Canadian Treaty Series
E103386 - CTS 1928 No. 7
AGREEMENT BETWEEN THE UNITED KINGDOM AND SPAIN REGULATING THE TREATMENT OF COMPANIES
His Majesty the King of the United Kingdom of Great Britain and Ireland, and of the British Dominions Overseas, Emperor of India, and His Catholic Majesty the King of Spain, being agreed that it is desirable to conclude a separate Agreement regulating the treatment to be accorded in the territories of each of the High Contracting Parties to the Companies registered in the territories of the other, have for this purpose named as their plenipotentiaries:
His Majesty the King of the United Kingdom of Great Britain and Ireland, and of the British Dominions Overseas, Emperor of India:
The Right Honourable Sir Horace George Montagu Rumbold, Baronet, G.C.M.G, M.V.O., His Ambassador Extraordinary and Plenipotentiary at Madrid;
His Catholic Majesty the King of Spain:
His Excellency the SeZor Don Fernando Espinosa de los Monteros y Bermejillo, Under-Secretary in charge of the Ministry of State, Knight of the Military Order of Calatrava, Grand Cross of the Orders of Leopold II of Belgium, of St. Maurice and St. Lazarus and of the Crown of Italy, of the House of Orange of the Netherlands and of the Pontifical Order of St. Gregory the Great;
Who, having exhibited their respective full powers, found in good and due form, have agreed as follows:
For the purposes of the present Agreement the expression "Companies of a Contracting Party" means Joint Stock Companies and other associations engaged in commercial, industrial, transport, insurance, financial or other description of business, constituted and authorized in accordance with the laws in force in the territories of that Contracting Party, and having their central management and control situation in those territories.
Except in so far as modified by the present Agreement, the Companies of either Contracting Party shall enjoy in the territories of the other the benefits accorded to subjects by the Treaty of Commerce and Navigation signed at Madrid on 31st October, 1922.
In particular it is agreed that the Companies of one Contracting Party, when carrying on business in the territories of the other, shall not be subject in respect of their property, business, trade, industry or any other matter, to taxes, general or local, or imposts of any kind whatever, other or greater than those which are or may be imposed on the Companies of the second Contracting Party.
Any taxes or imposts levied on the Companies of either Contracting Party in the territories of the other shall be strictly limited:
(a) if levied on capital, to that part of the capital which is effectively engaged within;
(b) and if based on volume of business done, to the business carried on or controlled within;
(c) and if based on profits, to profits arising from business carried on or controlled within;
that part of the territories of the second Contracting Party in which similar taxes or imposts are levied on the Companies of that Party. Such taxes or imposts shall be levied at rates not greater than those applicable to the Companies of that Party.
This Article in no way affects the powers which, under the laws of either Contracting Party in force at the date of signature of this Agreement, the Administrative Authorities possess for the determination of the amount of capital employed by a foreign Company, or profits of the Company, in the territory in which the tax is levied, subject always to the provisions of Article 5 of this Agreement.
Notwithstanding the provisions of the preceding Article, if the law of either of the Contracting Parties requires as a general rule, for all classes of Companies, that the amount of any tax levied on Companies of the other Contracting Party carrying on business in the territory of the first Party shall be computed on a percentage of the total profits or total capital of the Company as a whole, then the percentage shall be calculated in accordance with the following provisions:
(a) In the case of a deposit bank the percentage shall not exceed the proportion of the total of deposit and current accounts in the territory in which the tax is levied to the total of deposit and current accounts of the bank as a whole. For this purpose a deposit bank is understood to be one whose principal liability as shown in the balance-sheet of the bank as a whole arises from deposits and current accounts payable at sight or within 90 days, and whose principal assets consist of bills discounted and commercial promissory notes and loans, all of which are payable at sight or within 90 days, and investments in public funds.
(b) In the case of Insurance Companies the percentage shall as a general rule not exceed the proportion which the amount of the premiums attributable to the territory in which the tax is levied bears to the total premiums.
(c) In all other cases the percentage shall be based on a comparison of capital or assets or turnover or profits or the volume of purchases or sales, or some combination of these factors, but it shall not exceed the proportion which the figure calculated for the territory in which the tax is levied bears to the corresponding figure calculated for the territory in which the tax is levied bears to the corresponding figure calculated for the enterprise as a whole.
(d) In the event of a Company not furnishing within the prescribed period and in the proper form the necessary particulars required by the law, or furnishing false information, or obstructing the Administration in the verification of the information furnished, the percentage referred to in this Article shall be estimated by the Administrative Authorities at such figure as appears to them to be equitable.
The relevant stipulations of this Article and of the preceding Article will be applied to all assessments by the Spanish authorities on capital and profits of British Companies for which the percentage had not been published by the Administration in the "Madrid Gazette" prior to 1st May, 1924. In the latter case the percentage published by the Administration shall be regarded as final.
As an exception to the provisions of Articles 4 and 5, it is agreed that any British bank having branches established in Spain may be subjected, under paragraph (b) of disposition XI of the 3rd Tariff of Article 4 of the Spanish Income Tax Law, Revised Text of 22nd September, 1922, to a tax at a rate not exceeding one-fourth per mille on its total nominal capital and reserves after deduction of the amount of such capital and reserves corresponding to the branches in Spain calculated in accordance with the stipulations of Article 5 of this Agreement.
In no case shall the treatment accorded by either Contracting Party to Companies of the other be less favourable in respect of any matter whatever than that accorded to the Companies of the most-favoured foreign country.
No charge shall be imposed and no conditions prescribed by either of the Contracting Parties in respect of transactions with Companies of the other Contracting Party carrying on business in its territories other or more burdensome than the charges or conditions in respect of transactions with national Companies.
If the law of either Contracting Party does not provide for appeal against the determination by the taxing authority of the percentage referred to in Article 5 the assessment shall, before becoming effective, be communicated to the Company in the usual form and the Company shall have the right in the prescribed period to submit to the Minster of Finance any considerations which it deems relevant and in such a case the Minister, or the Government, as the case may be, after full inquiry and after the Company has been heard, will give a final decision.
No Company shall have the right to contest the determination of the percentage by the taxing authority if it has failed to furnish within the time and in the form prescribed the declarations and particulars required by the taxing authority in order to establish the percentage in accordance with the provisions of this Agreement.
The present Agreement shall come into force immediately and shall continue in operation until the expiration of twelve months from the date on which either Contracting Party shall have given notice to terminate it.
The stipulations of the present Agreement shall not be applicable to India or to any of His Britannic Majesty's Self-Governing Dominions, Colonies, Possessions, or Protectorates, unless notice is given by His Britannic Majesty's Representative at Madrid of the desire of His Britannic Majesty that the said stipulations shall apply to any such territory.
The terms of the preceding Article relating to India and to His Britannic Majesty's Self-Governing Dominions, Colonies, Possessions and Protectorates shall apply also to any territory in respect of which a mandate on behalf of the League of Nations has been accepted by His Britannic Majesty.
As regards India or any of His Britannic Majesty's Self-Governing Dominions, Colonies, Possessions or Protectorates, or any territory in respect of which a mandate on behalf of the League of Nations has been accepted by His Britannic Majesty, to which the stipulations of the present Agreement shall have been made applicable under this Article, either of the Contracting Parties shall have the right to terminate its separately at any time on giving twelve months' notice to that effect.
IN WITNESS WHEREOF the undersigned have signed the present Agreement and have affixed thereto their seals.
DONE at Madrid in duplicate, this twenty-seventh day of June, in the year one thousand nine hundred and twenty-four.
Fernando Espinosa de los Monteros