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V3444-16 20 July 2016 · SG de Fiscalidad Internacional Criterion in force
IRNR · cánones

Assignment of commercial software exploitation rights classified as royalties under Spain-US Treaty, subject to exceptions

A Spanish company sought clarification on whether it was required to withhold tax on software license payments made to a US entity. The Directorate General for Taxes (DGT) ruled that such income is classified as royalties if the right to commercial exploitation is transferred, unless the software is standardised and does not grant rights to adaptation or reproduction.

The question raised

Should withholding tax be applied to the payment made to the US company?

The DGT's ruling

According to the Convention with the USA, income from the assignment of the right to the commercial exploitation of a computer application is classified as a royalty. Payments for the distribution of standardized computer applications that do not involve a right of adaptation to the customer or reproduction are excluded from this classification. The determination of whether a program is standard or adapted is a question of fact that must be substantiated through means of evidence.

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