International economic double taxation: dividends and shares in profits

article 32 of the LIS regulates this deduction for international double taxation, which seeks to avoid international double taxation that arises in cases where that a parent company resident in Spanish territory receives dividends or shares in profits from its subsidiary entities residing abroad, and the profit obtained has been taxed in the territory of the subsidiary and is subsequently taxed in the territory of the parent company when it receives it.

For these purposes, article 32 of the LIS establishes that this deduction will be applied when the tax base includes dividends or shares in profits paid by an entity not resident in Spanish territory.

The amount of this deduction will be the tax actually paid by the non-resident entity in Spanish territory with respect to the profits from which the dividends are paid, in the corresponding amount of such dividends, provided that said amount is included in the taxpayer's tax base.

For the application of this deduction it will be necessary to comply with the following requirements :

1. That the direct or indirect participation in the capital of the non-resident entity is, at least, 5 percent , or that the acquisition value of the participation is greater than 20 million euros .

2. That the participation had been held uninterruptedly during the year prior to the day on which the benefit to be distributed becomes payable or, failing that, that it is maintained for the time necessary to complete a year. To calculate the time period, you also need to take into account the period in which the holding has been uninterruptedly maintained by other entities that fulfil the circumstances referred to in article 42 of the Code of Commerce to form part of the same group of companies, regardless of the place of residence and the obligation to draw up consolidated annual accounts.

In the case of distribution of reserves, the designation contained in the corporate agreement will be followed and, failing that, the last amounts paid to said reserves will be considered applied.

Dividends or shares in profits will be considered to be those derived from securities representing the capital or own funds of entities, regardless of their accounting consideration.

This deduction will not be applied in relation to dividends or shares in profits received whose amount must be delivered to another entity on the occasion of a contract that relates to the securities from which they come , recording an expense for this purpose. The entity receiving said amount may apply said deduction to the extent that it maintains the accounting record of said values and they meet the conditions established for this.

With effects for tax periods beginning until December 31, 2016 , the negative income obtained in the transfer of the participation in an entity that had previously been transferred by another entity that The circumstances referred to in article 42 of the Commercial Code to form part of the same group of companies with the taxpayer, regardless of residence and the obligation to prepare consolidated annual accounts, will be reduced by the amount of the positive income. obtained in the preceding transfer and to which an exemption regime would have been applied.