New protocol to US-Spain treaty signals possible changes in US policy on limitation on benefits

January 2013


The United States and Spain signed, on January 14, 2013, a new protocol amending the existing 1990 income tax treaty between the United States and Spain, together with a memorandum of understanding (MOU). The protocol is a significant development in that it modernizes the existing treaty and more closely conforms with both countries' current tax treaty policies. Specifically, the protocol provides for exclusive residence-state taxation of interest, royalties, certain capital gains and certain parent-subsidiary dividends. The protocol includes updated limitation on benefits (LOB) and exchange of information articles, and also contains a mandatory binding arbitration provision.

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