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V3143-15 19 October 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · establecimiento permanente

Withholding tax in Morocco for engineering services may be deductible for CIT if the income qualifies as a royalty

A Spanish company inquired whether the 10% withholding tax applied in Morocco for engineering services was deductible in its Corporate Income Tax. The DGT responds that deductibility depends on whether the services are provided without a permanent establishment and whether the income qualifies as a royalty under the Convention.

The question raised

Question posed: Whether this withholding tax may be applied in the Corporate Income Tax return for the 2014 fiscal year and under which concept it may be deducted.

The DGT's ruling

If no permanent establishment exists in Morocco and the income qualifies as a royalty, the company shall include the gross income and deduct the 10% withholding tax pursuant to Article 31 of the TRLIS. If the services are not royalties, they cannot be subject to withholding in Morocco and, therefore, will not be deductible in Spain. If a permanent establishment exists, the income will be taxed in Spain and the company may apply the exemption under Article 22 of the TRLIS or the deduction under Article 31 if the withholding is lawful.

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