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V2769-20 10 September 2020 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · retención

No income tax withholding required on leases of premises owned by a City Council

An individual has enquired whether they must withhold Corporate Tax when leasing premises from a City Council. The DGT has ruled that there is no obligation to withhold because local authorities are exempt from this tax.

The question raised

1) Whether there is an obligation to apply withholding tax on the lease of urban real estate, given that the lessor is a local authority.

The DGT's ruling

Local entities are fully exempt from Corporate Income Tax pursuant to Article 9.1 of the LIS. Therefore, as the lessor is an exempt entity, there is no obligation to apply withholding tax on the income paid by the applicant to the City Council.

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