A compromise clause is provided in the event that the tax authorities of Spain and the United States fail to reach an agreement within two years on a reciprocal agreement procedure requested by a subject. This procedure and its conciliation are not exclusively aimed at preventing cases of double taxation, but at resolving situations in which the taxpayer feels that there has been taxation that is not in accordance with the provisions of the new tax treaty. A separate agreement, called a totalization agreement, will help American emigrants to Spain not to pay social security taxes to both the U.S. and Spanish governments. The contributions of expatriates made during their stay in Spain can be credited to these two systems. The country they pay depends on the length of their life in Spain. Finally, the protocol and protocol slightly amend the 2006 agreement between the United States and Spain on the tax treatment of LCRs, partnerships and non-included companies. revenues generated by tax-transparent businesses benefit from the provisions of the treaty and protocol, provided that: (i) the income is allocated to a resident (as defined in the treaty) for taxation in accordance with national rules; (ii) loB exclusions are not applicable; and (iii) the tax-transparent unit is organized in accordance with the laws of the United States or Spain or a state that has entered into a tax information exchange agreement with the country concerned. The provisions currently in force under the new provision are constituted or organized by a tax-transparent unit according to the law of the United States or Spain, or (b) in a state with a tax information agreement derived from the State of origin, or b) in a state in which an agreement to exchange tax information with the contracting state from which the income comes from is considered to be derived from a state entry in the United States or Spain (according to the provided that the position is considered a resident`s income within the meaning of U.S.
or Spanish tax law (as applicable). As noted above, this new regulation of the mutual agreement procedure will apply to cases submitted to states after November 27, 2019. The new tax treaty will be supplemented by a Memorandum of Understanding including, among other things, its application to payments to tax-transparent companies, a Memorandum of Understanding for the conclusion of an agreement to avoid double taxation of investments between Puerto Rico and Spain, as well as the scope of the concept of “pension funds” and the rules for determining their place of residence. The new protocol adds to the pension section of the contract a provision that income received by a pension fund is taxable for those participating in the pension fund only if and to the extent that they are actually paid to or in favour of them.