Panama vs Banco Bilbao Vizcaya Argentaria (Panama), S.A., November 2017, Administrative Tax Court, Case No TAT-RF-087

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Category: Beneficial Owner, General Anti-Avoidance Rules (GAAR), Tax Treaty Interpretation | Tag: , , , , , ,
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In this case the Tax Court analyses the application of clause 10 (2) of the DTA between Panama and Luxembourg.

The case originated in an assessment issued 26 November 2014 by the Directorate General of Revenue through which the tax administration denied the application of the aforementioned clause, understanding that the dividends distributed by Banco Bilbao Vizcaya Argentaria (Panama), S.A. a company with tax residence in Panama, to its shareholder BBVA Luxinvest, S.A. did not qualify for the reduced rate provided for in the DTA because the latter was not the “beneficial owner” of the dividends, as required by the DTA.

The tax administration concluded that application of the reduced rate required the recipient of the dividends to demonstrate not only its legal status as a shareholder (or “legal owner”) of the dividends, but also that it was the ultimate recipient of the dividend payments distributed by Banco Bilbao Vizcaya Argentaria (Panama), S.A..

According to the tax administration, the documents provided did not constitute sufficient evidence to prove that BBVA Luxinvest, S.A. was indeed the beneficial owner of such dividend payments.

Judgement of the Tax Court

The court set aside the assessment. According to the court it had been proven that in the case at hand, Banco Bilbao Vizcaya Argentaria (Panama), S.A., was entitled to benefit from the payment of tax on dividends received in 2013, at the rate of 5%, as provided for in Article 10, paragraph 2, numeral a, of the Convention between Panama and Luxembourg for the avoidance of double taxation.

 

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Panama BO Dividend Lux Exp-005-15

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