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V0064-22 17 January 2022 · SG de Fiscalidad Internacional Criterion in force
IS · cánones

Rental income from cable capacity depends on physical possession or control

A Spanish telecom company asks whether payment for cable capacity usage to a Moroccan company constitutes a royalty or a service. The DGT states that if the customer lacks physical possession or control over the infrastructure, it is a service; if there is transfer of possession and control, it is a royalty.

The DGT's ruling

The classification of the income depends on whether the client acquires physical possession and control of the assets or merely their transmission capacity. If it constitutes a service, Article 7 of the Convention applies. If it is classified as a royalty for the use of equipment, Article 12.2.c) of the Spanish-Moroccan Convention applies, allowing a maximum withholding tax of 10%. In the event that it is a royalty, the tax paid abroad is deductible in Spain under the limits of the Convention and the Corporate Income Tax Act.

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