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S.I. No. 308/1994 - Double Taxation Relief (Taxes on Income and Capital Gains) (Kingdom of Spain) Order, 1994.

S.I. No. 308/1994 - Double Taxation Relief (Taxes on Income and Capital Gains) (Kingdom of Spain) Order, 1994. Skip to content Disclaimer Feedback Helpdesk Gaeilge Léim go dtí an t-ábhar Séanadh Aiseo

Article 7or Article 14, as the case may be, shall apply.

  1. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company, except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State.
  2. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this Article. ARTICLE 11 Interest
  3. Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State.
  4. 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, as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises but does not include any income dealt with in Article
  5. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.
  6. The provisions of paragraph 1 of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other 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.

Article 7or Article 14, as the case may be, shall apply.

4. Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or 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. 5. 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 paid, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the 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 payment shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention. ARTICLE 12 Royalties 1. Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties, the tax so charged shall not exceed:

  1. a)5 per cent of the gross amount of royalties for the use of, or the right to use, any copyrights of literary, dramatic, musical or artistic work;
  2. b)8 per cent of the gross amount of royalties received in consideration for the use of, or the right to use, cinematographic films, or films, tapes, and other means of transmission or reproduction of image or sound, and of the gross amount of royalties for the use of, or the right to use, industrial, commercial or scientific equipment, and for any copyright of scientific work; and
  3. c)10 per cent of the gross amount of all other royalties. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this limitation. 3. The term "royalties" as used in this Article means payment of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematographic films, and films and tapes for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience. 4. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise through a permanent establishment situated therein, or performs 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.

Article 7or Article 14, as the case may be, shall apply.

5. Royalties shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to pay the royalties was incurred and the royalties are borne by that permanent establishment or fixed base, then the royalties shall be deemed to arise in the Contracting 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 royalties paid, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the 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 13 Capital Gains 1. Gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State may be taxed in that other State. 2. Gains from the alienation of shares, rights or an interest in a company, in any other legal person or in a partnership, the assets of which consist principally of, or of rights in, immovable property situated in a Contracting State or of shares in a company the assets of which consist principally of, or of rights in, such immovable property situated in a Contracting State may be taxed in the Contracting State in which the immovable property is situated. 3. Gains from the alienation of shares or other rights, other than those mentioned in paragraph 2 of this Article, in a company or other legal person which is a resident of a Contracting State may be taxed in that Contracting State if the recipient of the gain, during the 12-month period preceding such alienation, had a participation, directly or indirectly, of at least 25 per cent in the capital of that company or other legal person. 4. Gains, other than those dealt with in paragraphs 2 and 3, from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such fixed base, may be taxed in that other Contracting State. 5. Except as provided in paragraphs 2 and 3 of this Article and notwithstanding the provisions of paragraph 4 of this Article, gains from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. 6. Gains from the alienation of any property other than those referred to in paragraphs 1, 2, 3, 4 and 5 of this Article shall be taxable only in the Contracting State of which the alienator is a resident. 7. For the purposes of this Article the term "immovable property" means immovable property as defined in paragraph 2 of Article 6. ARTICLE 14 Independent Personal Services 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State, unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base. 2. The term "professional services" includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. ARTICLE 15 Dependent Personal Services 1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

  1. a)the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days within any twelve-month period falling wholly or partly within the fiscal year concerned of that other State, and
  2. b)the remuneration is paid by, or on behalf of, a person who is not a resident of the other State, and
  3. c)the remuneration is not borne by a permanent establishment or a fixed base which the person has in the other State. 3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic may be taxed in the Contracting State in which the place of effective management of the enterprise is situated. ARTICLE 16 Directors' Fees Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State. ARTICLE 17 Artistes and Athletes 1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State. 2. Where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised. 3. Notwithstanding the provisions of paragraphs 1 and 2, income derived by a resident of a Contracting State as an entertainer or athlete shall be exempt from tax in the other Contracting State if the visit to that other State is substantially supported by public funds of the first-mentioned State or of a political subdivision or local authority thereof. ARTICLE 18 Pensions and Annuities 1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State and any annuity paid to such a resident shall be taxable only in that State. 2. The term "annuity" means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. ARTICLE 19 Government Service 1.
  4. a)Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
  5. b)However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:
  6. i)is a national of that State; or
  7. ii)did not become a resident of that State solely for the purposes of rendering the services. 2.
  8. a)Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
  9. b)However, such pension shall be taxable only in the other Contracting State if the individual is a resident of and a national of that State. 3. The provisions of Articles 15, 16 and 18 shall apply to remuneration or pensions in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof. ARTICLE 20 Students Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State. ARTICLE 21 Professors and Teachers 1. A professor or teacher who visits one of the Contracting States for a period not exceeding two years for the sole purpose of teaching or carrying out advanced study (including research) at a university, college or other recognised research institute or other establishment for higher education in that Contracting State and who was immediately before that visit a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits that Contracting State for such purpose. An individual shall be entitled to the benefits of this Article only once. 2. The preceding provisions of this Article shall not apply to remuneration which a professor or teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons. ARTICLE 22 Other Income 1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State. 2. The provisions of paragraph 1 of this Article shall not apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of a Contracting State, carries on business in the other Contracting State through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the right or property in respect of which the income is paid is effectively connected with such permanent establishment or fixed base. In such case, the provisions of Article 7 or Article 14, as the case may be, shall apply. ARTICLE 23 Elimination of Double Taxation 1. In Spain, double taxation will be avoided, in accordance with the relevant provisions of the law of Spain, as follows:
  10. a)Where a resident of Spain derives income or gains which, in accordance with the provisions of this Convention, may be taxed in Ireland, Spain shall allow as a deduction from the tax on the income or gains of that resident, an amount equal to the tax effectively paid in Ireland (excluding in the case of a dividend tax payable in respect of the profits out of which the dividend is paid). Such deduction shall not, however, exceed that part of the Spanish tax, as computed before the deduction is given, which is attributable to the income or gains, as the case may be, which may be taxed in Ireland.
  11. b)In the case of a dividend paid by a company which is a resident of Ireland to a company which is a resident of Spain and which controls directly 25 per cent or more of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Irish tax creditable under the provisions of subparagraph
  12. a)of this paragraph) the Irish tax effectively paid by the company in respect of the part of the profits out of which such dividend is paid, provided that in such case the Spanish tax shall be charged on the aggregate of the amount of the dividend and the amount of the Irish tax so effectively paid by the company paying the dividend. Such deduction, together with the deduction allowable in respect of the dividend under subparagraph
  13. a)of this paragraph, shall not exceed that part of the Spanish tax, as computed before the deduction is given, which is attributable to the income subject to tax in Ireland. For the application of this subparagraph it shall be required that the participation in the company paying the dividend is held on a continuous basis during at least the two years prior to the day on which the dividend is paid. 2. Subject to the provisions of the laws of Ireland regarding the allowance as a credit against Irish tax of tax payable in a territory outside Ireland (which shall not affect the general principle hereof):
  14. a)Spanish tax payable under the laws of Spain and in accordance with this Convention on profits, income or gains from sources within Spain (excluding in the case of a dividend tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any Irish tax computed by reference to the same profits, income or gains by reference to which the Spanish tax is computed.
  15. b)In the case of a dividend paid by a company which is a resident of. Spain to a company which is a resident of Ireland and which controls directly 25 per cent or more of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Spanish tax creditable under the provisions of subparagraph
  16. a)of this paragraph) the Spanish tax payable by the company in respect of the profits out of which such dividend is paid. For the application of this subparagraph it shall be required that the participation in the company paying the dividend is held on a continuous basis during at least the two years prior to the day on which the dividend is paid. 3. Where in accordance with any provision of the Convention income or gains derived by a resident of a Contracting State are exempt from tax in that State, such State may nevertheless, in calculating the amount of tax on the remaining income or gains of such resident, take into account the exempted income or gains. ARTICLE 24 Non-Discrimination 1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. The provisions of this Article shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents. 3. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected. 4. Except where the provisions of paragraph 1 of Article 9, paragraph 5 of Article 11, or paragraph 6 of Article 12, apply, interest, royalties and other disbursements paid by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purpose of determining the taxable profits of such enterprise, be deductible under the same conditions as if they had been paid to a resident of the first-mentioned State. ARTICLE 25 Mutual Agreement Procedure 1. Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention. 2. The competent authority 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 the Convention. 3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases not provided for in the Convention. 4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs. ARTICLE 26 Exchange of Information 1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Article 1. Any information received 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, or the determination of appeals in relation to, the taxes covered by the Convention. 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. 2. Notwithstanding the provisions of paragraph 1 of this Article a Contracting State shall not be obliged:
  17. a)to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;
  18. b)to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
  19. c)to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). ARTICLE 27 Diplomatic Agents and Consular Officers Nothing in this Convention shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special agreements. ARTICLE 28 Entry into Force 1. This Convention shall be ratified and the instruments of ratification shall be exchanged at Dublin as soon as possible. 2. The Convention shall enter into force upon the exchange of instruments of ratification and its provisions shall have effect:
  20. a)in Spain:
  21. i)in respect of taxes withheld at source, in relation to income derived on or after the first day of January in the calendar year next following that in which the Convention enters into force;
  22. ii)in respect of other taxes, in relation to the income of any tax year beginning on or after the first day of January in the calendar year next following that in which the Convention enters into force;
  23. b)in Ireland:
  24. i)as respects income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April in the calendar year next following that in which this Convention enters into force;
  25. ii)as respects corporation tax, for any financial year beginning on or after the first day of January, in the calendar year next following that in which this Convention enters into force. ARTICLE 29 Termination This Convention shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Convention, through diplomatic channels, by giving notice of termination at least six months before the end of any calendar year after the expiration of 5 years from the date of its entry into force. In such event the Convention shall cease to have effect:
  26. a)in Spain:
  27. i)in respect of taxes withheld at source, in relation to income derived on or after the first day of January in the calendar year next following that in which the notice of termination is given;
  28. ii)in respect of other taxes, in relation to the income of any tax year beginning on or after the first day of January in the calendar year next following that in which the notice of termination is given;
  29. b)in Ireland:
  30. i)as respects income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April in the calendar year next following that in which such notice is given;
  31. ii)as respects corporation tax, for any financial year beginning on or after the first day of January in the calendar year next following that in which such notice is given. In witness whereof the Plenipotentiaries of the two Contracting States, duly authorised thereto, have signed the present Convention and affixed thereto their seals. Done in duplicate at Madrid this 10th day of February, 1994 in the English and Spanish languages, each text being equally authoritative. RICHARD RYAN For Ireland JAVIER SOLANA MADARIAGA For the Kingdom of Spain Protocol At the moment of signing the Convention between Ireland and the Kingdom of Spain for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, the undersigned have agreed upon the following provisions which shall be an integral part of the Convention. 1. Where under any provision of this Convention income or gains is, or are, relieved from tax in Spain and, under the law in force in Ireland, an individual, in respect of the said income or gains, is subject to tax by reference to the amount thereof which is remitted to or received in Ireland, and not by reference to the full amount thereof, the relief to be allowed under this Convention in Spain shall apply only to so much of the income or gains as is, or are, remitted to or received in Ireland. 2. Notwithstanding the provisions of this Convention, income (imputed or otherwise) or capital gains derived from time-share rights not exceeding 4 annual weeks by a resident of a Contracting State, and capital represented thereby owned by a resident of a Contracting State, shall be taxable only in that State. 3. Notwithstanding the provisions of Articles 10, 11, 12 and 13, the tax reductions or exemptions which would, under those provisions, otherwise be applicable to dividends, interest, royalties and gains, shall not apply where such income or gains are derived from one Contracting State by a company which is a resident of the other Contracting State and in which persons who are not residents of that other Contracting State hold directly or indirectly a participation of more than 50 per cent of the share capital. Provided that the provisions of this paragraph shall apply only to dividends, interest, royalties and gains arising in one of the Contracting States and derived by a company resident in the other Contracting State where that company is engaged merely in the holding of shares or other property. 4.
  32. a)Notwithstanding the provisions of paragraph 1 of Article 11, if under Spanish domestic legislation interest arising in Spain and paid to a resident of Ireland becomes subject to Spanish taxation, such interest, which may be taxed in Ireland, may also be taxed in Spain, but if the recipient of the interest is the beneficial owner, the tax so charged shall not exceed 10 per cent of the gross amount of the interest.
  33. b)The provisions of subparagraph
  34. a)shall, in no case, apply to interest paid in connection with the sale on credit of any industrial, commercial or scientific equipment. 5. Notwithstanding paragraph 2 of Article 12, but subject to paragraphs 4 and 6 of that Article, income derived by a resident of a Contracting State from the leasing on a bareboat basis of ships, aircraft or containers, used in international traffic, shall be taxable only in that State. 6. Nothing in Article 24 shall be construed as preventing a State from applying the provisions of its domestic laws regarding "thin-capitalisation". 7. The Agreement dated 25 February, 1975, between Spain and Ireland for the avoidance of double taxation on income derived from the business of sea or air transport shall not have effect as respects any tax for any period for which this Convention has effect in relation to that tax. In witness whereof the Plenipotentiaries of the two Contracting States, duly authorised thereto, have signed the present Protocol and affixed thereto their seals. Done in duplicate at Madrid this 10th day of February, 1994 in the English and Spanish languages, each text being equally authoritative. RICHARD RYAN For Ireland JAVIER SOLANA MADARIAGA For the Kingdom of Spain GIVEN under the Official Seal of the Government, this 5th day of October, 1994. ALBERT REYNOLDS Taoiseach EXPLANATORY NOTE This Order gives the force of law in Ireland to the Convention with the Kingdom of Spain set out in the Schedule to the Order. The Convention provides for the allocation of taxing rights between Ireland and Spain and for the granting of relief from double taxation with regard to items of income and capital gains which, under the laws of Ireland and the laws of Spain, may be taxed in both countries. For example, items such as business profits, interest and gains on movable property not arising through or connected with a permanent establishment in the source country, profits from the operation of ships or aircraft in international traffic and non-government pensions are taxable only in the country of residence of the recipient. On the other hand, remuneration and pensions in respect of services rendered to a government of one of the countries is normally taxable only in that country, i.e. the country of source. Where both countries continue to have taxing rights, for example, with regard to business profits arising through a permanent establishment which an enterprise of one country has in the other country, certain income or gains derived from time-share rights, certain dividends or royalties received in one country from the other country, the Convention provides that the country of residence of the recipient will allow a credit against its own tax for the tax imposed on the same income by the country of source. Thus double taxation is relieved. The Convention effectively secures that rentals received by an Irish enterprise in respect of the leasing, on a bareboat basis, of aircraft, ships or containers used in international traffic will be taxable only in Ireland where the Irish enterprise does not have a permanent establishment in Spain. Capital gains arising from the disposal of immovable property and of shares linked with immovable property, and of shares in a company where the beneficiary has a participation of at least 25 per cent in the capital of the company may be taxed by the country in which the property is situated. Capital gains arising from the disposal of other property are normally to be taxed only in the country of residence of the taxpayer unless they arise from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country. Double taxation is relieved by the granting of a credit in the country of residence for tax paid in the country where the property is located. A provision of the Convention preserves the taxation rights of a State in respect of income and capital gains arising from the exploration and exploitation of the sea bed and subsoil in the territory of that State were such activities are carried on for more than thirty days. In the case of dividends flowing from Ireland to Spain, the Convention grants to Spanish portfolio investors* a tax credit in respect of Irish dividends. Where appropriate, repayment of the tax credit can be obtained subject to a liability to Irish tax not exceeding 15 per cent of the aggregate of the dividend and the tax credit. No repayment of a tax credit will be made in respect of a dividend, the beneficial owner of which is a direct investor**. However, no withholding taxes are levied on such a dividend. *A share-holder who is an individual or a company, other than a company which controls directly or indirectly at least 25 per cent of the voting power in the company resident in Ireland which pays the dividend. **A company which controls directly or indirectly at least 25 per cent of the voting power in the company paying the dividend. In the case of dividends flowing from Spain to Ireland, the Convention provides for a reduction of Spanish withholding tax from 25 per cent to 15 per cent for Irish portfolio investors. Dividends flowing to an Irish direct investor will be exempt from the Spanish withholding tax. In the case of Irish income and gains paid to residents of Spain a credit equal to the Irish tax paid will be granted. Where such income includes dividends paid to a Spanish company which is a direct investor in the Irish company paying the dividends, the credit will include the underlying Irish tax attributable to those dividends. On the Irish side, Spanish tax on profits, income and gains from sources within Spain will be allowed as a credit against Irish tax on the same profits, income or gains. Where dividends are paid by a Spanish company to an Irish parent company, credit will be granted when those dividends are being taxed in Ireland for the underlying Spanish company tax on those dividends. A provision has been included in the Protocol to the Convention which limits the benefits of certain of its provisions. Under this provision, the tax reductions and exemptions otherwise applicable to dividends, interest, royalties and capital gains will not apply where the income or gains are derived by a company which is not substantially controlled by residents of its country of residence and which is engaged in the mere holding of shares or other property. There is an understanding between the competent authorities of both countries that companies actively dealing in shares would not be regarded as engaged "in the mere holding of shares or other property". In considering the effect of this provision, account must be taken of reliefs available under the domestic laws of both countries and EU legislation which may limit the scope of the provision. Provision is made for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities for the purpose of resolving any difficulties or doubts arising as to the interpretation or application of the Convention and for the exchange of such information between these authorities as is necessary for carrying out the provisions of the Convention or of the domestic laws of the Contracting States concerning taxes covered by the Convention. The Convention will become operative— in Ireland: (
  35. i)as respects income tax and capital gains tax, for any year of assessment beginning on or after the sixth day of April in the calendar year next following that in which this Convention enters into force; (
  36. ii)as respects corporation tax, for any financial year begining on or after the first day of January in the calendar year next following that in which this Convention enters into force; in Spain: (
  37. i)in respect of taxes withheld at source, in relation to income derived on or after the first day of January in the calendar year next following that in which the Convention enters into force; (
  38. ii)in respect of other taxes, in relation to the income of any tax year beginning on or after the first day of January in the calendar year next following that in which the Convention enters into force. Privacy Statement Accessibility European Legislation Identifier (PDF) Open Data License Ráiteas Príobháideachais Inrochtaineacht Aitheantóir Eorpach Reachtaíochta (ELI) Ceadúnas Sonraí Oscailte Liosta Fianán © Government of Ireland. Oireachtas Copyright Material is reproduced with the permission of the Houses of the Oireachtas © Rialtas na hÉireann. Atáirgtear ábhar faoi Chóipcheart le cead ó Thithe an Oireachtais

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AI explanation based on the official legal text. Indicative, not a substitute for legal advice.