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V4022-15 16 December 2015 · SG de Fiscalidad Internacional Criterion in force
IS · establecimiento permanente

Marruecos recovery of retention depends on whether services are deemed canons or business benefits

A Spanish company asks how to recover a 10% retention in Morocco for services rendered there. The DGT explains that if the services are canons, retention up to 10% may be legal; however, if they are business benefits without a permanent establishment, retention is unjustified and recovery must be requested in Morocco.

The question raised

Procedure for recovering the amount withheld in Morocco for work performed in said country.

The DGT's ruling

If the services constitute royalties (technical or economic studies), Morocco may withhold up to 10%. If they do not constitute royalties, they may only be taxed in Spain as business profits and cannot be subject to withholding in Morocco; in such case, the withholding is improper and a refund must be requested in Morocco. If a permanent establishment exists in Morocco, both countries may tax, and double taxation would be eliminated in Spain.

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