CHAPTER 4 - DOUBLE TAXATION AGREEMENTS : CASES

CASE N1
The enterprise IT Projects, whose fiscal residence is located in Spain, is owned in a 25%
by the company BBP Technologies, whose fiscal residence is located in Canada. The
remaining 75% is owned by AGX Holding BV, fiscal resident in Holland.
The board of IT Projects has decided to distribute to its shareholders dividends
amounting to 1.000.000 Euros.
The student is asked to determine if the dividends are subject to taxation on
Spanish grounds. Discuss your answer.

CASE N2
The company Strategic Developments was founded in Spain in January 2014.
The headquarters of the company are located in a country with which Spain has not
signed a double taxation agreement.
a) Which is the fiscal residence of Strategic Developments?
b) Which would be the fiscal residence of the company assuming that its
headquarters are located in a country that has signed a double taxation
agreement with Spain, and which considers the location of the headquarters as
the main criteria to determine the fiscal residence of the company?

CASE N3
NEX BV is a Dutch company that produces and distributes sanitary products. The
enterprise has signed several commercial agreements with Spanish clients. In order to
guarantee a continuous supply of its products, NEX BV has leased a warehouse in
Madrid which it will use to temporarily store its products before their subsequent
distribution to the Spanish clients of the company.
Has Spain the right to tax part of the economic profit obtained by NEX BV from
the sale of its products in Spain?
Would your answer be different if NEX BV would be resident of a country with
which Spain has not signed a DTA?

CASE N 4
BBP Technologies is an enterprise located in Canada. The company has sent a team of
engineers and technical support employees, along with various materials to Spain in
order to complete the construction of an industrial plant. Construction works started on
the 20th of January 2014 and were finalised in September 2014.
The student is asked to determine whether there is enough reason to consider BBP
as having a permanent establishment in Spain.

CASE N 5
Dutch company PPM BV owns 100% of its Spanish branch PPM Spain SA. Both
companies have reached an agreement which establishes that the latter will act as a
commercial representative in Spain. For that reason, PPM BV has authorized one of the
employees of PPM Spain to negotiate and sign contracts on its behalf. From an internal
organization perspective, said employee reports to the chief of sales of PPM BV.
Discuss the existence (or not) of a permanent establishment of PPM BV in Spain.

CASE N 6
Mrs. Smith, whose residence for tax purposes is located in Canada, owns a building in
the Costa Brava, which she lends for the annual amount of 25.000. During the year,
she covered the following expenses related to her building:
-Property tax: 1.200

-Other expenses related with the rental: 500 .

The student is asked to determine the taxation applied to Mrs. Smith in Spain.
What if Ms. Smith were a resident of Holland?

CASE N7
Resa SL is a company whose residence for tax purposes is located in Spain. Since the
company was created, in January 2010, 10% of Resa is owned by Resa Inc, an
enterprise located in the United States, and the remaining 90% is owned by Resa Europe
BV, company located in Holland. The 1st of June 2014, the management board has
agreed to distribute dividends amounting to 1.000.000 to its shareholders.

On the 1st of October, Resa Europe BV agrees to sell 20% of its shares in the Spanish
company for an amount of 225.000. The shares were bought for 120.000.
The student is asked to determine the taxation applied to both operations (the
distribution of the dividends and the sale of the shares) in Spain.

CASE N8
French national legislation deems Mr. John Deluck, a Belgian citizen, as a fiscal
resident in France according to the permanence in French territory for more than 183
days criterion.
Nonetheless, during 2014, Spanish tax authorities have provided arguments to sustain
that the main base of Mr. Delucks economic interests is located on Spanish grounds:
for business reasons, Mr. Deluck travels frequently to Spain.
Mr. Deluck owns an apartment in Barcelona.
In which country is Mr. Delucks fiscal residence located?

CASE N9 (under review)

CASE N10
Spanish company ESTE, S.L. is partly owned since 2000 by an Irish company which
holds a 28% share of the company. The Irish company is a resident entity which has at
its disposal the necessary human and material means in order to complete the
management and administrative tasks of the company.
Discuss which type of withholding tax should be applied when paying dividends.
Discuss a case in which the Irish enterprise does not have employees, nor develops
a business activity and its main shareholder is resident of a country with which
Spain has not signed a double taxation agreement.

CASE N11
A French company builds in Spain an industrial recycling plant whose construction,
according to the budget, should finish 10 months after the works have started. The
French company realises the first stages of the works during February 2013. The
expected finish date is December 2013.
Nonetheless, in May, the company fails to receive the needed materials from a supplier
which delays the delivery date, and the company is obligated to interrupt the
construction works during 30 days. During August, construction works are interrupted
once again for a month, and although the construction of the plant is finalised in January
2014, the buyer does not have the right to use it until March 2014, when it obtains the
environmental permits the plant needed to properly function. The French company
delivers the final product to the buyer in March 2014.
The French company asks its fiscal advisor how will this operation be taxed under
the Non Resident Income Tax.