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Guide to mutual agreement procedures

c.4 The article of the convention which the taxpayer believes not to have been applied correctly and the taxpayer’s own interpretation of that article, explaining the reason for which the taxpayer believes there to be a question covered by the procedure.

Mutual agreement procedures are used to eliminate taxation that is not in accordance with a convention, whether it is one of the Tax Treaties ratified by Spain or the Arbitration Convention.

Therefore, requests for initiation must specify:

  • Which article of one of the Tax Agreements ratified by Spain or the Arbitration Convention has not been applied correctly.

  • How the taxpayer believes that article should have been applied, indicating why its incorrect application is covered by a mutual agreement procedure.Although it is mandatory for the taxpayer to include their own interpretation of the articles in the request document, that point of view does not have to be reflected either in the negotiations between the competent authorities or in any agreements they may reach.

Example:A Spanish company has been tax audited resulting in tax adjustments in its corporation tax because the registered expenditure, for marketing support services provided by associated entities domiciled in Portugal and Colombia, is deemed higher than the market value.

If the Spanish company wishes to initiate a mutual agreement procedure to eliminate the double taxation which that tax assessment could give rise to, they must submit two requests for initiation:

  • One request to eliminate the double taxation arising from the reduction of the deductible expense for the marketing support services provided by the Portuguese associated entity, indicating what articles of the Tax Treaty in force between Spain and Portugal and/or the Arbitration Convention have not been applied correctly, what the correct interpretation of those articles would be and why their incorrect application satisfies the requirements for being the subject of a mutual agreement procedure.

  • A second request to eliminate the double taxation arising from the reduction of the deductible expense for the marketing support services provided by the Colombian associated entity, indicating what articles of the Tax Treaty in force between Spain and Colombia have not been applied correctly, what the correct interpretation of those articles would be and why their incorrect application satisfies the requirements for being the subject of a mutual agreement procedure