Common note to the deductions of Articles 31 and 32 of the LIS
The deduction of article 32 of the LIS is compatible with the deduction of article 31 of said Law with respect to dividends or participation in profits , with the joint limit of deductibility of the full amount that would have to be paid in Spain for these incomes if they had been obtained in Spanish territory. The excess over said limit will not be considered a tax-deductible expense, without prejudice to the provisions of article 31.2 of the LIS.
In case of insufficient full quota to apply the deductions of articles 31 and 32 of the LIS , these may be deducted in the following tax periods.
The Administration has the right to verify these deductions for double taxation applied or pending to be applied. This right will expire after 10 years counting from the day following the day on which the deadline established for submitting the declaration or self-assessment corresponding to the tax period in which the right to apply was generated. .
After this period, the taxpayer must prove the deductions whose application they intend to apply, by displaying the liquidation or self-assessment and the accounting, with proof of their deposit during the aforementioned period in the Commercial Registry.
Example:
The Public Limited Company "X", resident in Spanish territory, and which pays the general tax rate, has 100 percent of the capital of the non-resident Company "Z".
During 2020, it has not had any participation in any other non-resident entity, and it did not benefit from taxation for the special taxes of the fifteenth and seventeenth additional provisions of the RDLeg. 4/2004, SA "X" has received net dividends for an amount equivalent to 7,200 euros, having been taxed in the country of origin at a rate of 10 percent. It is known that Company "Z" has been taxed in its country at an effective rate of 20 percent.
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Amount paid abroad for the dividend.
x - 0.1x = 7,200; x = 8,000
Therefore, taxation abroad has been 800
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Tax actually paid abroad by Company "Z" with respect to the profits from which the dividends have been paid.
y - 0.2y = 8,000; y = 10,000
Therefore, the tax paid by Company "Z" has amounted to 2,000
Calculation of deductions:
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Legal ID: tax borne by the taxpayer (art. 31 LIS)
The smallest of:
- Effective amount of what was paid abroad: 800
- Full fee that would have to be paid in Spain: 2,000 (8,000 x 0.25)
To include in boxes [00163] and [00165]: 800
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Economical DI: dividends and participation in profits (art. 32 LIS): 2,000
To include in boxes [00167] and [00169]: 2,000
Limit of the two deductions:
Full fee that would have to be paid in Spain if the income had been obtained in Spanish territory
10,000 x 25 = 2,500
Income that must be included in the tax base of Company "X": 10,000
Total deductions arts. 31 and 32 LIS: 2,500
To be entered in box [00573]: 2,500
Note : In this example, it must be taken into account that for tax periods that begin on or after January 1, 2016, section 2 of the fifteenth Additional Provision of the LIS establishes that for taxpayers whose net amount of turnover is at least 20 million euros during the 12 months prior to the date on which the tax period begins, the amount of the deductions to avoid international double taxation provided for in articles 31, 32 and section 11 of article 100 of the LIS, as well as those deductions to avoid double taxation referred to in the twenty-third transitional provision of this Law, may not jointly exceed 50 percent of the taxpayer's full amount.