Summary of Main Changes of New Protocol Amending the US-Spain Tax treaty

The new Protocol to the income tax treaty between the United States and Spain provides for exclusive resident -country taxation of interest, royalties, certain direct dividends and capital gains.

- Interests: with a few exceptions, no withholding will be applied to interest payments received by the beneficial owner of those interests.

- Royalties: eliminates withholding which ranged between 5%, 8%, or 10%, depending on the type of intellectual property or industrial property.

- Dividends: with a few exceptions, reduces withholding from 10% and 15 %( depending on ownership interest of the company/individual receiving the dividend) to 0% (80% voting right previous 12-month holding period), 5% (10% voting right) and 15%(less than 10% voting right).

- Capital Gains: eliminates tax at source, except in the provision of (i) assets or rights associates with permanent establishment and (ii) real estate or other rights over real estate.

In addition, consistent with a number of recent U.S. tax treaties, the new Protocol provides or resolution through mandatory binding arbitration of certain cases that the revenue authorities of the United State and Spain have been unable to resolve after a reasonable period of time.

The new Protocol contains a comprehensive limitation on benefits provision that is intended to ensure that only residents of United States and Spain will enjoy the benefits of the treaty. The new Protocol also provides for the full exchange of information between the competent authorities to facilitate the administration of each country tax laws.