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V3538-20 11 December 2020 · SG de Tributación de las Operaciones Financieras Criterion in force
IS · retención

Obligation to withhold on PIK interest arises at the time of exigibility or payment in kind

A private equity firm has requested clarification on when an issuer of convertible bonds must apply withholding tax or payment on account regarding PIK-cash and PIK-convertible interest. The DGT has ruled that the obligation arises when the interest becomes due or is satisfied in kind.

The question raised

The moment at which the obligation to perform withholding or payment on account of Corporate Income Tax arises for the taxpayer by the issuing company of the bonds in relation to the "PIK-cash" and "PIK-convertible" interest specified in the description of facts.

The DGT's ruling

The obligation to withhold or make a payment on account arises at the time the income becomes due or at the time of its payment or delivery if such occurs earlier. For PIK-cash interest, the obligation arises when they become due according to the agreed maturity or amortization dates. For PIK-convertible interest, the obligation arises upon the delivery of the shares (payment in kind) or, if no conversion occurs, when the amortization or maturity takes place.

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