Lawmaker Reiterates Request to Prioritize Plan to Amend Treaty With Spain

September 2, 2020

The Honorable Steven T. Mnuchin
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Secretary Mnuchin:

I write to respectfully request information on the status of discussions and negotiations between the United States and Spain regarding an agreement to avoid double taxation on investments between the latter and Puerto Rico.

As you are aware, the 1990 Tax Convention between the United States and Spain — which seeks to reduce or eliminate double taxation of income earned by residents of each nation from sources within the other — does not apply to Puerto Rico. Consequently, when a resident of the U.S. territory derives income in Spain or a resident of Spain derives income in Puerto Rico, the treaty's restrictions on source-basis taxation, such as reduced or zero withholding tax rates on dividends, interest, and royalties, are not available.¹

Last year, the U.S. Senate ratified the 2013 Protocol to amend the 1990 Tax Convention with Spain. Among other issues, its accompanying Memorandum of Understanding committed the two signatory nations to initiate discussions as soon as possible, but no later than six months after the Protocol's entry into force, regarding the conclusion of an appropriate agreement to avoid double taxation on investments between Puerto Rico and Spain.² Given that the Protocol entered into force on November 27, 2019, these conversations should have begun no later than May 27, 2020.³

As I previously expressed on a September 5, 2019 letter, I believe Puerto Rico's exclusion from the 1990 Tax Convention with Spain puts the Island at a competitive disadvantage, potentially discouraging exports, investments, and other similar activities that are crucial for economic growth. Extending the application of the treaty to Puerto Rico is undoubtedly critical to creating additional economic opportunities for the territory's 3.2 million Americans. I therefore respectfully request that the U.S. Department of the Treasury provide my office an update of efforts and discussions held to date to reach an agreement to avoid double taxation on investments between Puerto Rico and Spain, including an estimated timeframe for the conclusion of the relevant negotiations.

I thank you for your attention and look forward to your prompt response to this important matter.

Sincerely,

Jenniffer González-Colón
Member of Congress

Cc.
The Honorable Michael R. Pompeo, Secretary, U.S. Department of State