A revenue claim of a Contracting State shall not be recovered by imprisonment of the debtor in the other Contracting State.

5. Nothing in this Article shall be construed as creating or providing any rights of administrative or judicial review of a revenue claim of a Contracting State in the other State.

6. Where, at any time after a request has been made by a Contracting State and before the other Contracting State has collected and remitted the relevant revenue claim to the first-mentioned State, the revenue claim ceases to be a revenue claim of the first-mentioned State that is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, the competent authority of the first-mentioned State shall promptly notify the competent authority of the other State of that fact and, at the option of the other State, the first-mentioned State shall either suspend or withdraw its request.

7. In no case shall the provisions of this Article be construed so as to impose on a Contracting State the obligation:

Article XXVIII (Miscellaneous Rules) of the Convention shall be deleted and replaced by the following Article:

1. The provisions of this Convention shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded by the laws of a Contracting State in the determination of the tax imposed by that State.

2. 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 with respect to a company or other entity in which that resident has an interest.

3. This Convention shall not apply to any company or other entity that is a resident of a Contracting State and is beneficially owned or controlled, directly or indirectly, by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company or other entity by that State is substantially lower than the amount that would be imposed by that State (after taking into account any reduction or offset of the amount of tax in any manner, including a refund, reimbursement, contribution, credit, or allowance to the company or to any other person) if all of the shares of the capital stock of the company or all of the interests in the entity, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

4. For the purposes of paragraph 3 of Article XXII (Consultation) of the General Agreement on Trade in Services of the Marrakesh Agreement Establishing the World Trade Organization, the Contracting States agree that, notwithstanding that paragraph, any dispute between them as to whether a measure falls within the scope of this Convention may be brought before the Council for Trade in Services, as provided by that paragraph, only with the consent of both Contracting States. Any doubt as to the interpretation of this paragraph shall be resolved under paragraph 4 of Article XXV or, failing agreement under that procedure, pursuant to any other procedure agreed to by both Contracting States."

1. Paragraphs 1, 2 and 3 of the Protocol forming an integral part of the Convention shall be deleted and replaced by the following paragraphs:
2. Paragraph 6 of the Protocol of the Convention shall be deleted and replaced by the following paragraph:
3. The Protocol of the Convention shall be amended by adding the following paragraphs:

1. The Governments of the Contracting States shall notify each other, through diplomatic channels, that 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 receipt of the later of the notifications referred to in paragraph 1 and its provisions shall have effect:

3. Notwithstanding the provisions of this Article, the provisions of Articles 11 and 12 of this Protocol shall apply in respect of any taxes, mutual agreement procedure or information referred to in these Articles even if such matters pre-date the entry into force of this Protocol or the effective date of any of its provisions.

4. Notwithstanding the provisions of this Article, the provisions of Article 13 of this Protocol shall apply to revenue claims that are in respect of a tax year that commences after a date that is four years before the date on which this Protocol enters into force.

IN WITNESS WHEREOF the undersigned, duly authorized thereto, have signed this Protocol.

DONE in duplicate at Madrid, this 18th day of November, 2014, in the English, French and Spanish languages, each version being equally authentic.

Jon Allen
FOR CANADA
Cristóbal Montoro
FOR THE KINGDOM OF SPAIN
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