Spain, on July 7, 2017, published the new protocol to the tax treaty with Mexico. The new protocol will enter into force on September 27, 2017. The protocol, signed on December 17, 2015, amends several parts of the countries’ 1992 tax treaty.

Under the protocol there is no withholding tax rate on dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends. For shareholdings below 10% a maximum withholding tax rate of 10% applies. The withholding tax on interest payments is reduced under the protocol from 15% to 10%, though the rate is reduced further to 4.9% for financial institutions and to 0% for pension funds and other listed entities.

The protocol introduces a most-favored nation clause whereby if Mexico in the future enters into a tax treaty with certain countries that have lower withholding tax rates, those rates will automatically apply.