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V1860-17 13 July 2017 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · know-how

Article 23 LIS reduction may apply to know-how income in franchises under certain requirements

A company inquired whether income derived from the transfer of its know-how through franchise agreements could benefit from the reduction in the Corporate Tax taxable base. The DGT ruled that this is possible provided that the consideration for the transfer is distinguished from accessory services and all other legal requirements are met.

The question raised

Whether the application of the reduction provided for in Article 23 of the LIS is appropriate to the portion of the income obtained from the assignment of know-how.

The DGT's ruling

The assignment of the right to use know-how may qualify for the reduction provided in Article 23 of the LIS if the corresponding consideration is specifically identified in the franchise agreement, distinguishing it from assistance, advisory, or marketing services. Furthermore, it is necessary that the entity is not subject to an obligation of result regarding the franchisees and that the other requirements of the provision are met, such as the consideration corresponding to market value.

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