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V1825-20 8 June 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · transparencia fiscal internacional

Dividends from a Mexican transparent company taxed as capital gains

A Spanish resident asks whether dividends from a Mexican company, already taxed in Mexico under fiscal transparency, can be excluded from Spanish taxable income or whether a double taxation deduction applies. The DGT confirms that such dividends are treated as capital gains, but allows the deduction under Article 80 of the LIRPF for the tax paid in Mexico.

The question raised

Question posed: Whether the company reserves distributed to the taxpayer, which correspond to profits obtained by the company on which the taxpayer has already paid Mexican income tax, can be excluded from the Spanish personal income tax base, or if, in the negative case, the deduction for international double taxation established in Article 80 of the Spanish Tax Law would be applicable.

The DGT's ruling

Dividends distributed by a transparent entity are not included in the taxable base under the transparency regime, but are taxed under the general regime as income from movable capital. The exclusion of income provided in Article 91 of the LIRPF is not applicable because the previous taxation was under a foreign tax regime and not the Spanish one. Nevertheless, it is possible to apply the deduction for international double taxation under Article 80 of the LIRPF for the tax paid in Mexico regarding the portion corresponding to the dividends.

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