Deductions to avoid international double taxation

To apply this deduction, it is necessary for the direct or indirect shareholding in the non-resident entity's capital be, at least 5%, or its acquisition value greater than 20 million euros, and that it has been held without interruption for the whole year prior to the date the profit distribution can be called, or, otherwise, that it has been held for the time necessary to complete one year.

For tax periods beginning on or after 1 January 2021, the alternative requirement that the cost price of the holding must exceed EUR 20 million is eliminated for the purpose of qualifying as a holding.

Likewise, for tax periods commencing on or after 1 January 2021, in order to calculate the gross tax liability, for the purposes of applying this deduction, dividends or shares in profits shall be reduced by 5 per cent for management expenses relating to such shares. This reduction shall not apply in the case of dividends or shares in profits in which the circumstances set out in Article 21 Section 11 of Law 27/2014 apply.

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.

Yes, the quantities not deducted due to insufficiency of total tax due may be deducted in the following tax periods.

No, with effect for tax periods beginning on or after 1-1-2017, the negative income obtained from the transfer of a share in an entity that had previously been transferred by another entity that meets 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 not be reduced by the amount of positive income obtained from the preceding transfer and to which an ## exemption regime had been applied.

The deduction to avoid international double taxation regulated in article 32 LIS 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 paid by the company which is not resident in Spain on the profits to which the dividends are charged. The amount will be that corresponding to such dividends, provided that this amount is included in the taxpayer's gross tax base.

This deduction will not be applicable in connection with dividends or shares in profits the amount of which must be transferred to another company in respect of a contract concerning the securities from which such income is derived, an expense being recorded to this effect. The company receiving the above amount can apply this deduction insofar as accounting records are kept of these securities and these comply with the conditions established for this.

This deduction, together with that established in article 31 LIS with respect to dividends or profit shares, may not exceed the full amount that would have to be paid in Spain for these incomes if they had been obtained in Spanish territory. Any excess over the above-mentioned limit will not be fiscally deductible, notwithstanding the provisions of Section 2 of the above-mentioned article.