# US-Spain tax treaty protocol ratified by Senate



## underation (Oct 25, 2018)

The US Senate is in the process of ratifying amendments to protocols to four US tax treaties. The protocol to the US-Spain tax treaty has now been signed.



> The Senate on Tuesday ratified a protocol updating a tax treaty between the U.S. and Spain - the first of four agreements that are slated to get a vote this week after they were stalled for years.
> 
> In a ceremony held at the Spanish Ministry of Finance in Madrid today, the two officials signed a new Protocol intended to bring the existing tax treaty, concluded in 1990, into closer conformity with the current tax treaty policies of both the United States and Spain. Significantly, the new Protocol provides for exclusive residence-country taxation of interest, royalties, certain direct dividends and capital gains. In addition, consistent with a number of recent U.S. tax treaties, the new Protocol provides for resolution through mandatory binding arbitration of certain cases that the revenue authorities of the United States 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 the 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’s tax laws.


https://thehill.com/policy/finance/453401-senate-ratifies-long-stalled-tax-treaty?amp

The article gives a link to the final text.


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## Bevdeforges (Nov 16, 2007)

I would just point out that most of the support for this protocol is based on favorable treatment of corporate taxpayers and "employers" rather than individual taxpayers. Would be interesting to know if the "exclusive residence-country taxation" of investment type income gets taxpayers any sort of break on the FATCA reporting requirements (forms 3520, 5471 or 8938, for example).


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## underation (Oct 25, 2018)

Bevdeforges said:


> I would just point out that most of the support for this protocol is based on favorable treatment of corporate taxpayers and "employers" rather than individual taxpayers.


Stands to reason, and seems likely to be one of the reasons for the delay - waiting for the TCJA (with its switch to pseudo-territorial taxation of corporations) to get passed and implemented.



> Would be interesting to know if the "exclusive residence-country taxation" of investment type income gets taxpayers any sort of break on the FATCA reporting requirements (forms 3520, 5471 or 8938, for example).


Correct me if I’m wrong, but aren’t those all US-required information returns? With no need for negotiation with another country?


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## underation (Oct 25, 2018)

The other three countries for which protocols are being ratified are Switzerland, Japan, and Luxembourg.

Interesting to note that the US-Japan agreement includes a (limited) provision for mutual assistance in the collection of taxes - even from a dual Japanese national - for failing to file a tax return *for the purpose of evading tax*. (My bolding)

I rest my case: US expats who don’t have enough US-taxable income to reach the threshold for filing a return, are not evading tax; therefore can’t be required to file a US tax return.

https://www.congress.gov/114/cdoc/tdoc1/CDOC-114tdoc1.pdf

Links to the texts of all four protocols are supplied in this article:
https://mnetax.com/us-senate-foreign-relations-committee-approves-four-tax-treaty-protocols-34517


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## underation (Oct 25, 2018)

*Current US tax treaty policy*

The US Treasury Dept says, commenting on the Protocol to the US-Spain tax treaty:



> In a ceremony held at the Spanish Ministry of Finance in Madrid today, the two officials signed a new Protocol intended to bring the existing tax treaty, concluded in 1990, into closer conformity with the current tax treaty policies of both the United States and Spain. *Significantly, the new Protocol provides for exclusive residence-country taxation of interest, royalties, certain direct dividends and capital gains.* In addition, consistent with a number of recent U.S. tax treaties, the new Protocol provides for *resolution through mandatory binding arbitration* of certain cases that the revenue authorities of the United States and Spain have been unable to resolve after a reasonable period of time


Might be worthwhile for USC's filing US tax returns in countries with as-yet-unamended treaties to raise the issue with their Competent Authority and see if their treaty too can be brought into closer conformity with current US tax treaty policy.


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## underation (Oct 25, 2018)

More on mandatory binding arbitration:



> Individuals interested in serving as U.S. members of arbitration boards, as well as non-U.S. citizens interested in serving as arbitration board chairs with respect to U.S. tax treaties providing for mandatory binding arbitration should send an e-mail to [email protected] (subject line “Arbitration Panel Solicitation”).


https://www.irs.gov/businesses/international-businesses/mandatory-tax-treaty-arbitration


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