MADRID: A Tax Treaty developed to avoid double taxation, negotiated between Mexico and Spain in late 2015, was just recently published in the official gazettes of both nations. The new protocols are effective September 27, 2017. The Result: The most significant changes relate to withholding tax rates and the exemption from capital gains taxes in certain instances.
The changes should incentivize investment activities in both countries. On December 17, 2015, Mexico and Spain signed a Protocol to their Convention for the Avoidance of Double Taxation and the Prevention of Fraud and Fiscal Evasion (“Tax Treaty”). The action amended the nations’ respective legal provisions substantively. It took nearly two years for both countries to publish the protocol in their official gazettes: July 7, 2017, for Spain and August 18, 2017, for Mexico. The protocol will enter into force in both countries on September 27, 2017.
It is worth mentioning that the Tax Treaty was designated by both countries as a Covered Tax Agreement under the Multilateral Convention to implement tax treaty related measures under the BEPS Project (“MLI”). The amended Tax Treaty incorporates some of the MLI features such as Purpose of the Covered Tax Agreement, Prevention of Treaty Abuse, and real estate related capital gains from alienation of shares.
