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V3574-15 18 November 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · doble imposición jurídica

Tax paid in the Dominican Republic may be deductible in Spain if analogous to Corporate Income Tax

A Spanish company enquired whether withholding tax applied in the Dominican Republic on consultancy services could be considered an analogue to Corporate Income Tax for deduction purposes. The DGT ruled that such tax is deductible provided it is a direct tax levied on income, subject to a 10% limit under the Double Taxation Convention.

The question raised

Question posed: Whether the withholding tax applied is considered a tax of an analogous or similar nature to the Spanish Corporate Income Tax.

The DGT's ruling

For a foreign tax to be deductible under Article 31.1.a) of the LIS, it must be a tax of a direct character and personal nature that levies income. This requirement is presumed to be met if the withholding tax is a direct tax intended to tax the income obtained, even if the object of the tax is income, revenue, or any other indicative element. However, the amount of the deduction may not exceed 10% of the amount received, in accordance with the Convention with the Dominican Republic.

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