The Agreement between the United Mexican States and the Kingdom of Spain to Avoid Double Taxation in the Matter of Income and Property Taxes and to Prevent Fraud and Tax Evasion It is an international agreement signed with the purpose of regulating tax obligations between both countries, preventing the same income or assets from being taxed in both territories.
Some key points of the agreement are highlighted below:
Scope of Application
- Subjects: Applies to persons (natural or legal) resident in one or both Contracting States.
- Taxes: Includes income and wealth taxes, such as ISR in Mexico and Corporate Tax in Spain.
Definitions
- It defines key concepts such as “resident”, “permanent establishment”, “international traffic” and “dividends”, establishing uniform criteria.
Elimination of Double Taxation
- Mexico: It allows you to credit taxes paid in Spain against Mexican taxes, within certain limits.
- Spain: Recognizes tax credits for taxes paid in Mexico, including certain special provisions for dividends and capital gains.
Specific Income
- Dividends: A maximum retention rate of 5% or 15% is established, depending on the shareholding.
- Interest and Royalties: They can be taxed in both States, with specific limits of 10% or 15%.
- Capital Gains: Gains from the alienation of real property or shares linked to real property may be taxed in the State where the property is located.
Additional Protocol
- It includes clarifications on terms such as "bank", treatment of corporate reorganizations and limitations on applying tax benefits when transactions are carried out exclusively to take advantage of the agreement.
Conflict Resolution
- It establishes an amicable procedure to resolve discrepancies regarding the application of the agreement between the tax authorities of both countries.
Validity and Denunciation
- The Convention will enter into force upon exchange of instruments of ratification and may be denounced by any State with six months' notice after an initial period of five years.
This agreement is essential for companies and individuals with economic activities or interests in both countries, as it provides legal certainty, encourages investment and avoids excessive tax burdens.
Retention Rate Summary
Below is a summary of the withholdings established in the agreement:
| Type of Operation | Maximum Applicable Retention Rate | Comments and Specific Cases |
| Dividends | -5% | Applies if the beneficial owner is a company that directly owns at least 25% of the capital of the paying company. |
| -15% | Applies in all other cases. | |
| Interests | -10% | Applies when the beneficial owner is a bank. |
| -15% | Applies in all other cases. | |
| Royalties or fees | -10% | Includes payments for use of patents, trademarks, procedures, commercial and scientific equipment, etc. |
| No withholding applies | When it comes to royalties derived from copyright on literary, artistic or scientific works (except films). | |
| Capital gains | No withholding applies | Except in specific cases: |
| Variable up to 25% | Alienation of real estate located in the other State. | |
| Variable (case by case) | Alienation of shares or rights whose majority value is derived from real estate located in the other State. | |
| Wages and salaries | No withholding applies | Taxed in the State where the service is provided, except for exceptions (stay less than 183 days, foreign employer, etc.). |
| Professional services | No withholding applies | Taxed in the State of residence unless there is a fixed base or stay of more than 183 days in the other State. |
| Pensions | No withholding applies | Taxed in the State of residence of the beneficiary. |
| Public remuneration | No withholding applies | Taxed in the State that makes the payment, unless the beneficiary resides and is a national of the other State. |
| Income of artists and athletes | Variable | Taxed in the State where the activities are carried out, even if the income is paid to a third party. |
| Other income | No withholding applies | Taxed in the State of residence, unless they are linked to a permanent establishment in the other State. |
Conclusions
The agreement between Mexico and Spain to avoid double taxation encourages bilateral investment and reduces the tax burden by establishing competitive rates and clear limits on dividends, interest and royalties.
It offers tax certainty by defining which income and assets can be taxed in each country, preventing double taxation and promoting tax equity. It also includes mechanisms for conflict resolution, exchange of information and equal treatment for residents and nationals of both countries, strengthening international cooperation and the fight against tax fraud.
0 comentarios