Recently, the U.S. Senate finally passed several amendments on the protocol of various Tax Treaties that had been signed years ago by the US Government.
Notably, the protocols now approved affect the Tax Treaties signed by the US with Switzerland, Luxemburg, Spain and Japan.
They all have in common a new clause entailing a broader exchange of information between the competent tax authorities for tax purposes.
This clause is the main reason why those protocols were blocked by the US Senate for such a long time, as it was understood that it could somehow jeopardize the US citizens’ rights.
Once deblocked, those protocols have been entering into force throughout last weeks, from August 30th to this November 27th.
Case by case
Looking into these changes with a little more detail by country, we will find relevant differences from one to another.
For instance, changes to the Luxembourg protocol are purely focused on the exchange of information clause. No other relevant changes are implemented.
The protocol entered into force in September 9th.
On the contrary, the Spain one entails an in-depth redefinition of the tax relationships on most of the yields covered by the Treaty, following a very favorable approach for investors and trade, and the transatlantic relationship in general.
As an example, withholding taxes on dividends and royalties are virtually eliminated in most cases.
Furthermore, capital gains will be generally exempted from taxation at source, only excluding those related, directly or indirectly, with real estate located in the country.
Also, mandatory binding arbitration of unresolved competent authority cases is provided for.
As a downside, however, limitation of benefits (LOB) rules are extensively implemented
This protocol entered into force las November 27th.
Finally, both Swiss and Japan protocols include measures regarding mandatory binding arbitration of unresolved competent authority cases.
The Japan protocol redesigns the withholding taxes on both interest and dividends whilst the Swiss one focus on changing specific taxation cases for pension funds and other retirement arrangements.
The Swiss protocol entered into force September 20th and the Japanese one was the earlier of all these series, becoming effective last August 30th.
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