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V0792-16 29 February 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · arrendamiento de industria

No withholding tax on lease of business assets if the company carries out an economic activity

A company inquired whether Corporate Income Tax withholding should apply to the lease of a hotel operation (lease of business assets). The DGT ruled that no withholding will apply if the lease constitutes an economic activity for the lessor.

The question raised

Whether the yields derived from the described lease agreement are subject to withholding as a payment on account of Corporate Income Tax for the consulting company, which is the lessor of the hotel operation.

The DGT's ruling

If the leasing of a business or industry constitutes an economic activity for the lessor company in the course of its corporate purpose, the income shall not be subject to withholding. For it to be considered an economic activity, the company must possess its own organizational structure, with human resources and material means adequate to the volume of contracting. These factual circumstances must be proven before the Administration.

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