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Economic Activities Manual. Fiscal duties of employers and resident professionals in Spanish territory

4.4.1 Exemption

In order to avoid double taxation, the IS regulations have the following measures regarding the exemption method: 

  1. The exemption method to avoid domestic and international double economic taxation on dividends and income derived from the transfer of securities representing the capital of entities, both resident in Spanish territory and abroad. 

  2. The exemption method to avoid international legal double taxation on income obtained abroad through permanent establishments 

    Law 27/2014 on Corporate Tax incorporates a general exemption regime for significant holdings, applicable both domestically and internationally, eliminating in this second area the requirement relating to the performance of economic activity, although it incorporates a requirement of minimum taxation that is established at 10% of the nominal rate, this requirement being understood to be fulfilled in the case of countries with which an Agreement has been signed to avoid international double taxation.

    As of January 1, 2021, to understand what a significant participation is, the alternative requirement that the acquisition value of the participation be greater than 20 million euros is eliminated and the amount that will be exempt will be 95% of said dividend or income. This limitation will NOT apply to companies that have a net turnover (INCN) of less than 40 million euros and that are not part of a commercial group, for a period limited to three years, when they come from a subsidiary, resident or not in Spanish territory, established after January 1, 2021.