The exchange of letters to the Morocco – Spain Income and Capital Tax Treaty (1978) has been entered into force on 4th August 2016. The exchange of letters generally applies from 4th August 2016. The Exchange of Notes (EoN) was signed on 11th June 2015 by Spanish tax authority and on 23 June 2015 by Moroccan tax authority. The clarifications contained in the EoN are given below:
- The line ‘payments for technical or economic studies’ as added in the royalty’s definition covers any analysis or specific research of technical or economical nature in which one of the parties undertakes to use its special knowledge, skills and expertise to perform the analysis or research without transferring such knowledge to the other party so that the latter cannot use them for its own account;
- payments made by a resident of a Contracting State to a permanent establishment (PE) located in the same state in consideration for services rendered by the latter are not subject to withholding tax when those payments are attributable to that PE in accordance with the provisions of article 7 of the treaty.
- Additionally, the tax authorities have worried about the importance of issuing residency certificates to allow residents of one of the contracting states to benefit from the tax treaty.