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V3044-15 9 October 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · retención

The withholding of Corporate Income Tax arises at the time the loan interest becomes due

A company inquires whether it must withhold Corporate Income Tax when loan interest is capitalized semi-annually without being due. The DGT responds that the obligation to withhold arises when the interest becomes due according to the contract or is recognized in the accounts.

The question raised

Whether the determination of interest that is capitalized semi-annually does not give rise to the obligation to perform any withholding or payment on account, given that said interest, which is added to the principal, has not been due prior to its capitalization.

The DGT's ruling

The obligation to withhold or pay on account arises at the time the income becomes due or at the time of payment if such payment occurs earlier. Interest shall be deemed due on the maturity dates specified in the contract for its settlement or collection, or when it is recognized in the accounts, even if it is capitalized into the principal. In this case, if the contract stipulates that the interest is not due until the maturity of the loan, the withholding shall be carried out at that time.

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