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Practical Handbook for Companies 2021

Common note to the deductions of Articles 31 and 32 of the LIS

The deduction under Article 32 of the LIS is compatible with the deduction under Article 31 of that Law in respect of dividends or shares in profits, with the joint limit of deductibility of the gross tax liability that would be payable in Spain on such income if it had been obtained in Spanish territory.For the purpose of calculating this gross tax liability, dividends or shares in profits shall be reduced by 5 per cent as management fees in respect of such shares.This reduction will not be applied in the case of dividends or shares in profits in which the circumstances established in article 21.11 of the LIS are met.The excess over this 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 gross tax liability to apply the deductions of Articles 31 and 32 of the LIS, these can be deducted in the following tax periods.

The tax authorities have the right to check these double taxation deductions applied or to be applied.This right will expire after 10 years counting from the day following the end of the period established for filing the tax return or self-assessment corresponding to the tax period in which the right to its application was generated.

Once this period has elapsed, the taxpayer must accredit the deductions he/she intends to apply, by showing the tax assessment or self-assessment and the accounts, with proof of their deposit during the aforementioned period at the Companies Registry.


X, a corporation resident in Spanish territory, whose net turnover in the immediately preceding tax period is less than EUR 40 million and which is taxed at the general tax rate, owns 100 per cent of the capital of Z, a non-resident company.

During 2021, in which it has not had any shareholding in any other non-resident entity, and which did not avail itself of the special taxation under the fifteenth and seventeenth additional provisions of the RDLeg.7,200, which was taxed in the country of origin at a rate of 10 per cent.Company Z is known to have been taxed in your country at an effective rate of 20 per cent.

  • Amount paid abroad for the dividend.

    x - 0.1x = 7,200;x = 8.000

    Therefore, the taxation abroad has been 800

  • Tax actually paid abroad by Company Z in respect of the profits out of which the dividends have been paid.

    y - 0.2y = 8,000;y = 10.000

    The tax paid by Company Z has therefore amounted to 2,000

Calculation of deductions:

  • Legal DI:tax borne by the taxpayer (art. 31 LIS)

    The lesser of:

    1. Actual amount paid abroad:800
    2. Full tax payable in Spain:2.000 (8.000 x 0,25)

    To be inserted in boxes [00163] and [00165]:800

  • Economic DI:dividends and shares in profits (art. 32 LIS): 2.000

    To be inserted in boxes [00167] and [00169]: 2.000

Limit of the two deductions:

Full tax payable in Spain if the income had been obtained in Spanish territory:

10.000 x 0,25 = 2.500

Income to be included in the tax base of Company "X":10000

Total deductions arts.31 and 32 LIS:2,500

To be entered in box [00573]:2,500

Note:In this example, it should be borne in mind that for tax periods beginning on or after 1 January 2016, section 2 of the fifteenth additional provision of the LIS establishes that for taxpayers whose net 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 transitory provision of this Law, may not exceed 50 per cent of the taxpayer's gross tax liability.