close
Share with your friends

Tax treaty update: U.S. Senate approves Protocol with Spain

U.S. Senate approves Protocol with Spain

The U.S. Senate this evening, July 16, 2019, approved a Protocol to amend the income tax treaty with Spain.

1000

Related content

The Protocol to amend the income tax treaty with Spain was signed in January 2013, and provides for:

  • Exemption from withholding taxes for interest (subject to certain exceptions), royalties, and capital gains
  • Exemption from withholding tax for dividends paid to certain pension funds, or to companies holding shares representing 80% or more of voting power in the subsidiary and meeting certain other requirements (and a parallel exemption from branch profits tax)
  • A new comprehensive limitation on benefits (LOB) article
  • A new provision addressing income earned through fiscally transparent entities
  • Mandatory binding arbitration of unresolved competent authority cases
  • Broad exchange of information between competent authorities for tax purposes

 

Senate Majority Leader Mitch McConnell (R-KY) has announced his intention to hold votes tomorrow, July 17, 2019, on the remaining three Protocols with Switzerland, Luxembourg, and Japan.

  • The Protocol to amend the income tax treaty with Switzerland was signed in September 2009.
  • The Protocol to amend the income tax treaty with Luxembourg was signed in May 2009.
  • The Protocol amending the income tax treaty with Japan was signed in January 2013.

KPMG observation

Once the Protocols are approved by the Senate, there are certain ministerial actions required (such as preparation and exchange of articles of ratification) before ratification is completed in the United States and before the Protocols can enter into force.

These Protocols were all negotiated and signed long before the December 2017 enactment of the U.S. tax law (Pub. L. No. 115-97) that is often referred to as the “Tax Cuts and Jobs Act” (TCJA).

The Protocols do not appear to modify the provisions of the respective treaties arguably relevant to the TCJA.  The treaties, on the other hand, might arguably do so and, in the case of any conflict, would supersede the TCJA because the treaties would be later in time.

Still pending ratification are the income tax treaties with Hungary, Poland, and Chile. There is no Senate action scheduled on these treaties at this time.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal