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V4259-16 5 October 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · doble imposición internacional

The international double taxation deduction is considered at 20% for interest according to the Convention with Brazil

A Spanish company has requested clarification on how to calculate the double taxation relief for interest income received from Brazil that is exempt from withholding tax in that country. The Directorate General for Taxes (DGT) has ruled that, pursuant to the relevant Double Taxation Convention, such interest must be deemed to have been taxed in Brazil at a rate of 20% for the purposes of calculating the relief.

The question raised

For the purposes of applying the deduction under Article 31 of the LIS, what would be the base and the deduction percentage and, if applicable, the limit thereof?

The DGT's ruling

For the purpose of the deduction under Article 31 of the LIS, it is considered that the interest obtained in Brazil has been taxed at 20%, regardless of its effective taxation. The basis for the deduction shall be the interest differential (interest received minus interest paid). The amount of the deduction shall be the lesser of: the tax deemed paid in Brazil (20%) or the full tax liability that would correspond in Spain for those incomes.

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