Both Spanish and Mexican Governments signed a new Protocol amending the Double Taxation Treaty (DTT) between the countries back in December 17th, 2015. The Protocol in currently under discussion by the Legislative Bodies of each country, and must be properly ratified and implemented by them before becoming effective. This is expected to occur by July in Mexico. However, in Spain, the current political situation poses certain uncertainty in this regard.
In general terms, main aspects being modified are:
- Exemption on dividends when the payee holds a 10% stake at least in the issuing entity or it is a pension fund.
- Reduction on WHT on interest to 4,9% (banks) and 10% (others).
- Reduction of WHT on capital gains to 10%, it all subject to specific conditions.
Other elements being modified, are:
- Transfer pricing bilateral adjustment.
- Exit tax on certain capital gains.
- PE consideration for certain activities related to the exploitation of hidrocarbures.
Finally, the document itself also modifies some elements of the former Protocol, such as:
- CFC and thin cap rules.
- Introducing a Most Favored Nation clause.
- Technical assistance taxation.
- Neutrality tax regime for restructurings.
- OECD arbitrage model in case this be introduced in any subsequent DTTs signed by Mexico.