Taxation of dividends: inclusion in the savings tax base

The Directorate General of Taxes (DGT) has clarified the tax treatment applicable to dividends received by shareholders of a company in respect of their shareholding in the social capital. This criterion is fundamental to understanding how these earnings must be reported in their income tax return.

What the DGT has ruled

The inquiry addresses whether dividends received by a shareholder must be included in the savings tax base and whether it is possible to apply tax benefits to avoid double taxation with Corporate Tax. Following a regulatory analysis, the DGT has determined the following:

• Dividends are considered gross returns from movable capital, in accordance with Article 25.1.a) of the Law 35/2006 on Personal Income Tax (LIRPF).
• These amounts constitute savings income and must be mandatorily included in the savings tax base.
• The operation is subject to a withholding tax of 19 percent.
• It is not possible to apply the dividend double taxation deduction, as this mechanism was abolished as of January 1, 2007.

What it means for you

If you are a shareholder of an entity and receive dividends, you must take into account that these amounts are not taxed in the general tax base, but in the savings tax base. This implies that the tax rates corresponding to said base will apply. Furthermore, the company is obliged to apply a 19% withholding tax on the distributed amount. It is important to remember that the possibility of offsetting the tax burden already borne by the company through double taxation deductions no longer exists.

What you should do

It is necessary to verify that the withholding applied by the company is correct and that the inclusion in the savings tax base is carried out following the criteria of the LIRPF. Since every financial situation presents particularities, it is recommended to assess your specific case to ensure compliance with tax obligations and avoid errors in the IRPF settlement.