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V1245-24 30 May 2024 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · scrip dividend

Scrip dividend income is treated as dividends and subject to withholding tax if sold to the company

A query was raised regarding whether a company must apply withholding tax when its shareholders (legal entities without exemption) choose to receive cash, sell their rights on the market, or sell them to the company itself under a scrip dividend scheme. The DGT determines that this income is characterised as either a dividend or a capital gain and analyses the withholding tax treatment based on the option selected.

The question raised

Whether the company must apply withholding or payment on account in the event that the shareholder, a legal entity affected by this Resolution and not falling under any of the scenarios provided for in article 61 of Royal Decree 634/2015, of 10 July, approving the Corporate Income Tax Regulations, opts to sell the free allotment rights on the market or to receive cash from the company, in the event that the capital increase is carried out against reserves corresponding to undistributed profits.

The DGT's ruling

Income derived from the remuneration program is of a dividend nature, regardless of whether shares are received, rights are sold on the market, or cash is received. If the shareholder sells the rights on the market, there is no withholding or payment on account. If the shareholder sells the rights to the issuing company itself, the compensation received is of a dividend nature and is subject to withholding in accordance with the Corporate Income Tax Regulations.

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