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V2146-14 5 August 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · royalties

No Corporation Tax withholding required if design licensing is part of an economic activity

A company inquired whether income from design royalties was subject to Corporation Tax withholding. The DGT ruled that if the licensing is carried out as part of an economic activity, withholding is not applicable.

The question raised

Whether income derived from royalties is subject to withholding tax for Corporate Income Tax purposes.

The DGT's ruling

Income subject to withholding is that considered returns on movable capital pursuant to Article 25.4 of the Personal Income Tax Law (LIRPF). Since such returns exclude industrial property related to economic activities, the assignment of use of designs shall not be subject to withholding if carried out within the framework of an economic activity.

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