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V1794-14 9 July 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · retención

Withholding tax must be applied to competition prizes awarded to legal entities, subject to specific exemptions

A local council has requested clarification on whether it must withhold tax when awarding cash prizes exceeding €300 to associations or entities. The Directorate General of Taxes (DGT) clarifies that the obligation to withhold depends on the entity's tax regime and whether the income is exempt.

The question raised

Given that the prize winners are not natural persons, whether they are subject to withholding on the amount of the prizes.

The DGT's ruling

Entities taxed under the general regime must undergo a 21% withholding if the prize exceeds 300.51 euros. Non-profit entities that opt for the special regime and meet the requirements of Law 49/2002 shall not be subject to withholding if they prove their status. Partially exempt entities shall only be exempt if the prize does not constitute income from economic exploitation and is received in the exercise of their specific object or purpose.

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