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V4690-16 4 November 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · rendimientos del capital mobiliario

Payments to shareholders for equity participation are not deductible for Corporate Tax purposes

A query was raised regarding whether a company can make monthly payments to a shareholder as returns on movable capital and whether such payments are deductible. The DGT ruled that while these constitute returns on movable capital if they meet Personal Income Tax requirements, they are not deductible expenses for the company.

The question raised

Can a monthly amount be paid to the shareholder as income from movable capital? Would this amount paid to the shareholder be a deductible expense for determining the company's Corporate Income Tax taxable base?

The DGT's ruling

Amounts paid to the shareholder arising from their participation in the company's equity are considered income from movable capital if they comply with Article 25 of the Personal Income Tax Law (LIRPF). However, pursuant to Article 15 of the Corporate Income Tax Law (LIS), these amounts are not considered tax-deductible expenses for the entity as they represent a distribution of equity.

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