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A public limited company distributing dividends to two legal entities holding more than 5% of capital for over a year is not required to withhold tax under LIS Article 21.1, provided the conditions are met. However, even without a withholding obligation, the paying entity must file Model 123 with a negative declaration if no other taxable income has been paid during the period.
Question raised 1. Whether said dividends are subject to withholding.
In accordance with Article 128.4.d) of the LIS and Article 61.p) of the RIS, there is no obligation to withhold tax on dividends that may qualify for the exemption under Article 21.1 of the LIS, for which the recipient entity must communicate compliance with the requirements in writing. The DGT conditions the absence of withholding on the effective fulfillment of the requirements (a minimum percentage of 5% held uninterruptedly during the previous year), which are a matter of fact. Even without an obligation to withhold, Article 68 of the RIS requires the submission of a negative Form 123 in those periods in which no income subject to withholding has been paid.
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