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Convention Between Spain and Italy for the Avoidance of Double Taxation with Respect to Taxes on Income and for the Prevention of Fiscal Evasion1

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Convention Between Spain and Italy for the Avoidance of Double Taxation with Respect to Taxes on Income and for the Prevention of Fiscal Evasion1 CONVENTION BETWEEN SPAIN AND ITALY FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND FOR THE PREVENTION OF FISCAL EVASION1. The Government of Spain and the Government of Italy, desiring to conclude a Convention for the avoidance of double taxation with respect to taxes on income and for the prevention of fiscal evasion, have agreed as follows: CHAPTER I - Scope of the Convention Article 1 - Personal scope This Convention shall apply to persons who are residents of one or both of the Contracting States. Article 2 - Taxes covered 1. This Convention shall apply to taxes on income imposed by each Contracting State, or its political or administrative subdivisions and local authorities, irrespective of the manner in which they are levied. 2. There shall be regarded as taxes on income all taxes imposed on total income, or on elements of income, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation. The existing taxes to which the Convention shall apply are, in particular: (a) In the case of Italy: (1) the income tax on individuals (imposta sul reddito delle persone fisiche); (2) the corporation income tax (imposta sul reddito delle persone giuridiche); (3) the local income tax (imposta locale sui redditi); even when they are obtained through withholding at the source (hereinafter referred to as "Italian tax"). (b) In the case of Spain: (1) the income tax on individuals (el impuesto sobre la renta de las personas fisicas; 1 Date of Conclusion: September 8, 1977. Entry into Force: In accordance with Article 28 this Convention entered into force on November 14, 1980, upon the exchange of instruments of ratification. The provisions of the Convention have effect as respects taxes withheld at the source on income derived as from January 1, 1977; and as respects other taxes, to fiscal periods ending on or after January 1, 1977; however the provisions of Article 8 shall apply as from January 1, 1969. 1 (2) the income tax on companies and other legal entities (el impuesto sobre la renta de sociedades y demas entidades juridicas); (3) the following prepayments: the tax on rural and on urban land; the tax on earned income; the tax on income from capital and the tax on business and industrial activities and profits; (4) the "surface royalty" and the tax on company profits, regulated by Law of June 27, 1974, applicable to enterprises engaged in prospecting and exploiting hydrocarbons; (5) the local taxes on income (hereinafter referred to as "Spanish tax"). 4. The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of this Convention in addition to, or in place of, the existing taxes. At the end of the year, the competent authorities of the Contracting States shall notify each other of the changes of importance which have been made in their respective taxation laws. CHAPTER II - Definitions Article 3 - General definitions 1. For the purpose of this Convention, unless the context otherwise requires; (a) the term "Spain" means Spanish State (peninsular Spain, the Balearic and Canary Islands, the Spanish territories in Africa) and the areas adjacent to the territorial waters of Spain within which Spain may, in accordance with Spanish law, exercise rights with respect to the sea-bed and sub-soil and their natural resources; (b) the term "Italy" means the Italian Republic, and includes the areas beyond the territorial waters of Italy, and mainly the sea-bed and sub-soil adjacent to the peninsular territory and the Italian Islands, to the limit established by the Italian laws for allowing the exploration and exploitation of the natural resources in such areas; (c) the terms "a Contracting State" and "the other Contracting State", mean, as the context requires, Spain or Italy; (d) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise which has its place of effective management in a Contracting State, except when the ship or aircraft is operated solely between places situated in the other Contracting State; (e) the term "person" includes individuals, companies and any other body of persons; (f) the term "company" means any body corporate or any entity which is treated as a body corporate for tax purposes; (g) the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" mean, respectively, an enterprise carried on by a resident of a Contracting State (including the State itself, its political or administrative subdivisions and its local authorities) and an enterprise carried on by a resident of the other Contracting State (including the State itself, its political or administrative subdivisions and its local authorities); 2 (h) the term "national" means: (1) any individual possessing the nationality of a Contracting state; (2) any legal entity, partnership and association established in accordance with the legislation in force in a Contracting State; (i) the term "competent authority" means: (1) in the case of Spain: the Minister of Finance, or any other authority duly authorized by the Minister; (2) in the case of Italy: the Minister of Finance. 2. As regards the application of the Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes which are the subject of this Convention. Article 4 - Fiscal domicile 1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other similar criterion. Nevertheless, this term does not include any person who is liable to tax in that State in respect only of income from sources in that State. 2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be resolved in the following manner: (a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests); (b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode; (c) if he has an habitual abode in both Contracting States or in neither of them, then he shall be deemed to be a resident of the Contracting State in which he is a national; (d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the matter by mutual agreement. 3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated. 3 Article 5 - Permanent establishment 1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on. 2. The term "permanent establishment" includes especially: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; (f) a mine, a quarry or any other place of extraction of natural resources; (g) a building site or installation project lasting more than 12 months. 3. A "permanent establishment" is not deemed to exist when: (a) facilities are used solely for the purpose of storage, display or delivery of merchandise belonging to the enterprise; (b) a stock of merchandise belonging to the enterprise is maintained solely for the purpose of storage, display or delivery; (c) a stock of goods or merchandise belonging to the enterprise is maintained solely for the purpose of processing by another enterprise; (d) a fixed place of business is maintained solely for the purpose of purchasing merchandise or of collecting information, for the enterprise; (e) a fixed place of business is maintained solely for the purpose of carrying on, for the enterprise, publicity, the supply of information, scientific research or any other similar activity of an auxiliary or preparatory character. 4. Where a person -- other than an agent of an independent status to whom paragraph 5 applies -- is acting on behalf of an enterprise and has, and habitually exercises in a Contracting State, an authority to conclude contracts in the name of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State, unless the activities of such person are limited to the purchasing of merchandise for the enterprise. 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business through a broker, general commission agent or any other intermediary of an independent status, provided that such persons are acting in the ordinary course of their activities. 4 6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.
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