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

4.4.2 Deductions for double taxation

They allow you to avoid double taxation of income that has already been taxed in another company. Double taxation can be:

  1. For taxes borne : the same income of a taxpayer is taxed in two different states by the same tax. When the resident company integrates income taxed abroad, it may deduct the lesser of:

    • Tax paid abroad.

    • The amount that would have to be paid in Spain for said income. The portion of the tax paid abroad that does not give rise to a deduction in the total amount is considered a deductible expense.

  2. For dividends and profit sharing: When a parent company resident in Spain receives dividends or profit shares from its foreign subsidiaries, taxed abroad, it may deduct: the tax paid on the profits from which dividends are paid, in the corresponding amount, with certain requirements.

    As of January 1, 2021 the requirement for the application of this deduction is that the direct or indirect participation in the capital of the non-resident entity is at least 5%, eliminating the alternative that the acquisition value of the participation is greater than 20 million euros and to calculate the full quota, the dividends or shares in the profits will be reduced by 5% as management expenses related to said participations.

With effect for tax periods beginning on or after 1 January 2016, for taxpayers whose net turnover is at least €20,000,000 during the 12 months prior to the date on which the tax period begins, the amount of deductions to avoid international double taxation may not jointly exceed 50% of the taxpayer's total tax liability.