This Agreement’s reinterpretation will enable law firms and chambers’ works and businesses with the neighbouring country.
Spain and Morocco have introduced some modifications in their 1978 Agreement to avoid double taxation in the income and heritage tax fields, which will mean further improvements in both countries’ commercial relations and in the businesses and commercial activities’ specification that will be benefited from this Agreement.
Those changes in the Agreement’s interpretation have been made through some Interpretive Letters that both governments have been exchanging during last June. It has been settled on them a series of changes, published in the Official State Gazette (BOE):
The first of them is focused on the Article 12.2.c: this article is referred to the charges that a Contracting State’s professional or entity pays to a professional residing en the other State by his/her works. These amounts are linked to the applicable State’s taxation and they are applied to the granted remunerations by the “technic and economic reports” drafting, taxed by a tax that cannot exceed the 10% of the paid amount’s gross sum, following the Agreement’s text. But what it is understood as “technical and economical reports”? in the Interpretive Letters, Spain and Morocco have agreed on considering them as “any specific analysis or research work (…) in the field of professional activities like (…) legal counselling”, among others.
The second change is set in the Article 7 that is referred to the business’ incomes. Thus, in the Letters is reminded that “outgoing payments by a Contracting-State resident” for the professional’s services provided “are not bound to withholdings at source”. In this point is taken in mind the so-called “permanent establishment”, which by virtue of the Agreement’s article 5 is defined as “the regular place where the business is making the whole or a piece of its works” and, in the case of legal advisory firms, it can be an “office (art. 5.1.c) where works “to give information, scientific researches or another similar activities are taking place defined as auxiliary or preliminary activities (art. 5.3.e)”.
Finally, regarding the resident permits, Spain and Morocco have agreed on fostering these certificates’ issuing in order to Spanish and Moroccan residents could both get benefited from this Agreement’s advantages.
These changes will help to enable the law firms and chambers’ works owning clients in Morocco. Until now, by not having specified what kind of works are included in the “technical and economic reports” definition, these activities were in a kind of limbo that, at the very least, it provoked serious concerns to those law firms in order to comply with the law; a problem that it is seems it is starting to be solved already.
If you have any legal doubt about your investments, savings or assets and their related taxes, please do not hesitate to contact us for a complimentary review at firstname.lastname@example.org
Del Canto Chambers’ Newsroom.