Spain and Canada sign double tax avoidance and tax evasion prevention treaty

The new protocol contains an improvement and updates to certain articles of the agreement aimed at adapting them to requirements arising from current economic and trade relations between Spain and Canada, and the successive changes that have been made to the OECD's Model Taxation Agreement to avoid double taxation.

Furthermore, the protocol is intended to act as an instrument capable of strengthening trade and investment from Canada in Spain and vice versa by providing legal certainty to such economic relations. Hence, improvements are made to the fiscal treatment of dividend and interest payments by reducing the withholding rates while the number of situations in which exemptions are applicable is increased.

This will stimulate existing economic exchanges and foster new business opportunities. Trade between the two countries was worth in excess of 2.2 billion euros in 2013. Pharmaceutical products, fuels and oils, machines and mechanical apparatus, and minerals are especially important. Gross direct investment by Canada in Spain amounted to 110 million euros in 2013, while such investment by Spain in Canada amounted to 109 million euros in the same year. The direct investment stock held by Canada in Spain exceeded 2 billion euros in 2012, while the direct investment stock held by Spain in Canada amounted to 800 million euros in the same year.

The text of the protocol also examines the list of taxes in both countries to which the agreement applies, incorporates assistance for tax collection purposes and updates the regulations governing the exchange of information and mutual agreement procedures.

Furthermore, an anti-abuse clause was included that was not present until now. This type of clause is included in most of the double tax treaties that Spain has negotiated in recent years and is fully in line with the anti-tax evasion process being promoted worldwide in recent years (OECD, G-20, etc.). Its main purpose is to ensure the agreement cannot be used to foster or encourage either tax evasion or opacity in international capital flows.

With this protocol, Spain is taking yet another step forward in its commitment to renegotiating all those agreements that, both due to the passing of time and the strong economic relations maintained with certain countries, need to be adapted to the new status quo.

More agreements on the horizon

Spain has currently negotiated 101 double tax treaties, with 88 of them currently in effect. The other 13 are at various stages of implementation (Azerbaijan, Bahrain, Belarus, Cape Verde, Qatar, Montenegro, Namibia, Nigeria, Oman, Peru, Senegal, Syria and Uzbekistan). Besides its agreement with Canada, Spain has recently renegotiated its agreements with Argentina, Austria, Belgium, the United States, the Netherlands, India, Mexico and the United Kingdom.

Information exchange

Information exchange treaties are currently in force with Andorra, Aruba, the Bahamas, Curaçao, Saint Martin and San Marino, as is a treaty with the United States to Improve International Tax Compliance and Implement the Foreign Account Tax Compliance Act (FATCA).

The information exchange treaties negotiated with Bermuda, Guernsey, the Cayman Islands, the Cook Islands, the Isle of Man, Jersey, Macao, Monaco, Saint Lucia and Saint Vincent and the Grenadines are also at various stages of development.

Giant step in Berlin

Besides the signing of bilateral agreements, the steps being taken multilaterally on the international stage should also be highlighted. In this regard, over 50 countries and jurisdictions around the world signed a multilateral agreement on 29 October on the exchange of financial account information. Spain will receive bank account information on a regular basis in an automatic and standardised fashion.

Spain, Germany, France, Italy and the United Kingdom (the five countries promoting the proposal) described the establishment of a global standard for the exchange of information as historic and encourage more countries to sign up to the Berlin agreement.