Companies must withhold the full amount of payments to non-resident doctors

The taxation of services provided by non-resident professionals whose activity is utilized within Spanish territory has been defined by the Directorate General of Taxes (DGT). The criterion focuses on determining the base upon which resident entities must apply the corresponding withholding under Non-Resident Income Tax (IRNR).

What the DGT has ruled

The ruling establishes that income derived from the provision of services is considered obtained in Spain when such services are used within Spanish territory. In the case analyzed, medical services are performed to complete a piece of work that is sent to a resident entity, which implies that the benefit of the service occurs in Spain.

Therefore, current regulations determine that the resident entity is obliged to apply withholding on the full amount of the sums paid. This means it is not possible to apply deductions or reduce the taxable base for concepts such as social security charges at the time of withholding.

What this means for you

This criterion has a direct impact on two profiles:

• Entities resident in Spain: Companies that contract medical services from non-resident professionals must ensure that withholding is applied to the total invoice amount. It is not permitted to reduce the withholding base under the argument of costs or social security charges associated with the professional.
• Non-resident medical professionals: Those who provide services whose final use is located in Spain will be subject to IRNR on the entirety of their income received from said activity.

What should be done

Given the application of this criterion, companies must review their payment management processes for non-resident providers to avoid errors in the settlement of withholdings. It is necessary to verify that the tax treatment of professional service invoices complies with the obligation to withhold on the gross amount, avoiding deductions that the administration considers improper for determining income obtained in Spain.