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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 input taxes : The same income of a taxable person is taxed in two different states for the same tax. When the resident company integrates income taxed abroad, it may deduct the lesser of:
    • The tax paid abroad.

    • The amount that would be paid in Spain for said income. The part of the tax paid abroad that did not give the right to deduction in the full amount is considered a deductible expense.

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

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

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