A protocol to the Spain-Mexico tax treaty which reduces withholding tax rates will enter into force on September 27, the Spanish government has announced.
The protocol, signed December 17, 2015, amends several parts of the countries’ 1992 treaty.
It provides for a general 10% dividend withholding tax, which is reduced further to 0% for dividends derived from companies that own at least 10% of the capital of the payor or from pension fund resident in the other state.
The withholding tax on interest payments is reduced under the protocol from 15% to 10%, though the rate is reduced further to 4.9% for financial institutions and to 0% for pension funds and other listed entities.
The protocol introduces a most-favored nation clause whereby if Mexico in the future enters into a tax treaty with certain countries that have lower withholding tax rates, those rates will automatically apply.
It also adds language to the preamble stating that the treaty is not to be used to create opportunities for tax avoidance
