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V2303-21 16 August 2021 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · cuentas en participación

Results from joint venture agreements are treated as financial income or expenses for Corporate Tax purposes

A company sought a ruling on the tax classification of profits derived from a joint venture agreement (cuentas en participación). The DGT has determined that these results constitute financial income or expenses for Corporate Tax purposes and that the distribution of results is not subject to VAT.

The question raised

What tax classification should be assigned to the result, once settled, for both Corporate Income Tax and VAT purposes? How should the income be invoiced?

The DGT's ruling

In Corporate Income Tax, the positive or negative results of a joint account contract are assimilated to financial income or expenses and must be included in the limitation provided by Article 16 of the LIS. The managing partner must apply the corresponding withholding tax to the non-managing partner pursuant to Article 128 of the LIS. Regarding VAT, the settlement of results in cash does not constitute a transaction subject to the tax, as there is no supply of goods or provision of services.

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