Payments to non-managing participants in joint account agreements are deductible financial expenses

The legal nature of joint account agreements (cuentas en participación) has raised doubts regarding their tax treatment in Corporate Income Tax (IS), especially when used to finance specific projects.

What the DGT has ruled

The Directorate General of Taxes (DGT) has determined that joint account agreements are structured as a form of external financing for the managing entity. Consequently, the results, whether positive or negative, corresponding to the non-managing participant must be treated for tax purposes as financial income or expenses.

Under this criterion, the amounts that the managing entity must pay to the participants for their share in the positive results of the contract are considered deductible financial expenses. For this deductibility to be effective, the administration requires compliance with standard requirements: accounting entry, accrual, correlation with income, and proper documentary justification. This treatment applies without prejudice to the limits established in Article 16 of the Corporate Income Tax Law (LIS).

What it means for you

If your entity acts as the manager in joint account agreements, especially in real estate operations, this criterion provides legal certainty regarding the deductibility of financing costs. By treating these payments as financial expenses, it is confirmed that the cost of attracting external capital through this mechanism can reduce the Corporate Income Tax taxable base.

For individuals acting as non-managing participants, this shift in focus underscores the nature of the relationship, where their remuneration is not an operating expense of the manager, but rather the cost of financing received.

What you should do

Entities using this financing model must ensure that all operations strictly comply with accounting and tax regulations. It is essential to guarantee that the accrual of the participant's remuneration is correctly documented and linked to the generation of the income that justifies it. Likewise, compliance with the financial expense deductibility limits provided in current regulations must be monitored to avoid contingencies in the tax settlement.