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V0004-15 2 January 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · exención de dividendos

Dividends and foreign branch profits may be exempt from Spanish tax

A company asked whether dividends from a Uruguayan subsidiary and profits from a US permanent establishment could be tax-exempt in Spain. The DGT states that such exemptions may apply if the requirements of ownership, foreign tax liability, and profit origin in business activities are met.

The question raised

Whether the dividend income from U and the profit from E that the taxpayer could obtain could be considered exempt from taxation in Spain pursuant to the provisions of Articles 21 and 22 of the consolidated text of the Corporate Income Tax Law.

The DGT's ruling

Dividends from a non-resident entity are exempt if at least 5% of the capital is held uninterruptedly for one year, the entity has been taxed by an analogous tax (or resides in a country with an information exchange agreement), and the profits derive from business activities (at least 85% of income). Likewise, income from a permanent establishment abroad is exempt if it derives from business activities and the establishment has been taxed by an analogous tax or resides in a country with an information exchange agreement.

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